Australian buy-now-pay-later (BNPL) player Zip has dropped its previously announced merger plans with US-based rival Sezzle.

The news comes as the BNPL space continues to face losing investor interest and strengthening regulatory pressures amid difficult market conditions.

Zip agreed to take over Sezzle in a $352.59m (A$491m) deal in this February in a bid to bolster its US operations and remain competitive in its most important market.

The deal was expected to deliver substantial synergy benefits to drive profitability for both companies.

The two firms agreed to terminate the merger agreement because of “current macroeconomic and market conditions”, according to a report by Reuters.

Zip, which owns the Quadpay brand in the US, said that its decision to pull the merger is in interests of the firm and its shareholders, and will enable it to focus on its strategy and core business.

Last month, the firm said in a trading update that it was raising fees and reviewing global operations outside the US, but that “the acquisition of Sezzle remains on track”.

Sezzle CEO Charlie Youakim said that the firm remains focused on driving toward profitability and free cashflow.

“We believe this is the best outcome for our shareholders,” Youakim added.

In November last year, Zip acquired Central European BNPL provider Twisto Payments.

In September, the firm made a strategic move into the Indian BNLP space with a $50m investment in fintech ZestMoney.

The same month, Zip struck a deal to acquire BNPL firm Payflex to further expand its footprint on the South African continent.