Sezzle layoffs follow wave of ‘buy now, pay later’ consolidation

Hello and welcome to Protocol Fintech. This Friday: Sezzle layoffs and the Zip deal, Stripe’s Harry Potter types, and Square’s near-death experience.

out of the chain

Bessemer is dedicating $250 million of his latest fund, half of a Bain Capital Crypto, to Web3 projects. It’s also, more perplexingly, the launch of BessemerDAO, which looks like a crypto Discord group without even a token to fight with. The “Web3 community for founders, creators and operators” will be “centralized, but transparent” at first, and will become effectively decentralized over time. I guess that’s clear!

—Owen Thomas (E-mail | Twitter)

Cut now, merge later

Consolidation has come to the “buy now, pay later” industry as companies seek global scale. It’s not just about competing: they also have to fend off the biggest payments, banks and card companies in the world, who all seem to agree that offering installment plans is the new thing in consumer credit. consumption.

The last sign is a problem at Sezzle. The Minneapolis company agreed to sell itself to Australian Zip last month for $353 million. It’s common to see layoffs after a deal is done, but in Sezzle’s case, they happen long before the deal is done. The company said it would cut 20% of its North American staff, but according to a source who spoke to Protocol, the company cut 40% to 50% of its global employees as it sought to reduce his costs to sell his sale to Zip.

Global scale is essential for businesses that “buy now, pay later”. Doing business with big merchants and brands like Amazon, Walmart or Nike requires serious reach.

  • Klarna is perhaps the most global, operating in 45 countries, and has aggressively entered the US market. Affirm has long had a significant share of the US market and has deals with Amazon, Shopify and others. Block plans to boost Afterpay’s growth after closing its multi-billion dollar takeover deal.
  • Meanwhile, PayPal has enabled “buy now, pay later” services for its vast network of merchants. It recently acquired Japan’s Paidy, expanding its presence in Asia.
  • Zip needed Sezzle, especially for its US market and its strength with small and medium merchants. Sezzle has a deal with Target, but it’s not exclusive: Affirm also offers installment plans for Target shoppers.

Scale is also important for other reasons. Data is the lifeblood of buy now, pay later, and the more consumers and merchants you have, the more data you have.

  • Offering loans requires ever-larger pools of data to determine who can repay a loan profitably and avoid losses.
  • “Buy now, pay later” companies tout their ability to increase checkout conversions. This, too, requires constant refinement of data-driven offerings and interfaces.
  • And “buy now, pay later” apps are evolving to offer a range of other financial services, becoming super apps. This not only includes purchases and payments, but also savings, crypto, and customer support.

With size comes more control. Regulators are looking at “buy now, pay later” as a new, largely unregulated form of consumer credit.

  • In December, the Consumer Finance Protection Bureau asked Affirm, Afterpay, Klarna, PayPal and Zip for information and data.
  • The UK’s FCA recently asked ‘buy now, pay later’ companies to change their terms for buyers to make them “fairer and easier to understand”.
  • In the United States, “buy now, pay later” is not regulated as strictly as credit cards, thanks to the whims of state rules around retail installment loans, but that could change.

Scale may be necessary, but it brings a whole new set of problems. The consolidation of “buy now, pay later” companies means that they are now in the same business as the same large credit and payment companies with which they increasingly compete. This means more control, more rules and potentially more constraints on their growth.

— Tomio Geron (E-mail | Twitter)

A MODERN TREASURY MESSAGE

Payments operations can waste finance, product, and engineering teams time and energy that would otherwise drive growth and deliver greater value to customers. Unsurprisingly, 86% of executives now prioritize improving their payment operations. Download our report to learn about the most costly payment challenges and how fast-moving businesses are solving them.

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on the money

Canadian police have seized $28 million worth of bitcoins in a ransomware case. Sébastien Vachon-Desjardins, a Canadian, was charged in Florida on charges of conspiracy to commit computer fraud and wire fraud, willful damage to a protected computer, and extortion.

South Korean regulators enforce a rule requiring choice in app payments. A law, approved last year, prohibits operators of app stores like Apple and Google from forcing developers to use their integrated payment systems. The directive comes into force on Tuesday.

FTX.US wants to go deeper into derivatives. The CFTC is Seeking Public Comment on the Crypto Exchange’s Proposal for trading in derivatives with clear margins directly for individual and institutional clients.

Merchants could get an eBay wallet. In an Investor Day presentation, eBay teased a “digital wallet” that could store funds for sellers. This could address a complaint from sellers who previously used their PayPal accounts to pay eBay fees and purchase goods. (No it’s not a crypto thing.)

Virginia has approved a bill allowing banks to provide crypto custody services to their customers. A state-chartered bank should meet three requirements before doing so, by implementing effective risk management systems, insurance coverage and a monitoring program for service providers.

Understood

Sasha de Marigny, brand communications manager at Bandagedthink people who have read the Harry Potter books might have his colleagues. “People often ask me to describe the average Stripe employee. The simplest answer: Hermione Granger. Lots and lots of Hermione Granger,” she tweeted.

To block co-founder Jim McKelvey believed the company, then called Square, was under death threat from Amazon after the e-commerce giant launched Amazon Register, a payment product with lower processing fees, in 2014. “When Amazon does this to a startup, the startup dies. When Amazon did this to Square, we were terrified,” he said in an interview with CNBC.

FBI director Christophe Wray don’t worry about Russia using crypto to circumvent sanctions. “The Russians’ ability to circumvent sanctions with cryptocurrency is probably greatly overstated by perhaps them and others,” he said during a Senate hearing.

Table

February was a tough month for most payments business as tech stocks swung and investors punished any hint of weakness in a company’s financial outlook. Both PayPal and Affirm were hit hard after earnings reports, while Block was boosted by its progress in turning Cash App into a super app.

How Payments Companies Fared in February

Image: Protocol

A MODERN TREASURY MESSAGE

Scaling a business that moves money isn’t easy. A bad process, bad software or luck can lead to costly mistakes and, even worse, distract from your main priorities. Yet many companies still struggle to build a scalable payment infrastructure. Download our report to learn about the top hurdles businesses face when upgrading their payment operations.

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Thanks for reading – see you Monday!

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