The Buy-Now-Pay-Later sector has been experiencing a pandemic-induced boom and investors are in a race of claiming the highest spot in the industry. American multinational financial technology company PayPal Holding Inc has revealed plans to buy Paidy – a Japanese Buy-Now-Pay-Later firm, in a $2.7 billion largely cash deal.
The Buy-Now-Pay-Later industry has been experiencing quite a boom, coupled with the fact that the pandemic is still ongoing. PayPal already offers a wide range of financial services including the buy-now-pay-later service and hopes to gain market dominance in Japan with its acquisition of Paidy. Japan is currently the third e-commerce market in the world and has seen tremendous growth in online shopping. According to what PayPal said in a presentation to investors, acquiring Paidy will enable the company to expand in a country that already has large online shopping volumes. PayPal also emphasized that the e-commerce market in Japan has seen shopping volume triple over the last ten years to about $200 billion and that these payments are done majorly in cash.
In its Tuesday statement, PayPal said that “The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third-largest e-commerce market in the world, complementing the company’s existing cross-border e-commerce business in the country”.
PayPal’s decision to acquire Paidy comes on the heels of its rival – Square’s acquisition of AfterPay. AfterPay is an Australian BNPL firm that Square acquired for $29 million last month. The deal marks the beginning of Square’s dominance in the sector.
PayPal stepped up its challenge to rival Afterpay by launching a “buy now, pay later” option, which will not charge late payment fees in Australia. The interest-free buy-now-pay-later option, known as ‘PayPal Pay in 4’ in Australia, has lowered its minimum purchase value from A$50 to A$30. With this, PayPal hopes to toughen the competition with AfterPay, and now that AfterPay has been acquired by Square, the competition is now against Square.
With over 6 million registered users, Paidy is one of the biggest and fast-rising e-commerce brands in Japan. It offers services that enable Japanese shoppers to buy goods and services online and provides a platform for them to make payments via a bank transfer or convenience store on a monthly basis.
PayPal has enjoyed a pandemic-induced boom as people were pushed to using online options to make purchases and pay for bills. Acquiring Paidy will help it become a strong contender in the Japanese market as well as consolidate its position in the market.
Paidy is already a strong contender in the Japanese space and is backed by Soros Capital Management, Visa Inc (V.N), and Japanese trading house Itochu Corp. It will continue to operate its existing business and maintain its brand after the acquisition and key people like Founder/Chairman Russell Cummer and CEO Riku Sugie will keep their roles in Paidy. According to a report by Financial Times, Paidy was already considering an Initial Public Offering (IPO).
The PayPal-Paidy deal is expected to be closed in the last quarter of this year.