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Sezzle Is Innovative Example of Growing 'Fintech' Sector

charlie-youakim-sezzleSezzle is a Minneapolis-based startup that uses new financial technology to tap into an underserved market.

Launched in August, the company enables online shoppers to make purchases at participating merchants. Instead of your typical checkout options where the user needs to pay today, Sezzle allows shoppers to pay for items ordered in four interest-free installment payments spaced two weeks apart – while still receiving the merchandise right away.

"Young people often have limited access to credit," says Charlie Youakim, CEO and founder of Sezzle. "Our typical customer is between the ages 18 and 35. Our system allows them to budget and extend their purchasing power."

Fintech sector is growing fast

Sezzle – with seven full-time and three part-time employees based in an Uptown office – is a good example of the growing "financial technologies" or "fintech" sector.

Fintech includes digital services provided by traditional financial services as well as by new startups – through things like mobile payments, money transfers, asset management, loans and fundraising.

It’s a fast-growing area. Investment in fintech worldwide increased from $1.8 billion in 2010 to more than $22.3 billion in 2015, according to a 2017 report by Accenture.

Minnesota has seen growth – with about 60 small businesses and startups in fintech-related services. Larger, more established Minnesota firms are also active in fintech, including U.S. Bank, Wells Fargo, Deluxe Corporation and Wolters Kluwer, just to name a few.

Pay now or pay later

Shoppers who make a purchase from one of Sezzle’s participating retailers have a choice of using a card or using Sezzle. Clicking on the Sezzle widget, first-time users are asked to sign in to their bank account and enable Sezzle to use bank statement data to analyze their ability to repay. Sezzle is able to make a decision in seconds and set up automatic payments.

"The first time through, it takes just a couple of minutes," says Youakim. "And once a customer is set up with a pin, subsequent purchases take just seconds."

Before each interest-free automatic payment, customers are sent a notice. They’re able to reschedule a payment for no charge one time. After that, there is a $5 fee to shift a payment.

'Off to a great start'

Having a large pool of participating merchants is key. How does Sezzle find merchants?

"We do zero advertising," says Youakim. "We use Instagram as our hub. We find merchants there and send cold emails. The response rate has been fantastic.

"We’ve added 45 merchants in the last month and another 40 are in the onboarding process – with an additional 90 in the pipeline," he adds. "We’re off to a great start – it’s exciting."

Participating merchants put a Sezzle widget on their product pages. For example, a retailer offering a $119 dress will promote that you can also buy it through Sezzle for four automatic, interest free payments of $29.75. (See screenshot.)


Sezzle charges merchants a 6 percent transaction fee. But it pays the merchants upfront for the purchases and assumes the risk for the installment payments.

This installment payment option helps drive sales for merchants – sales they might not otherwise not get, says Youakim. What’s more, he adds, preliminary results show that "average orders are 45 percent higher on checkout with us than with their other payment options."

While Sezzle shoulders the risk if someone doesn’t pay, Youakim says, "It’s very early, but we haven’t even had a failed payment yet."

Pivoting to meet the market

Youakim founded Sezzle in January 2016. Early months were spent getting financing, putting together a team and developing the product.

The company initially had a different business model – based on lower cost processing for merchants and rewards points as an incentive for customers.

But when an initial launch last winter didn’t perform as expected, Sezzle was able to quickly pivot. It developed its current business model in June and did a fresh launch in August.

Along the way, Sezzle has won recognition and awards. It was a finalist in the high tech division of the 2016 MN Cup, the largest statewide startup competition in the country. It also received the 2016 MN Cup Securian Prize – a $10,000 award for technology innovation that shapes the future of financial services or life insurance.

Nurturing through early investment

Youakim co-founded his first tech company, Passport Parking, in Minneapolis in 2010. He moved the company to Charlotte in 2011 where it continued to grow. When he was ready to start his second company, he decided to launch it in Minnesota, where he grew up.

In 2016, Sezzle raised $1.09 million from investors with the help of the Angel Tax Credit program managed by the Minnesota Department of Employment and Economic Development (DEED). One of the company’s investors is E-Merge, a Brussels-based angel fund.

"I have family and friends here – but part of the draw was also the tax credit," Youakim says.

"In five years, I believe we’ll employ a few hundred people – and we may not have existed without this tax credit – or we might have located in California to begin with," he adds. "It definitely has an effect."

– Published September 2017

"Young people are lacking access to credit, and we're doing our best to build a payment option to change that."
— Charlie Youakim, Sezzle CEO and Founder

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