On this episode of Thriving at the Crossroads, we have Charlie Youakim, CEO and founder of Sezzle. He was our guest back at episode one, and we talk to him now about how Sezzle has grown since we last talked to him.
Listen to the episode here:
TATC Ep 21 – Checking In On The Growth Of Sezzle
Today, we are welcoming back Charlie Youakim, CEO and founder of Sezzle. Welcome to the show today, Charlie.
Thanks for having me.
This is the first time I’ve brought a guest back. I’ve brought Charlie back today because he was guest number one. He was my first victim on the podcast for the first time. He said, “Sure, I’ll record this random podcast with this person starting something up.” I’m excited to hear more about what you guys had been up to. Before we get to that Charlie, why don’t you tell our audience about Sezzle? What is Sezzle?
Sezzle is an alternative payments platform. It’s probably the best way to describe it. We’re very similar to PayPal. Essentially, a PayPal 2.0 for eCommerce; a button in the checkout where you’ll see Sezzle. When you click on Sezzle to pay with us, it’s very eCommerce-centric. It’s a next generation payment platform. You type in your mobile phone number and we secure it with phone and pin. We ask you to sign in to your bank to pay with Sezzle. The reason we do that is because interchange or credit card processing with Visa, MasterCard, it’s an expensive endeavor for our merchants. I was one of those merchants in my prior company. There’s a lot of pain around fees for merchants. That was the inspiration for starting the company, “Let’s try to solve the pain.” The way that’s solved is basically bypass. We’re using the bank to pay. When you pay your friend with PayPal or Venmo, it’s a similar process.
You’re really the guy that says, “I’m creating a new payment instrument, effectively. It’s not a credit card. It’s coming straight off of your bank, like a direct debit or something to that effect.” I think one of the best parts, to recap our audience, is the fee difference. As a consumer, I don’t directly see the fee. Let’s talk about it from the merchant’s side. How big a problem are fees for merchants?
Fees, especially for smaller merchants online, is a big problem. 2.9% plus $0.30 per transaction is the quoted fee out there for small merchants. It can actually get higher if you’re in “higher risk industries” or industries that are frowned upon.
What does that mean?
Selling tobacco, guns, or anything that’s on the fringe. It can get higher. It can get lower. If you’re a really high volume merchant, you can probably get somewhere to 2.2%, in that range. It’s still a painful endeavor for merchants. I still remember the first merchant processing invoice I received in my last company. I was like, “Whoa.” What they told me they were going to charge me isn’t what I ended up getting charged. It was effectively 25% processing rates, but then we were doing small transactions. It really blew me away and it stuck with me.
For a lot of merchants, especially the small ones we’re talking with a lot lately, they are unhappy with the fees. Our fee is 1.5%. We’re almost half the rate. We’re going to come at you with half the rate of the traditional methods. We’re able to do that because we’re using bank payments. We’re only charging 1.5%. We are passing on 1% to the consumer to use our system too. We’re really taking that value that we’ve created and trying to distribute it amongst the stakeholders involved. Giving a lot back to the merchants for choosing us and giving some back to the consumer for using us.
It sounds like, given that it’s coming straight off the bank account, I find it attractive that it comes right off my bank account, because who wants to get in any more credit card debt? If we look at some of the consumer rates and the amount of credit card debt, it seems like it would be pretty attractive for anybody that says, “Just take it out of my account. I can’t overspend.” Then you give them a kicker of 1% back. Really, it’s a deal upon a deal. I don’t overspend on my credit card and then you’ll also give me a little magic back, a little extra bang for my buck.
Actually, debit is the fastest growing payment method. It’s especially the strongest payment method or has the strongest growth in young people in the United States. There are a lot of theories about why that’s happening. The millennial generation is really skewed towards debit more than any of the other prior generations. Some of the theory is they saw what happened in 2008 and 2009. It was scary, the amount of debt people took on and how much problems it cost. Also, the increasing cost of school and the amount of debt because of school fees rising. I’ve always though potentially too, it’s the generation of, “I want it now.” If you sign up for a credit card, you have to wait. For whatever reason, it’s skewing towards debit, probably a lot of it has to do with the backlash against credit. If you pay with debit, you’re almost getting punished.
The rewards go away in a lot of cases.
All those rewards programs push up the fees for merchants. Essentially, all the debit card users are subsidizing and giving points to credit card users. One of the things we’ve talked about with Sezzle and our ability to give rewards back is that we’re changing that. We’re going to start giving rewards for paying in a physically responsible way. You’re no longer shunned away for paying in a physically responsible way. You can still get those rewards. Actually, we give 1% cash back, it’s our base reward. All of our merchants thus far have opted in for in-store credit. When you shop with them through Sezzle, you get 5% or in some cases, 10% in-store credit through our system.
That’s a pretty incredible deal if you think about it.
We’re actually helping the merchants on cost savings and on top line too. We’re creating some stickiness with their customers. You can accumulate those points, come back later. When you’re making a choice between which merchant to go to, in the back of your mind, “I got some points with this merchant.” It’s easy to get. It’s just pay and you’re getting those points.
Last time we talked to you, you were just getting started in effectively the beta. You were going on Shopify, very first merchant said, “We don’t even have results yet.” You were so early.
It was just an idea. It really was. We were putting a team together, finishing our funding. Actually we didn’t finished our funding at that point but we were on our way. The company started in January. We finished our funding in November. We ended up raising almost $2 million, which is awesome. Then put the team together. That was harder than I thought. It was more of a roller coaster. We launched in the middle of February. We’re just six or seven weeks into our system. We’re still on Shopify. Shopify has worked out well.
What have you learned off that Shopify experience? What are some of the key takeaways? As you’re a brand new startup company, what were the takeaways from that first interactions on the Shopify?
It was a good choice for us. I think picking a platform that’s on the rise is a smart move for a young company. They made a lot of things easier for us, like getting connected with merchants. The implementation phase would have been a lot more difficult if we didn’t have a consistent platform on the install. At that part, getting our button installed was easy. That was a success. Shopify themselves, because they’re on the rise and they’re a public company, I wouldn’t say they gave us much attention. That’s probably the downside as a startup. We saw obvious problems. One problem, and this is us being probably super picky, but it’s a problem. Our button was a little bit out of focus. We uploaded our image. It was a little bit out of focus. We asked them to help us fix it. We’re still waiting for it. This is two and a half, three months later. We’re squeaky, we’re making a lot of noise.
Those are probably the tradeoffs in that choice. We have a lot of challenges as a platform. A platform business has two customers essentially. We’re really B2B2C, but the B and C are really important to us. Merchants love our platform. We’re trying to solve the consumer side right now. Actually, we’re just talking about this before the podcast, if the audience have ideas on what gets you to click on a payment button or what gets you interested or what are the pain points of the payment side for you, we’d love to hear your feedback.
We’re looking for audience participation on this one. We would love to hear what makes you click on the button.
Why do you choose the payment you use? What would make you choose a new one? Do you have pain on that side? Is there any pain? It’s important to us.
Where do you go next? You first started it with Shopify. Now, are you available say, if a corporate listening to this on their own eCommerce channel wants to add you as a payment channel, is that available now? It wasn’t before. Are things like that available?
It’s really close. We’re publishing our API. It was actually planned for the end of this month. Actually, we’re getting it done within the time period. That’s probably in a couple of weeks out. We’ll have our API that someone can consume if they want to put it on their site. We actually just did a research project on what platform we should move to next. Not that we’re leaving Shopify any time soon, but we’re just planning.
You’re rolling out into other places.
We’re planting the groundwork for the next site. It looks like Magento community is our next choice. It skews a little bit higher for merchant size. It’s also an open platform. That’s probably next in our game plan. I don’t think it’d be anytime over the next six months. We’re probably going to stick on Shopify for a while just to grow that merchant base, and then really focus on consumers.
As a company, we know that merchants love our value proposition where our fees are half. They’ve been really responsive and receptive towards that. We’re really, as a company, focused 100% on the consumer side. What value propositions get people to click through, what we’ve changed to lift that, just what’s their sentiment and what they want. That’s what we’re focused 100% as a company.
You’re available, not quite yet, coming for corporates, platforms like Shopify. What about other eCommerce sites? If other large sites wanted to approach you, will that come in that same API that the corporates will use?
Yeah. When we have our API public, if an eCommerce platform wanted to implement us, they could do it themselves. That’s where the API really helps a lot. We actually just talked to a small eCommerce platform at Shoptalk, we were at a conference last week, it’s called Reaction Commerce. It’s a new open source eCommerce platform. That’s a company that might actually do the groundwork to implement us because they’re trying to add features to their platform. With that API out there, they can implement it. That might be one of our newer additions.
What has surprised you the most about this process that you’ve been through and as you look to grow? What did you not expect when we last talked that you’ve learned in that subsequent time period? That was October. You haven’t launched yet. I know it’s like dog years. For startups, one month is like 10 years.
Sometimes it feels like you’re going so slowly internally, and then when you like step out and look back, “Maybe we weren’t going that slowly. Maybe it was going pretty fast actually.”
I think it’s moving pretty fast. You’re up on Shopify. You’re available for people. You’re adding merchants. What has been the merchant that has either made you laugh the most or surprised you the most that has signed up during that time? Any interesting types of merchants you’ve had?
We definitely have interesting merchants. Probably our best merchant right now is Head Shop. They sell tobacco pipes, water pipes, if you know what I’m saying. The site is called Thick Ass Glass. It was actually a great story to talk to the founder too because he started the company three years ago or four years ago in his bedroom, basically. He’s a super small startup and now they’re doing really good business, a few million per year in sales. Just to hear that as an entrepreneur myself, that’s a really cool story to hear, starting from nothing and starting a business up. Actually, they are our highest volume shop for our merchants. We have a shoelace site. We have a company called Swannies who are up here in Minnesota. They sell golf gear for younger people. We’ve talked to the most unique merchants. We’ve talked to all these small merchants. One site was called Graveside Flowers. The niche is like selling classic flowers. The business is doing great. It’s really interesting. Shopify is helping a lot of small merchants become bigger merchants. It’s really cool to see the diversity in stores.
You’ve had some pretty fun customers?
It sounds like business is going well. You’re looking for some help from our audience, get some feedback. This is your chance to actually influence a product. You don’t get that chance as a consumer very often. This is a brand new company, influence it away.
We’re open ears for sure. We are watching like hawks on the consumer process when they use our product, where there is a question mark in the process. They can probably go into our apps and stuff and start doing things like, “They don’t get it. They could probably figure this out.” You overreact to everything little thing you see in your site.
We’ve all had those sites, we’re like, “I don’t know what button to click,” and you struggle with it. Usability is such a huge deal. I imagine that you’re obsessive about watching these.
The tools nowadays are ridiculous. Starting the last company in 2010 to now, starting a company in 2016, 2017, the tools you have are just, it’s like light years. It’s only six years apart. It’s really cool to be involved in tech right now.
To be able to see and learn from what users are doing so that you can improve it. Improve your designs and learn from it and do better. Hint, hint for a lot of my audiences, there’s some large software providers that can probably learn from that. ERP is our market. Everybody knows the crowd I’m talking about.
Thank you so much, Charlie, for joining us today. Tremendously appreciate it. We look forward to checking back with you again as things develop.
Thank you. Really appreciate it. It’s been a lot of fun.
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