Sezzle, Zip Deal Continue BNPL Consolidation

This year is a bit like 2021, in at least one way: the buy-it-now, pay-later (BNPL) industry continues to consolidate.

As reported late Sunday night (February 27), Australia’s Zip is buying Sezzle in a deal valued at $352 million.

Read more: Zip to buy BNPL Rival Sezzle in $352m deal

In any fledgling industry, the question is always to build or to buy. And at BNPL, where growth is the hallmark but where growth could pinch margins, the strategy has definitely been… to buy.

In a merger or acquisition, after all, scale becomes a reality once the deal closes, as assets and brands merge under one roof. For Zip and Sezzle, as Sunday’s announcement detailed, the combined entity will have 8.8 million customers and more than 60,000 merchants in the United States.

The deal was and isn’t entirely unexpected, as earlier this year Zip announced that it was considering acquiring Sezzle. Sezzle said in its fourth quarter results that it saw a 76% increase in the number of active merchants year over year. Additionally, active consumers were also up 51.5% year over year.

Admittedly, other offerings, as seen last year, dominate this one, price-wise. Late last year, PayPal agreed to buy Japanese provider BNPL Paidy for $2.7 billion; Square, of course, bought Afterpay for $29 billion, in a deal struck last month.

In our latest BNPL provider ranking, Sezzle is the fifth most popular BNPL app and Zip is the ninth. So we see that a combination of the two would immediately gain some presence among consumers.

Fortuitous timing?

When it comes to timing, geopolitics, war, and a general environment where inflation makes everything a bit more expensive, all should make BNPL a more popular payment option than ever. Visibility on its financial obligations leads to a better ability to anticipate cash needs; an uncertain interest rate environment may also deter individuals from traditional credit products. Thus, BNPL’s appeal is expected to span across a number of demographic boundaries, including PYMNTS research which finds that financially stable consumers find value with BNPL.

Read also: Why Even Financially Carefree Consumers Are Using Buy Now, Pay Later

The name of the game may indeed be the scale, which in turn lends itself to more transactions in the months and years to come. As Karen Webster noted in a column just as 2021 gave way to 2022, the BNPL battle continues to brew. Amazon, of course, works exclusively with Affirm and could eventually offer more than 150 million US Prime customers better cashback and other incentives to adopt BNPL. Walmart has been on board, since last year, with installment payments as well.

At the start of the year, it’s still not entirely fair to say that history is repeating itself in the BNPL space, at least in terms of mergers and acquisitions, but, to quote that old adage — if it does not repeat itself, it certainly rhymes.

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NEW PYMNTS DATA: ACCOUNT OPENING AND LOAN SERVICE IN THE DIGITAL ENVIRONMENT

On: Forty-two percent of US consumers are more likely to open accounts with financial institutions that facilitate automatic sharing of their bank details upon sign-up. The PYMNTS study Account opening and loan management in the digital environmentsurveyed 2,300 consumers to explore how FIs can leverage open banking to engage customers and create a better account opening experience.

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