Buy now, pay later (BNPL) business Sezzle hopes to save millions of dollars by scaling back its operations in Europe, stopping payment processing in India, and spinning off its Brazilian arm, as it continues to burn through cash.

ASX-listed Sezzle is merging with larger BNPL firm Zip, at a time when share prices in the sector have collapsed due to changing interest rate expectations, putting pressure on loss-making operators to turn a profit more quickly.

In a quarterly update, US-based Sezzle said merchant sales on its platform rose 20.1 per cent in the year to March, while income was up 6.2 per cent to US$27.6 million.

Sezzle, which provides instalment loans to consumers, said provisions for bad debts were consistent with this time last year.

As Zip also cuts costs ahead of the merger, Sezzle said it hoped to save at least US$17 million by scaling back in Europe, stopping operations in India, spinning off Brazil, and cutting jobs, which it had previously announced.

Sezzle said its total cash on hand fell US$18.3 million to US$60.6 million in the quarter. It used US$26.2 million in financing activities while making US$7.8 million from operating activities.

While investors bid up the value of loss-making BNPL businesses last year when interest rates were at record lows, the expectation of higher rates has caused investors to slash the valuations of these businesses.

Sezzle shares were down more than 70 per cent this year to 82c before rising as much as 10 per cent this morning to 90c after the announcement.

Sezzle chief executive Charlie Youakim said the company was taking “decisive actions to move toward profitability and free cash flow as expeditiously as possible.“

“With over US$98.0 million in liquidity, between cash on hand and availability on our line of credit, Sezzle is well funded for current operations and future growth opportunities.“