This year is looking a bit like 2021, at least in one respect: The buy now, pay later (BNPL) industry continues to consolidate.
As reported late Sunday evening (Feb. 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 nascent industry, the question is always build vs. buy. And in BNPL, where growth is hallmark but growth might pinch margins, the strategy has decidedly been … buy.
In a merger or acquisition, after all, scale becomes a reality after the deal is done, as assets and brands coalesce under one roof. For Zip and Sezzle, as the Sunday announcement detailed, the combined entity will have 8.8 million customers and over 60,000 merchants in the U.S.
The deal was and is not entirely unexpected, as earlier this year Zip announced that it was exploring acquiring Sezzle. Sezzle said in its fourth-quarter earnings that it had seen a 76% increase in active merchants year over year. In addition, active consumers also grew by 51.5% year over year.
To be sure, other deals, as seen last year, tower over this one, in terms of price tag. Late last year, PayPal agreed to buy Japan-based BNPL provider Paidy for $2.7 billion; Square, of course, bought Afterpay for $29 billion, in a deal that closed last month.
In our latest rankings of BNPL providers, Sezzle stands as the fifth most popular BNPL app, and Zip at the ninth-most spot. So we see that a combination of the two would immediately gain some top-of-mind presence among consumers.
Fortuitous Timing?
As for the timing, geopolitics, war and a general environment where inflation is making everything a bit more expensive all stand to make BNPL a more popular payments option than ever. Visibility into one’s financial obligations leads to a better ability to anticipate cash flow needs; an uncertain interest rate environment also may shift individuals away from traditional credit products. Thus the appeal of BNPL should extend across any number of demographic boundaries, including PYMNTS research finds that financially stable consumers are finding value with BNPL.
Read also: Why Even Financially Worry-Free Consumers Use Buy Now, Pay Later
The name of the game may indeed be scale, which in turn lends itself to more dealmaking in the months and the years ahead. As Karen Webster noted in a column just as 2021 gave way to 2022, the BNPL battle continues to brew. Amazon, of course, is working with Affirm exclusively, and might conceivably offer 150 million-plus U.S. Prime customers better cash back and other incentives to embrace BNPL. Walmart’s on board, as of last year, with installment payments as well.
This early in the new year, it’s not quite fair yet to say that history is repeating itself in the BNPL space, at least in terms of mergers and acquisitions, but, to quote that old saying — if it’s not repeating, it sure is rhyming.
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