Sezzle: A High-Potential GARP Play in the Evolving BNPL Landscape

The Buy Now, Pay Later (BNPL) sector has emerged as a transformative force in consumer finance, blending fintech agility with e-commerce demand. Amid this landscape, Sezzle (SEZL) stands out as a compelling growth-at-a-reasonable-price (GARP) opportunity, distinguished by its strategic innovation, regulatory adaptability, and superior risk-adjusted returns. This analysis evaluates Sezzle's trajectory against peers like Klarna, Affirm, and Afterpay, arguing that its unique value proposition positions it to outperform in a maturing market.

Strategic Growth: Innovation as a Catalyst

Sezzle's explosive growth in 2025 is underpinned by a relentless focus on product innovation and merchant integration. The company's partnership with WebBank in early 2025 enabled the launch of Sezzle On-Demand, a virtual card solution that expanded its reach to any Visa-accepted merchant, effectively eliminating the friction that previously limited BNPL adoptionSezzle (SEZL) Stock Increase: The Structure of a 620%...^[2]. Complementing this, features like Pay-in-5 (beta) and Sezzle Balance—which allows users to borrow against future income—have enhanced consumer flexibility, driving engagement. According to a report by Tickeron, Sezzle's subscription revenue surged 59.7% year-over-year in Q1 2025, reflecting strong user retentionSezzle (SEZL) Stock Increase: The Structure of a 620%...^[2].

Comparatively, peers like Klarna and Affirm have prioritized ERP integrations to scale their offerings. Klarna, for instance, leveraged a partnership with JPMorgan to connect nearly one million businesses to its BNPL services11 Statistics Mapping BNPL Penetration Across ERP Ecosystems^[5], while Affirm's 358,000 active merchants highlight its dominance in high-ticket sectors like consumer electronics11 Statistics Mapping BNPL Penetration Across ERP Ecosystems^[5]. However, Sezzle's mid-market focus—targeting smaller and mid-sized businesses—has allowed it to capture underserved segments. Its gross merchandise volume (GMV) reached $2.5 billion in Q4 2024, with revenue growing 123% year-over-year in Q1 202511 Statistics Mapping BNPL Penetration Across ERP Ecosystems^[5], outpacing Klarna's 19% GMV growth and Affirm's 76% revenue increaseSezzle Reports Second Quarter 2025 Results^[4].

Regulatory Resilience: Navigating a Shifting Landscape

The BNPL sector's regulatory environment has grown increasingly complex in 2025, with the U.S. and UK implementing stringent frameworks. In the U.S., the Trump administration's reversal of the CFPB's 2024 classification of BNPL as a credit product created a federal regulatory vacuum, shifting oversight to states like New York, which imposed a 16% interest rate cap and licensing requirementsPayments regulation roadmap: Q3 2025^[1]. Meanwhile, the UK's Financial Conduct Authority (FCA) announced plans to regulate third-party BNPL providers starting in mid-2026, mandating affordability assessments and independent complaint resolutionPayments regulation roadmap: Q3 2025^[1].

Sezzle's partnership with WebBank has been instrumental in navigating these challenges. By leveraging WebBank's regulatory infrastructure, Sezzle has maintained compliance while expanding its product suite. This approach contrasts with Klarna's struggles: the company reported a 17% year-over-year rise in credit losses to $136 million in 2025, partly due to its exposure to high-risk usersSezzle Reports Second Quarter 2025 Results^[4]. Sezzle, by contrast, achieved a 34.5% net income margin in Q1 2025, underscoring its operational efficiency and risk management capabilitiesSezzle (SEZL) Stock Increase: The Structure of a 620%...^[2].

Market Differentiation: Risk-Adjusted Returns and User Base

The BNPL sector's growth is tempered by rising default rates, with 24% of users missing payments in 2025—up from 18% in 202311 Statistics Mapping BNPL Penetration Across ERP Ecosystems^[5]. Younger and lower-income users, who constitute 73% of BNPL users2025 Buy Now, Pay Later Trends Study^[3], are particularly vulnerable. Sezzle's risk profile, however, appears more favorable. Its Sezzle Anywhere subscription model has driven higher order frequency among subscribers compared to non-subscribersSezzle Reports Second Quarter 2025 Results^[4], suggesting a more engaged and creditworthy user base.

Affirm's delinquency rate for 30-day late payments in Q1 2025, while elevated, remained below historical peaks2025 Buy Now, Pay Later Trends Study^[3], while Afterpay's 19% transaction growth during the 2024 holiday season highlights its resilience in peak periods11 Statistics Mapping BNPL Penetration Across ERP Ecosystems^[5]. Yet, Sezzle's strategic focus on mid-market ERP integration and its WebBank partnership have created a moat against regulatory and credit risks. For instance, its 34.5% net income margin in Q1 2025Sezzle (SEZL) Stock Increase: The Structure of a 620%...^[2] far exceeds Klarna's reported credit provisioning costsSezzle Reports Second Quarter 2025 Results^[4], which have raised market skepticism about its long-term profitability.

Conclusion: A GARP Play in a High-Growth Sector

Sezzle's combination of explosive revenue growth, regulatory agility, and superior risk-adjusted returns makes it a standout in the BNPL sector. While peers like Klarna and Affirm face headwinds from rising defaults and regulatory scrutiny, Sezzle's strategic partnerships and product innovations position it to capture market share. For investors seeking a GARP play, Sezzle offers a compelling balance of growth potential and operational discipline in a sector projected to reach $560.1 billion in 2025Sezzle (SEZL) Stock Increase: The Structure of a 620%...^[2].