Why Sezzle's shares may be overvalued

Sezzle, the US buy-now-pay-later provider, is resting on shaky foundations. Is it time to sell this stock?

Sezzle logo is displayed on a smartphone screen.
(Image credit: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)

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.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri