Motley Fool Money - Interview with Sezzle CEO Charlie Youakim

Episode Date: November 16, 2025

Sezzle is a fintech company known for its buy now, pay later services. At our annual Motley Fool member event, Motley Fool co-founder and CEO Tom Gardner talked with Sezzle co-founder and CEO Charlie Youakim about entrepreneurship, competition, and the business of buy now, pay later.  Host: Tom Gardner  Producer: Bart Shannon, Mac Greer  Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, "TMF") do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement.  We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode  Learn more about your ad choices. Visit megaphone.fm/adchoices

Well, I think we're early days still in this market. I think we have like seven to ten years of growth or strong growth in the BMPL space. So I think it's going to be a rising tide for all the players. That was Charlie Euchar, co-founder and CEO of Sezzle. I'm Motley Fool producer Matt Greer. Now at our recent Motley Fool co-founder and CEO Tom Gardner talked with Eweakim about entrepreneurship, competition, and the business of buy now, pay, later. We're going to talk about Sezell a second, but I think I just want to start with your

background. What caused you to become an entrepreneur? What made you think about starting the first company you started? And how did it lead you to Sezzle? Well, I wasn't the lemonade stand kid. That's for sure. I was a video gamer. I love science technology, coding, building computers, you know, basically a nerd. But no entrepreneurs in my like family or friend group, you know, or anywhere nearby. I just always thought it was interesting. And I think my first job out of school, I wasn't that pressured.

It wasn't that high of a bar-eyed, time on my hand. I was tinkering, playing with stuff. I remember building like a Dropbox-like product before Dropbox. And I wish I would have known how to start a company back then. And then it just kind of happened. I was talking to my cousin about starting a company, going to business school. And it was during the global financial crisis.

And we just said, let's do it. Let's try it. I mean, we're, I think we're both adventurers, and we just decided to do it and just jumped in and learn the hard way, every which way, and the first company, that's for sure. How many companies have you started? Just two. Just two. Okay.

What is happening with the first company? What was the business and what is it doing now? So it's a company called Passport, and we did mobile payment apps. So first of all, we had the wrong idea at the start, though. We started into parking hardware, way too hard for us with low capital. We went into mobile payments for parking. and everyone thought we couldn't do it because at that time there were two big leaders, Park Mobile, pay by phone that were leading the way.

And, you know, where people in the parking industry were like, you guys just give up. We just didn't. We just kept on innovating and adapting. We invented the wallet functionality. We invented white label. And we just worked our way up. And that company is currently a market leader in that space. That is a private.

It's a private company. Yeah. Got it. I moved out from that company in end of 2015 and then wanted to stay in payments. because I knew payments, but I wanted to go after something bigger. So retail payments. And again, wrong idea at the start. We were trying to do like a Venmo for checkout to lower processing fees.

And then we noticed Buy Now Pay Later, this paying for technology taking off in Australia, we pivoted to it. And it was just a rocket ship from that point forward. I still think there's a lot of misunderstanding about Buy Now Pay Later. I mean, if you look out in the comments areas about Buy Now Pay Later stocks, in our case out in our community and elsewhere, there are, skeptics that think people are buying things they can't afford, and this is a bad alternative. It should never have been brought to market. So maybe explain the difference between buy now,

pay later and typical traditional credit card usage and why you favor BNPL. Yeah, so I think customers are making these purchases anyway on their credit cards if they didn't have BMPL. So I think the difference being that with BNPL, the customer actually feels safer. It also computes to a lower cost product for the customer as well. I don't think they're sitting here with a calculator figuring out, but I think they're figuring out through usage. And here's the reason why I say that's the case. Well, I'll give an empirical example as well, but I think the customer when they use BMPL, the payments are planned. We got down payment today, one at two weeks, four weeks, and six weeks, which matches to these pay cycles for these young customers, mid to low income, like these biweekly pay schedules.

They view it as budgeting. And I think they want to use BNPL. because they don't want to get over their skis. Because what happens with BNPL, the moment there's a missed payment, i.e., you've over-extended, you can't use this anymore. You've got to catch up before you can use this again. So BNPL companies like Sazzel, but I think all of us, we're all 100% aligned with financially allocating credit to these customers. If we overextend them, we also get into trouble.

because if they get too overextended, they're less inclined to want to catch up with us. Now flip that to the credit card companies. I think they're inclined to get people over their skis, which is the very reason why these young customers are afraid of credit cards because if they overspend, they find themselves with end of a month balance. They can't catch up on. They've got to make the minimum payment. They spend more.

And they get into this never-ending cycle. They can't catch up. And the upcoming holiday period is the greatest example of that, I think. For us, our credit decision teams, it's like we're getting ready for war. We batten down the hatches. We pull back limits across the board. We shut off some new customer groups, especially to new products. We really play defense in the holidays to make sure people don't overextend themselves.

I think that's when the revolver is created for the credit card company. I think they don't mind the overextension at that period because now they got a revolver for five years. it's a better product. These days I'm all about quality over quantity, especially in my closet. If it's not well-made and versatile, it's just not worth it. That's honestly why I love Quince. The fabrics feel elevated, the cuts are thoughtful, and the pricing actually makes sense. Quince makes high-quality wardrobe staples using premium fabrics like 100% European linen, silk, and organic cotton poplin.

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I'm pretty clear in my thinking on it, but I do encounter a lot of people that aren't sure about whether this is a beneficial, you know, solution that's being provided in the marketplace. But I see no advantage to using your credit card over BNPL, but I'm sure there is some, obviously larger, some larger payment. You have to make points, et cetera. But I think the average balance on a buy now, pay later, maybe it sezzles around $85 that is not paid.

And the credit card, it's like $6,000. Is that anywhere near close? It's near close. We're in the low hundreds. Okay. I think these are different credit tools for, great at different products or usages and different stages of life. And you can interchange the two as well. Got it. I want to talk a little bit about what will happen to Sezzle during a recessionary period

because there are a lot of questions for Sezal shareholders and of course we're all here as fools. In fact, raise your hand if you own shares of Sezell. Great. We have probably about a third of the room that are Sezell shareholders. So you're speaking to them and then you're speaking to the two thirds that haven't yet been convinced, which is fine. The fear is that there will be a lot of defaults, transactions will slow down, your earnings will get clobbered, and what will happen in it, even just in a normal recession, like a two or three-quarter recession? What do you think happens to Cecil during that? Well, I think, first of all, our customer is more paycheck to paycheck than the average customer anyway, because they're mid-low income, younger. So our CFO, she's always

been in this sort of lending area, and she says, this customer's already in a bit of recession. So they're kind of, you know, in there at situation already, just a level set. But I think here's where the big benefit we have at Sezal versus other companies in the credit space. First of all, incredibly short durations with an incredible amount of data points coming in really fast per customer. So we can detect a customer reaching some sort of financial difficulty early. They get shut off. The moment they miss a payment, they get shut off. Extension of further credit is stopped. Credit card's not the case. They can continue to purchase. So we stopped the extension of credit. We stop the runaway train to that customer. And then we can also, if we're starting to see like

abnormalities in our system, which we see every day, we watch data every day. We see abnormalities. We can lower limits across the board. Again, a tool a lot of other companies cannot do, especially credit cards. Credit cards have to get 45 day notice just to lower a limit to a customer. We can lower limits next hour if we're seeing things we don't like across the board. And then we can also shut off new customer groups or tighten across the board and new customer groups. What the downside might lead to, I think, is maybe lower volumes, maybe at the start. But if you look at a downturn in the economy, I think it actually could pull higher scoring credit groups potentially or people that may not have used BMPL into trying out BMPL.

Maybe a spouse got laid off in that time period. Hey, maybe we should try another, that's other credit products. It might help us in this time period. We might pull more users into the space, which could offset our tightening to the existing customer group and offset that. And then I said the last thing that I think makes, I mean, I'm a big shareholder. This one makes me feel good about our system. We have really strong gross margins already. Great safety factors.

So right now our PLRs are about, you know, 2% kind of running 2% principal loss rates. But our top line revenue percentage is like 11%. And our gross margin per, this is on. on volumes. Our gross margin on volumes, 6% or so. We can basically triple our loss rates and still come out with a profit. I mean, I don't think we'd be high-fiving at the end of this, but we'd be profitable still. Great safety factors. Got it. Can you talk about what your customers are using SESL for to purchase? For example, the natural inclination of a critic, and I understand, is they're buying unnecessary items, and this is just encouraging people to overspend.

But what percentage of it is spent on what you would consider to be basic necessities, for example? Well, I think, you know, it's growing, actually. What's happening is it's growing. So where the business started was we were partnering with e-commerce merchants, getting our product displayed on their website, helping them make the sale. Those types of products initially were like beauty cosmetics, fashion apparel, supplements, You name it across all the internet companies.

Like if you see internet e-commerce companies, that's where Sezzle was and other BNPLs. But Sezzle is a little bit different than the rest of the competition. We started to go to what I call open loop products faster. And what I mean by that is we went direct to consumer and said, hey, you don't have to look, wait for us to find us at a website. You can sign up for Sezzle premium. You can sign up for Sezzle anywhere.

We'll issue you a virtual card. And now you can go tap this card anywhere. And then what happened Tom, when we started issuing these cards, we became more general purpose. You know, people are using us at Target. They're using us a Walmart. They're using this home deep to Los. Everywhere in their lives, probably where they're making something like $100 to $120 purchase, like, oh, let's, I'll sezzle this one and split it up over my paycheck. And that's where we're seeing more and more purchase behavior is toward that just general purpose purchase. Some of the best lessons don't come from a classroom. They come from experience. On the

Power of advice, a new podcast series from Capital Group. You'll hear from CEOs, investors, and founders about how they built careers, took risks, and reinvented themselves. If you're starting your own journey, this is the kind of advice you won't want to miss. Available wherever you get your podcast, published by Capital Client Group, Inc. Two or three reasons that you think somebody would use Sezzle instead of Klarna. Well, I think one is we've got credit building. That's the the tool and the tool about that we really believe in. So we've got young customers, mid to low income, and actually a good number that are new to credit completely.

And so when we launched our BMPL products, all of our competitors were doing nothing with credit reporting. So we decided, let's do that. And the reason wasn't just because our competitors were not doing it. The reason we decided to do it was these are young customers. They don't have good credit scores or they have no credit score. let's help them build their credit scores up. And by the way, so the audience understands,

young people generally have low credit scores. So your credit score grows with age, typically if you look at the profiles. And so you actually want to start building your credit reporting at a younger age because it helps you get your credit score up over time, which gives you access to renting an apartment, buying a house, buying a car.

And when we were talking about it within our management team, we were thinking about this. And I was thinking even about my own family. Like I have a little kid right now, but he's not. But if he was 18 years old, I would have not told him to use Sezzle when he was 18 because I would have been like, you got to build your credit score. And I was like, if I couldn't recommend the very product I'm helping build to my son, what the hell am I building?

You know, so we just viewed it as like this is just the right thing to do. So that's one big difference between us and a Klarna. And I'd say the other big one is the open loop products. I think we just have this fantastic suite of open loop products that reach direct. to consumers. So consumers don't have to wait to find us on a merchant website. When they like the way Sezzle operates and the way the system works, they can just get the card and tap away. And the reason I think that's really important is think about the evolution of or think about a credit card in your wallet. Would you rather have 15 private label credit cards or would

you rather just use your general purpose credit card? I think that's what the BMPL customer is finding. I'd rather just have a general purpose credit card that I can use everywhere. In this case, BMPL. I've heard you speak positively about the competition. We've had two conversations in an interview, and then we had an opportunity to have lunch, both of which I so much enjoyed. And when I hear that from a CEO, obviously one scenario, that CEO is delusional. We don't want any competition. We want to crush everyone, eliminate everyone.

And the other scenario is the market is still so misunderstood and so early on that actually there's a benefit to just people getting in the game with one of the solutions because it's going to open their eyes to the other possibilities. I'm presuming that's more of how you see the market developing or where it is now. And of course, I do like CEOs that admire their competition and learn from them. So maybe talk a little bit about how you think about competition for this stage of the market. Well, I think we're early days still in this market. I think we have like seven to 10 years of growth or strong growth in the BMPL space.

So I think it's going to be a rising tide for all the players. Our view is get our elbows out and gain more of the share of it, i.e. win the game as we do that. And I really view business as like a sport. You know, I kind of viewed as like we're going out to play tennis. Tennis would really suck if you're just hitting up against a board all day. I mean, maybe not in terms of like, you know, we're going to win all day. But you're going to have the monopoly. But it's way more fun.

You wake up in the morning. What's the competition doing? What can we do to out-compete them? I think that helps drive, at least drive me, like, you know, getting up in the morning, what to do, what to do. And I really do believe, Tom, that we have good competition. You know, my last industry passed. This parking space.

I think it was a great industry for me to start in as an entrepreneur. But I almost call it nowadays like the minor leagues of business. It doesn't drive as much talent. And then but you're in the retail payments or the payments industry we're in. Wow. It's the major leagues. And actually I'm thankful that I had passport behind my belt before I came in to Cecil because it better prepared me for this level of competition.

I mean, we've got we've got Clarna. We've got a firm. We've got PayPal. We've got after pay, which is a part of a block now. We've got Zip. I mean, these are all really good teams. So we're always excited to see what they've got. And our goal is still just keep on gaining market share ahead of them.

Well, you're definitely an innovator and a visionary. I'm sure you're operating the business very well as well. But I know you have a lot of ideas. So how far out is your vision, do you think? I mean, obviously, maybe there are flashes of it. But, you know, a tangible vision for Sezzle goes how far for you? And what does it look like? I usually like to think five years ahead, like where we're going to be with our products and services.

And so I think five years from now, we're going to be hitting the same customer group, younger, mid to low income, which by the way is the heart of America. It's like this is a huge percentage of America. And the way I see it is I want that group of consumers to see us as a must have application on their phone. A must have for financial services and a must have for shopping services. and if, you know, they found what their friend does and have the app on their phone, why don't you have Sezell? You have to download it.

Charlie Eukum, the founder and CEO of Sezl, and I will say before we give him an applause, Charlie took a red-eye flight last night and did not sleep at all, and he performs at this level on zero sleep. So Charlie, thank you so much for the half hour. As always, people in the program may have interest in the stocks they talk about

and the Motley Fool may have formal recommendations for her against. So don't buy or sell stock space solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For the Motley Full Money team, I'm Matt Greer. Thanks for listening, and we will see you tomorrow.