Sezzle branches out into interest lending with new bank partnership

US-based BNPL player Sezzle (ASX:SZL) is moving into interest-based lending, the company announced this morning.

SZL said it will provide longer-term financing options via Ally Bank, the personal lending division of NYSE-listed Ally Financial.

Shares in the company rose by around four per cent in morning trade to ~$7.60.

Those early gains were broadly consistent with other BNPL players such as Afterpay (ASX:APT), up 4.9pc, and Zip Co (ASX:Z1P), up 3.3pc.

Combined with a steady day of trade yesterday, the sector is taking a breather (for now) following a month of heavy selling, as another round of inflation fears prompted a re-rating in tech stocks valued on high revenue multiples.

Sezzle credit

SZL’s update is notable in that it marks the first departure among ASX-listed BNPL plays away from zero-interest instalment plans.

The company said the move is in response to feedback from its merchant customer base, who are looking to provide payment options to customers for a wider array of items, including larger more expensive purchases.

Subject to credit approval, customers will be able apply for fixed-rate loans of up to 60 months and US$40,000 from Ally Bank on the Sezzle platform, via a fully digitised loan approval process.

As an example of how the lending product will work, Sezzle said customers can apply for a US$1,000 loan and pay it off in six monthly instalments of ~US$174, at an annual percentage loan rate of 14.99%.

“With Ally Lending’s personalised, flexible financing solutions now available on Sezzle’s platform, we offer shoppers a responsible, transparent way to finance higher ticket items over a longer period,” SZL president Paul Paradis said.

At the end of April, Sezzle said it intends to file documents with US regulators in order to initiate a US IPO.

Similarly, competitor Afterpay also flagged a possible US listing as it focuses on the North American market to drive its next leg of top-line growth.