Why Sezzle’s shares may be overvalued

One of the most controversial areas of the financial technology (fintech) sector is buy-now-pay-later, or BNPL. Like traditional consumer financing schemes, BNPL allows a firms’ customers to buy goods without paying for them upfront; the company essentially lends them the purchase price. However, instead of the company having to provide the capital, and take on the risk that the purchaser won’t be able to pay, a BNPL provider uses its own money, assuming the credit risk, in exchange for a cut of the sale price.

BNPL’s supporters argue that it can be a win for all concerned, with consumers getting hassle-free access to a wider range of goods and merchants making more sales. Of course, BNPL firms hope that the money they get from the loans and merchant fees will more than compensate for any defaults. It has certainly proved popular, with research suggesting that the value of BNPL loans in the US will eclipse $100 billion for the first time in 2025. However, the worry is that it may encourage people to borrow beyond their means. What’s more, from an investor’s point of view, the quality of some of the loans that BNPL firms provide are a cause for concern.