UX Report for Sezzle: Competitive Analysis

Team 16: 4U

Authors: Alexa YoonSeon Yi, April Shin, Jesi Zhang, Sunny Kim

March 12, 2019

Word count: 2975

Table of Contents

Table of Contents 1

Executive Summary 2

Introduction 2

Methodology 3 Direct Competitors Partial Competitors Parallel Competitors Indirect Competitors

Findings 6 Direct Comparison: Klarna, Afterpay, Quadpay Partial Comparison: Bread, Affirm, Zip-pay Parallel: Samsung Pay, Apple Pay Parallel: Alipay Indirect: Credit/Debit Cards

Recommendations 9 Discussion 12

Conclusion 12 Appendices 13 Appendix A - Competitive Matrix Appendix B - Functionality Comparison Chart Appendix C - Account Setup - Afterpay Appendix D - Account Setup - QuadPay Appendix E - Initial Account Setup - Klarna

Appendix F - Future Payment Tracking - Klarna, Quadpay, Afterpay

Appendix G - Apple Pay Wallet — Walgreen and Salads Up

Executive Summary

This report focuses on the methods used to evaluate the competitors of Sezzle, as well as our findings and recommendations. In order to properly evaluate the competitors, we grouped them by functional similarities and placed them into four categories: direct competitors, partial competitors, parallel comparisons, and indirect competitors.

By having all competitors in each category, we developed 19 criterias by which to evaluate these services based on values found in our user research. We drew a table that clearly compares the functionality of competitors and Sezzle. Based on our findings, we further developed a competitive matrix to better understand the core differences between Sezzle and the competitors, and ultimately found the opportunity areas including key findings and recommendations.

We found that each competitor has experienced growth in their businesses by focusing on the target population and strategically partnering with merchants according to core needs of target users. There are five key recommendations we highlighted in this report:

1. We recommend that Sezzle should clearly re-define target population and from there, should actively seek out strategic partnerships with retailers. 2. We recommend that Sezzle should provide tailored benefits, perks, or reward for target users, which can be stood out from other competitors. 3. We recommend Sezzle to simplify the initial account setup process and provide visual overview to help users easily keep track of future payments due. 4. We recommend Sezzle to offer more flexible payment cycle to users for a better user experience. 5. We recommend Sezzle to offer a variety of omni-channel features that users can use both on and offline stores.

Introduction

Sezzle is a payment platform that offers buy-now and pay-later feature when users make online purchases. After users select using Sezzle to pay on the shopping website, Sezzle allows users to have 4 interest-free installments payment option. The 25% of the purchase is paid at the time of the transaction, and the remaining 75% are scheduled every 2 week until all is paid.

An overarching goal of our comparative evaluation is to better understand how Sezzle works as a buy-now pay-later online payment method and what the weaknesses and strengths are compared to other competing payment platforms. The below are our core research questions:

● Compared to Sezzle, how do other online payment methods vary on factors such as partnered merchants, UI elements and payment plans? ● What are the weaknesses and strengths of those competitive online payment methods? ● What features help enhance user experience while using the third platform to make online purchases and potentially apply to Sezzle for future improvements?

Methodology

After analyzing the data gathered from our user interviews, we began our comparative evaluation by generating a list of buy-now pay-later platform comparable to Sezzle.

As Sezzle plans to develop mobile application and provide in-store payment options, we sought out competitors that offered one or both of these capabilities. We finalized our list to focus on 12 competitors to investigate whether there were certain valuable usability features that could cross over effectively to Sezzle.

Using Mark Newman’s taxonomy of comparisons, we refined our list into four different categories, as follows:

Direct Competitors

● Klarna is an interest-free installment payment platform allowing users to split over four equal biweekly payments or flexible month-to-month payments. ● Afterpay offers four interest-free installment payments, partnering with top retailers including Forever21, Urban Outfitters and Revolve. ● Quadpay allows users to split the purchase amount into four interest-free payments, spread over six weeks.

Partial Competitors

● Bread helps retailers offer pay-over-time solutions as a way to build stronger consumer connections, power sales, and improve brand loyalty. ● Affirm allows shoppers to make monthly payments at a rate between 0–30% APR based on users’ credit and available promotions.

● Partial.ly targets business enterprises to better manage their sales and business flows by providing flexible payment plans with user-specific down payment, duration, and frequency. ● Zip Pay offers interest-free purchases with user-catered budget and flexible payment plans. It sends monthly statement in the beginning of the month allowing users to pay upfront or pay over time with $40 minimum monthly payment. ● Paypal provide easier and faster online checkout experience for shoppers by linking, saving and auto-loading users’ credit/debit card information.

Parallel Comparisons

● Apple Pay uses NFC technology to allow mobile and in-store payments for Apple device users. ● SamSung Pay is a mobile payment system utilizing both NFC technology and magnetic stripe readers. USers receives Samsung reward points additional to their credit/debit card benefits. ● Ali Pay is a Chinese one-time payment platform providing easier e-commerce experience in online stores and between users. Users can scan QR codes or use Face ID verification for in-store purchases.

Indirect Competitors

● Credit/Debit Card offers a wide range of choices allowing users to build credit scores and offering difference APR, annual fee and benefits.

Next, we developed criteria by which we would evaluate and compare the features and characteristics of these products. We used the findings and recommendations developed from our interviews to guide our investigation of common features amongst these platforms. Since many of our interviewees valued services that featured content breadth as well as viewership flexibility, we developed a matrix (Appendix B) on the presence of the following features:

● Can only use after login ● # of information required for signup ● Approval duration for Account setup ● Walk through / manual ● # of partnered merchants ● Partnered merchants categories ● Interest rate ● User Interface ○ Attention grabbing CTA button ○ Consistency on different merchants ○ Quick overview guideline on how to use the platform

● # of required information for check-out ● Auto-saved information ○ Convenience vs. Security ● Payment Cycle Flexibility ● Security measure for each transaction ● Budget limit for each transactions ● Payment confirmation message ● Payment Reminder ● Punishment for late payment ● Mobile Application ● Domestic vs. International ● In-store payment availability

This matrix allowed us to not only track and compare the availability of common features, but also to develop a 2x2 space in which we compared the dimensions of payment cycle flexibility and conveniency of initial account setup. (Appendix A).

Findings

By investigating the key features and characteristics of our competitors, we analyzed the strengths and weaknesses of current Sezzle product including account set-up process, partnered merchants, UI elements and installment payment cycles. Then, we discovered the following findings for different payment platforms and suggestions on potential improvement.

1.Direct Comparison: Klarna, Afterpay, Quadpay

Sezzle has three main direct competitors that provide 4 interest-free installment payment method: Klarna, Afterpay, and Quadpay. All three competitors are offered as payment options in the checkout where users can either sign up by selecting the platform as a payment method or creating an account ahead of time. They are partnered with B2C merchants in various categories such as apparel and beauty, travel, technology, and sports.

Klarna offers three type of payment options for its users on online purchases: “Pay after delivery,” “Pay now with card,” and “Pay over time.” Klarna account holders can spread their payments overtime with any of partnered merchants who provide the “pay over time” option at checkout. “Pay after delivery” option allows customers to have their order delivered to them before they pay with a 30 day payment deadline. Klarna provides simple initial account-setup process by only requiring email address. In its mobile application, users can access to-do lists that where they can visually track upcoming payments.

Afterpay is offered in a large breadth of retailers, with over 14,000+ merchants including Urban Outfitters, Forever21, and Revolve. Users pay for their online purchases over $35 in four equal installments due every two weeks and receive the purchased items immediately. Most first-time customers are typically given a $500 spending limit and users can’t spend more than $1,500 through the service. Using its mobile application, users can keep track of their future payments and view them by upcoming deadlines: 15, 30, 60 days. Users can also use this platform in offline retail stores within the maximum budget allowed to spend in-store. Users can access the unique barcode on mobile app and scan at the register in order to be automatically charged user’s first installment.

Quadpay splits users’ purchase into four even payments without interest and charge users 25% of the item's price upfront. It uses automated system to approve the customer and provide spend limit for each users. Initially, users can sign up to use the platform by providing date of birth, mobile number and card information.

All three platforms send multiple reminders in regards to users’ upcoming payments via mobile and email. Additionally, they have penalties for unpaid transactions before the due date.

2. Partial Comparison: Bread, Affirm, Zippay, Paypal

Sezzle has four partial competitors that provide customers several options for interest-free installment payment method: Bread, Affirm, Zip Pay, and Paypal. They provide similar functions, however, do not offer the exact same service compared to that of Sezzle.

Bread helps customers pay for their purchases over time by making easy-to-understand monthly payments. The function called, Bread’s full-funnel solution, gives enterprises a better way to attract more customers by offering a diverse options of financing and checking-out options.

Affirm provides users the flexibility to pay over time for the most important purchases on a schedule that fits their budget. It tries to provide the lowest interest rate or late fees allowing shoppers know that the amount they see at checkout what they will pay in the end.

Zippay helps customers to create tailored personal payment plans suited to their lifestyle. Every time a user makes a purchase, Zippay adds it to his or her personal account. At the beginning of the following month, Zippay sends customers a summary of what they’ve spent and what they need to pay that month.

Paypal enables individuals or businesses to securely, quickly and conveniently make payments online and receive payments via email. It has cooperation relationships with more than a million merchants and supports trading in up to 23 currencies in 190 countries and regions around the world. Paypal usually saves user’s personal information including payment card preference, shipping address and billing address; which efficiently shortens the process time for online purchases.

3-1. Parallel: Samsung Pay, Apple Pay

Sezzle has two main parallel competitors that provide mobile payments and digital wallets: Apple Pay and Samsung Pay. They are widely accepted in many countries including the United States. Both of the services are partnered with B2C merchants.

Apple Pay allows users to make purchases in iOS apps, on the web, and in retail stores. It is mainly supported in Apple’s products such as iPhone, Apple Watch, iPad and Mac. For Apple device users, the service is already set up through the Wallet application. Thus, users simply

need to add cards using the built-in camera and can quickly access the digital cards in stores when needed. The service is compatible with NFC (Near Field Communication) technology for payments, meaning that it covers over 50% of the retail stores in the United States.

Samsung Pay also allows users to make payments using its application to add their credit, debit and gift cards in Samsung devices. Unlike Apple Pay, which only relies on NFC technology for payments, Samsung Pay is also compatible with magnetic strip readers, allowing users can use the service anywhere that accept credit and debit cards. Moreover, users can receive Samsung Rewards points through their purchases on top of credit card rewards. These points can be redeemed for Samsung products and gift cards.

3-2. Parallel: Ali Pay

Ali Pay is a Chinese platform offers services both in online and offline stores. Alipay automatically creates an identical QR code for both merchants and consumers, which could be conveniently used for future transactions. When consumers make purchases, they either need to present the personal QR code to the merchant or scan the merchant’s QR code and make account connections for future transactions. Then, the users would be asked to use Face ID verification to confirm the final transaction/purchase. The entire process takes less than 1 minute to complete but the security is under warranty.

4. Indirect: Credit/Debit Cards

Sezzle has indirect competitors that allow users to make payments through a different medium: credit and debit cards. Although digital payments allow users to make payment directly from a device at a point of sale, physical cards are still widely used at brick-and-mortar stores. Unlike debit cards, which directly transfers the money from the cardholder’s bank account when making a payment, credits cards allow users to borrow money from the card issuer. Depending on the banks, credit cards provide a variety of interest rates. If users fail to make the minimum payment by the due date, the issuer may charge extra fee, which could possibly lower the credit scores when neglected. The core benefit of using credit cards is that most issuers provide a variety of rewards program for users. However, many users find it inconvenient to carry physical cards. Unlike digital cards, which require users’ mobile authentication, lost or stolen cards can be easily used by a thief.

Recommendations

1.1 Re-define target population more clearly

The majority of competitors clearly demonstrate their target population. For instance, although Afterpay covers a variety of retail business partners and customers including men or kids, its service focuses on female shoppers who are interested in fashion and accessories. It has been attracting more target customers by providing tailored advertisement for their target population on its website. Identifying target populations would not only attract more customers among targeting segments but also help target customers build stronger trust and loyalty to the service.

While our team was carefully examining and exploring Sezzle, we figured that Sezzle’s target population sounds ambiguous. Even if Sezzle advertises itself as a service, particularly for the millennial generation, the term seems too general; we figured that each millennial population has too many, and too different needs when using the service. We also read numerous user reviews where many users who have been using Sezzle is not defined as a millennial generation. In this regard, we suggest that Sezzle be more specific in determining the target population. This would help the service build better brand identity and attract more users among target populations.

1.2 Actively seek out strategic partnerships with retailers based on needs from target population

Once the brand clearly defines the target population, it is imperative that the company strategically partner with retailers who can fully satisfy the needs of these population. In the case of Afterpay, they explicitly acknowledge their target population who are in mid-30s-40s who raise kid. They strategically partner with retailers such as kids clothes or toys. We suggest that Sezzle should actively analyze the target users’ shopping behavioral patterns and their needs for the service, and ultimately be able to partner with top retailers where target users visit the most.

1.3 Provide special and customized benefits to users

Direct competitors like Afterpay periodically offer customized benefits, discounts, or rewards to their target users. It is contingent upon careful data analysis of the target population’s consumption behavioral patterns. One of the strong indirect competitors, credit card companies,

attract many customers by offering tailored benefits - cashback, coupons, rewards, and perks. We suggest that Sezzle should also be able to provide some customized benefits to target users which can be exceptionally stood out among competitors. According to our user research, personalized benefits, rewards or perks have been one of the most effective ways to attract more users and build loyalty to the service.

2.1 Simplifying the initial account setup process

All direct competitors provide short initial account set up process on a mobile application (Appendix C, D, E). We suggest Sezzle reduce requirements on initial information to the email address or phone number, allowing users to add further details later and putting less pressure to potential users.

2.2 Provide visual overview for each users to easily keep track of future payments due

We suggest Sezzle provide user-friendly dashboard where users can easily budget and track all of their e-commerce transactions. Direct competitors use different visualizations to organize all orders that each user has made and how much payment each user owes (Appendix F). These visuals would highlight where the users are within the total 4 installments and help users to understand their current financial status using the platform.

3.1 Allow users to have flexible payment cycle based on their payment history

We found that direct competitors - Klarna, and all the partial competitors including Bread, Affirm, Partial.ly and Zippay provide flexible payment cycles whereas Sezzle does not. For example, Zippay lets users choose to pay any amount at any time. Sezzle could also allow users to have more extended payment plans and pay a smaller amount of each installment. Meanwhile, to control the whole time frame, the degree of changing or expanding their payment cycles could depend on individual user’s past payment history with Sezzle.

3.2 Provide users more choices on the amount of each installment

There is another potential option to improve user experience during the user’s payment cycle, which is to provide users choices on arranging their payment amount each installment without

changing the 6-week payment time frame. Users may DIY their payment plans on the first checkout from their assumptions on the financial state in the following two months. On the last payment date on the schedule, users have to pay the rest of the installments to complete the full amount of the purchase.

4.1 Provide convenient and quick ways to access the payment service in brick-and-mortar stores to achieve enhanced omni-channel experience for users

Parallel competitors like Apple Pay allow users to add not only credit/debit cards but also loyalty cards, gift cards, tickets, and coupons. Once registered in the Wallet app, users can also opt to have the loyalty cards appear automatically on the screen while they are in-store. In order for corporations to utilize Apple Pay, they must provide iOS applications where users can download the rewards cards (Appendix G: figure 1). Once Sezzle develops the application, connecting its service with third-party digital wallets may increase its business by attracting omnichannel retail customers who purchase in a variety of non-traditional ways.

For example, Salads Up, allows users to save their credit card information and provides a ‘Salads Up Card’ in the form of QR code, which can be added to Apple Pay Wallet (Appendix G: figure 2). This QR code card is a combination of the rewards card and credit card. Hence, when users try to make a payment and gain rewards points in the restaurant, they only need to access the QR code in the Wallet app by double-clicking the side button.

Discussion

Due to the complex market structure of Buy-now pay-later platforms, there are several limitations in writing a comparative evaluation for Sezzle. If Sezzle extends its 4-months payment cycle to more extended periods (i.e., 6 months, 12 months), users with the lower monthly budget could benefit as it gives them more time to pay off their purchases. However, we have to consider the business model as this extension could significantly influence Sezzle’s sales due to the drop in dollar amounts for each transaction.

There are some limitations associated with the geographical locations of the competitors. For instance, Alipay and Zippay can be only used in certain countries. As these companies target different demographics and cannot be used in the United States, they may target consumers with different preferences and shopping behaviors. However, the cases may still be considered and benchmarked into the Sezzle’s payment model.

Furthermore, as Sezzle currently doesn’t have a mobile platform, we were unable to compare the exact functionalities with its competitors. Our analysis was limited to features within the competitor’s existing mobile application and in-store availability options. While we were able to suggest potential features for Sezzle’s mobile app, we acknowledge that there are limitations in comparing what services are currently being offered in the market.

Conclusion

In this report, our group conducted a thorough competitive analysis with 12 competitor’s products for Sezzle. It helped with understanding the functions and characteristics of each competitor’s products, which were differentiated from that of Sezzle. By comparing these products, we were able to find several key findings, and based on there we provided recommendations. We would like to highlight that our recommendations can be subjective. We hope that what we discovered can be proper guidance on how Sezzle can strategically market in the future.

Appendix A: Competitor Matrix

13 Appendix B: Functionality Comparison Chart

14 Appendix C : Account Setup - Afterpay

15 Appendix D: Account Setup - QuadPay

16 Appendix E: Initial Account Setup - Klarna

17 Appendix F: Future Payment Tracking - Klarna, Quadpay, Afterpay

18 19 Appendix G: Apple Pay Wallet — Walgreens and Salads Up