The Sezzle Inc (ASX: SZL) share price has fallen approximately 70% in the last six months.
That is a large decline.
In-fact, it has been a pretty rough few months for several operators including Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P), Splitit Ltd (ASX: SPT) and so on.
The market has punished the buy now, pay later (BNPL) industry.
There is growing commentary and concern that regulators are having a closer a look at the BNPL sector with how large it has become. It is more important for the overall payments system and economy.
Australian BNPL under the spotlight
In Australia, the BNPL sector is coming under greater scrutiny and there is a growing call for merchants to be able to add surcharges to customers who use that option. Why? On the Reserve Bank of Australia's website is this segment from last year:
The Bank's longstanding view, which has been borne out by experience following the Bank's reforms in the early 2000s, is that the right of merchants to apply a surcharge promotes payments system competition and keeps downward pressure on payment costs for businesses.
If a business chooses to apply a surcharge to recover the cost of accepting more expensive payment methods, it may encourage customers to make the payment using a cheaper option. In addition, the possibility that a consumer may choose to use a lower-cost payment method when presented with a surcharge helps put competitive pressure on payment schemes to lower their pricing policies, indirectly lowering merchants' payments costs. The possibility of surcharging may also help merchants to negotiate lower prices directly with their payments service provider.
By helping keep merchants' costs down, the right to apply a surcharge means that businesses can offer a lower total price for goods and services to all of their customers.
How does Australia regulation affect the Sezzle share price?
Sezzle isn't an Australian-based business, though sentiment about Australian peers could possibly impact things.
In the US, where Sezzle is based, officials are also looking at the industry.
Just before Christmas, the Consumer Financial Protection Bureau (CFPB) issued a series of orders to five BNPL companies: Affirm, Afterpay, Klarna, PayPal, and Zip. The CFPB said it is concerned about accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology.
CFPB Director Rohit Chopra said:
Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately too.
Is the company still growing strongly?
Whilst the Sezzle share price has been sinking, its underlying merchant sales (UMS) have continued to scale quickly.
For the month of November 2021, Sezzle saw its growth of 83% year on year with the annualised run rate reaching US$2.5 billion.
For the 4-day period of Black Friday to Cyber Monday, there was growth of 53% for the US and Canada, with in-store growth of 783% and online rising 46%.
Active merchants went up 84% year on year and active consumers rose 60%.
Is the Sezzle share price a buy?
The broker Ord Minnett thinks so, with a price target of $9.90. If that happened during 2022, it would be a return of around 250%. Ord Minnett notes the success of Sezzle of a partnership in the huge US retail space.
