The name Sezzle’s got you thinking of sizzle, no doubt, and it very well should.
The numbers are in. Same Day ACH payments are gaining traction right out of the gate, with nearly $5 billion and 3.8 million transactions in October, the first full month of activity. And though the bulk of that took place though direct deposit activity (think payroll) and B2B transactions, P2P and consumer bill pay saw tens of thousands of payments.
This sets the stage for increased adoption of same-day payments across consumers and the merchants who serve them. At present, the ACH same-day conduit exists across credit, but the roadmap less than a year out mandates same-day debit transactions. That, Sezzle CEO Charlie Youakim says, bodes well for them.
In the latest installment of Topic TBD, PYMNTS’ Karen Webster touched base with Sezzle CEO Charlie Youakim to better understand how the latest ACH news could inspire more creative use cases for retail payments.
The sizzle behind Sezzle, noted Webster, is that it operates as a payments platform that allows merchants to have an alternative to enabling payments to their online storefronts and, she added, offers cash back to consumers who use the Sezzle app at the time of payment.
The ACH news “definitely has an impact for our business,” said Youakim of the same-day rollout. “Sezzle started in January 2016, and we knew that Same Day ACH would be coming since the start of the business,” he said. “And we see the waves coming. So, this Same Day ACH is going to improve ACH [as a process] dramatically. One of the problems with ACH, for a merchant, is that aspect of settlement. Someone can write a check, or write a few checks, and not have the funds available to settle that payment.”
“But if ACH is going to settle several times a day,” continued the executive, “that problem gets diminished pretty significantly. And so, right now, the credit side of the equation is covered. But the one that we are more concerned with, and will be happy about, is the debit side. Once that kicked in, our traction would be significant with merchants.”
Sezzle’s value add, according to the company, works across both merchants and the consumers they serve. In the traditional (read: non-Sezzle) landscape, the process operates this way: Merchants typically pay 2.9 percent on each transaction. But Sezzle says that bypassing the card networks means that merchants can pass along at least some of those savings to the consumers — to the tune of 1 percent cash back on all purchases.
“We are essentially like PayPal,” said Youakim. “It is a two-sided platform,” with a side that takes the merchant information and the customer information. The Sezzle platform will exist as a payment option for consumers at the point at which they check out online. The cash back rewards, according to the firm, can be accessed through the payments button. The initial transaction requires bank information to be entered. But thereafter, according to the firm, consumers need only enter their mobile number and PIN data.
“If you have a credit card, nowadays, that doesn’t have rewards,” he said, “people will not sign up for it.” Sezzle, he said, looks to increase conversions among its target market, which is focused on younger consumers. The goal is to convert those younger users to the Sezzle solution across both credit and debit cards.
How, then, asked Webster, to change the consumer’s habits? It’s never easy to get people to change their payments behavior, Webster said, especially when it comes to trusting companies with bank account information.
Youakim concurred that “putting your bank account information into our system is a big step for a lot of consumers,” adding that his firm does not take that step lightly.
“What everyone has been missing with wallets,” he said, “is what is in it for the consumer. Why do they need to do this?” Hence the rewards incentive, which also can foster repeat customers.
“Platforms are difficult, and we knew that … and we could have launched with merchant-specific rewards or merchant lock-ins. But we thought that that was just taking too much away from the consumer.”
Consumers do indeed want cash back, but they also want flexibility in just how and when they get those rewards, said Youakim. But the rewards landscape can also be a bit daunting, he said, as “we are starting to get to a point … where the rewards are getting ridiculous. Merchants wind up paying for those rewards,” he added.
Next steps: “We’re focused on eCommerce platforms right now,” he said, targeting smaller merchants. Near-term goals, he said, include garnering 2 percent of payment action and flow across the merchants. As for target audience, it is the millennials, a generation that is largely bereft of (and perhaps mistrustful of) credit cards, and they are best primed to adapt and adopt to alternative payments and are more prone to use technology in the pursuit of payments than other demographics.