PayPal, the global payments giant, is poised to enhance its market position in Japan through the purchase of Paidy, a leading ‘buy now, pay later’ firm, for a sum estimated at 300 billion yen ($2.7 billion).
This strategic move aims to bolster PayPal’s capabilities in the significant Japanese e-commerce market, as outlined in a company announcement.
The deal, to be settled in cash, is anticipated to have minimal impact on PayPal’s adjusted earnings in 2022. The transaction is likely to be finalized in the last quarter of the year.
Paidy’s initial brainchild and current executive chairman, Russell Cummer, alongside President and CEO Riku Sugie, are set to maintain their dual roles steering the company’s course.
BNPL services accounted for a 2.1% share in the worldwide e-commerce payments market in 2020, according to research by FIS.
In the robust Japanese retail online marketplace—ranked third in online shopping volume globally—cash still holds sway, with about 75% of transactions conducted with physical currency, a trend PayPal has noted. With around 4.3 million active PayPal accounts in Japan, the Paidy acquisition is expected to significantly grow the company’s domestic payment operations.
With Paidy, customers can make purchases without the need of a credit card, opting to repay by cash in manageable installments at nearby convenience stores—a unique service in Japan.
Prior to its acquisition, Paidy reached a valuation of $1.2 billion as an unlisted startup, following a funding round of 13 billion yen ($120 million) in March led by the Soros family fund among others.
“We couldn’t envision a more fitting environment than PayPal, which has been smoothing out the online shopping experience for over two decades, for Paidy to continue flourishing and innovating,” Russell Cummer commented on the partnership.
The BNPL segment offers payment deferral options with no fees for a set period, generating revenue from merchants for each consumer adoption. Amid an e-commerce surge due to the pandemic, BNPL’s popularity has skyrocketed. BNPL’s share of the e-commerce payments is projected to expand to 4.2% by 2024 from 2.1% in 2020, as per financial services firm FIS.
Other significant players in the BNPL arena include Jack Dorsey’s Square with its $29 billion acquisition of Australia’s Afterpay, and Sweden’s Klarna, which raised $639 million in June, bringing its valuation close to $46 billion.
Moreover, PayPal has not lagged, operating its in-house BNPL service which has already processed transactions exceeding $3.5 billion.
Among Paidy’s financial backers are Visa Inc. and Japanese corporation Itochu Corp. “Paidy has been at the forefront of custom-tailored BNPL solutions in Japan,” said Peter Kenevan, head of Japan at PayPal. “Merging Paidy’s innovative brand, expertise, and team with PayPal’s international resources and knowledge base will lay down a solid foundation to boost our growth trajectory in this strategically critical market.”
