A figurative illustration of a “buy now, pay later” receipt
Illustration: Getty Images; Protocol

To go global, 'buy now, pay later' must consolidate

Protocol Fintech

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

Off the chain

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

— Owen Thomas (email | 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 with each other: They also have to fend off the world’s largest payments, banks and card companies, all of which seem to agree that offering installment plans is the hot new thing in consumer credit.

The latest sign is trouble at Sezzle. The Minneapolis company agreed to sell itself to Australia’s Zip last month for $353 million. It’s common to see layoffs after a deal closes, but in Sezzle’s case, they’re happening well before the deal is done. The company said it would cut 20% of North American staff but according to a source who spoke to Protocol, the company cut 40% to 50% of global employees as it sought to cut costs to make its sale to Zip pencil out.

Global scale is key for “buy now, pay later” companies. Doing deals with big merchants and brands such as Amazon, Walmart or Nike requires serious reach.

  • Klarna’s perhaps the most global, operating in 45 countries, and has moved aggressively into the U.S. market. Affirm has long held a big share of the U.S. market and has deals with Amazon, Shopify and others. Block plans to supercharge Afterpay’s growth after closing its multibillion-dollar buyout deal.
  • Meanwhile, PayPal has turned on “buy now, pay later” services for its massive merchant network. It recently bought Japan’s Paidy, expanding its presence in Asia.
  • Zip needed Sezzle, particularly for its U.S. market and its strength with small to medium-sized merchants. Sezzle has a deal with Target, but it’s not exclusive: Affirm also offers installment plans to 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 profitably repay a loan and avoid losses.
  • “Buy now, pay later” companies tout their ability to boost conversions at checkout. That, too, requires constant refinements of offers and interfaces based on data.
  • And “buy now, pay later” apps are evolving to offer a range of other financial services, becoming super apps. That includes not just shopping and payments but also savings, crypto and customer support.

With size comes more scrutiny. Regulators are examining “buy now, pay later” as a new and largely unregulated form of consumer credit.

  • The Consumer Finance Protection Bureau in December asked Affirm, Afterpay, Klarna, PayPal and Zip for information and data.
  • The U.K.’s FCA has recently gotten “buy now, pay later” firms to change their terms for shoppers to make them “fairer and easier to understand.”
  • In the U.S., “buy now, pay later” is not regulated as strictly as credit cards are, thanks to the vagaries of state rules around retail installment sale loans, but that could change.

Scale may be necessary, but it brings a new set of problems. The consolidation of “buy now, pay later” companies means they’re now in the same realm as the same large credit and payments businesses they’re increasingly competing against. That means more scrutiny, more rules and potentially more constraints on their growth.

— Tomio Geron (email | twitter)


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On the money

Canadian police seized $28 million in bitcoin in connection with a ransomware case. Sebastien Vachon-Desjardins, a Canadian man, was indicted in Florida on charges of conspiracy to commit computer fraud and wire fraud, intentional damage to a protected computer and extortion.

South Korea regulators are enforcing a rule requiring choice in app payments. A law, approved last year, bans app-store operators like Apple and Google from forcing developers to use their in-app payment systems. The guideline takes effect Tuesday.

FTX.US wants to get deeper into derivatives. The CFTC is soliciting public comment on the crypto exchange’s proposal to clear margined derivative trades directly for retail and institutional customers.

Merchants could get an eBay wallet. In an Investor Day presentation, eBay teased a “digital wallet” which could store funds for sellers. That 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 approved a bill allowing banks to provide customers with crypto custody services. A state-chartered bank would have to meet three requirements before doing so, by implementing effective risk management systems, insurance coverage and a service provider oversight program.


Sasha de Marigny, head of brand communications at Stripe, thinks people who have read the Harry Potter books might get her colleagues. “People often ask me to describe the average Stripe employee. The simplest answer: Hermione Granger. Many, many Hermione Grangers,” she tweeted.

Block co-founder Jim McKelvey thought the company, then called Square, was facing death by Amazon after the ecommerce giant launched Amazon Register, a payments product with lower processing fees, back in 2014. “When Amazon does this to a startup, the startup dies. When Amazon did that to Square, we were terrified,” he said in an interview with CNBC.

FBI director Christopher Wray isn’t worried about Russia using crypto to bypass sanctions. “The Russians' ability to circumvent the sanctions with cryptocurrency is probably highly overestimated on the part of maybe them and others,” he said in a Senate hearing.

The chart

February was a rough month for most of the payments business as tech stocks gyrated and investors punished any hint of weakness in a company’s financial outlook. PayPal and Affirm both took heavy hits after earnings reports, while Block got a boost from its progress turning Cash App into a super app.

How payments companies fared in February

Image: Protocol


Scaling a company that moves money isn’t easy. Bad process, software, or luck can lead to costly errors, and worse, distract from your main priorities. Yet, many companies still struggle to build scalable payment infrastructure. Download our report to learn the main barriers companies face upgrading their payment operations.

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Thanks for reading — see you Monday!

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