PayPal To Acquire Japanese ‘Buy Now Pay Later’ Unicorn Paidy For USD 2.7 Billion

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PayPal Holdings Inc is all set to heat up the ‘buy now, pay later’ race with the purchase of Japanese unicorn Paidy. The deal is worth USD 2.7 billion or around 300 billion yen. The deal will be done principally in cash and will put PayPal in a stronger position in the crowded ‘buy now, pay later’ sector. PayPal said the deal is expected to be finalized in the fourth quarter. The BNPL sector is growing significantly as it allows consumers to spread the cost of goods over a small number of payments. The money returned over the fixed period is usually interest-free. More often, consumers are offered the facility even when they don’t have a credit check.

This service is extremely popular among youngsters. Mainly because they don’t use credit cards and want to repay the money without any interest. Japan is the third-largest market for online shopping in the world. This acquisition will help PayPal expand its distribution and relevance in Japan. This will be beneficial for the company’s existing cross-border e-commerce business in Japan. However, it must be noted that Japan is among the few countries where paper currency is still king.

Commenting on the development, Peter Kenevan, vice president, head of Japan at PayPal said that acquisition will make PayPal a strong player in the strategically important market. “Paidy has excelled in the ‘buy now, pay later’ solutions. It initially tailored the program for the Japanese market but quickly grew to become a popular name. Paidy has now developed a huge two-sided platform for both consumers as well as merchants. Paidy has a talented team and combining its capabilities with the resources and expertise of PayPal at a global scale will result in a strong foundation. This will give a much-needed push to our momentum in this strategically important market,” said Kenevan. Paidy was founded in 2010 and the company has now at least 4.3 million active accounts.

The company has over six million registered users. According to Yano Research Institute, the volume of transactions made through these ‘buy now, pay later’ services is likely to increase manifold in the next couple of years. An estimate suggests that it was around 882 billion Yen in 2020 and likely to be at 1.88 trillion Yen in 2024. Paidy is backed by big names like Goldman Sachs, trading house Itochu and Soros Capital Management. PayPal was also of the companies that had backed the Japanese unicorn. Paidy had recently raised USD 120 million. Following this, the company was valued at USD 1.2 billion.

Chairman and Paidy’s Founder Russell Cummer along with President and Chief Executive Riku Sugie will continue to be in their roles and lead the business even after the acquisition. Moreover, Paidy will continue to work with its existing business and maintain its brand. Reacting to the acquisition by PayPal, Cummer said that there was no better deal than this “PayPal has been working in the field of online shopping for more than 20 years. This acquisition would allow Paidy to continue to grow and innovate. The deal comes at a time when the pandemic has fuelled online shopping and there is a boom in the e-commerce industry. And this is one of the reasons for the popularity of ‘buy now, pay later’ option.

This allows consumers to split the amount of their purchase into smaller amounts without charging any interest. Instead, these platforms make money by charging a small amount from merchants each time a product is sold through the platform. Paidy can be used to purchase products Japanese site of Amazon and it has also tied up with Apple Inc. The Paidy deal comes close on the heels of Square acquiring Australian firm Afterpay. Square is a company founded by Twitter chief executive officer Jack Dorsey. The deal was finalized for USD 29 billion.