PayPal Acquires Japan Fintech Company Paidy in US$2.7B Acquisition Deal
PayPal will soon be expanding its operations in Japan after recently closing an acquisition deal with one of the country's leading fintech companies.
The company announced on 7 September 2021 that it has agreed to acquire Paidy, a startup fintech company that pioneered buy now, pay later (BNPL) payment solutions in Japan, for US$2.7 billion in cash.
The acquisition not only expands PayPal's operations in Japan, specifically in the distribution and relevance in the domestic payments market in the country, but also deepens PayPal's hold in the growing BNPL market. Additionally, the deal is expected to complement PayPal's existing cross-border e-commerce business there.
The BNPL model Paidy pioneered in Japan is a consumer financing option that allows customers to finance payments over time. It has some similarities with credit card payments, but the key difference is that the BNPL model has a shorter repayment schedule, and the amount to be paid is smaller. This is mainly due to the total amount being split into set instalments. Although there are no interest rates involved, late payments are subject to additional fees. These make the model popular with customers in Japan as it allows them to shop online and make monthly payments through a bank transfer or by paying a consolidated bill at a convenience store.
The model has recently seen a surge of popularity due to the e-commerce boom brought by the COVID-19 pandemic, so much so that Amazon recently decided to partner with Affirm, a fintech company that offers flexible payment options, to try out its BNPL solution for some purchases over US$50. Square, another fintech company, also decided to try the model out with its US$29 billion acquisition of Australian BNPL service provider Afterpay.
Paidy currently has six million registered users, and with PayPal's acquisition deal, the company expects to reach other online and offline merchants beyond its platform. Russell Cummer, Paidy's founder and executive chairman, called the deal a great opportunity for the company to grow and innovate. "Together with PayPal, we will be able to further achieve our mission of taking the hassle out of shopping," Cummer said.
Additionally, Paidy CEO and President Riku Sugie commented that the acquisition would help accelerate the company's plans beyond e-commerce and "build unique services as the new shopping standard".
Paidy will maintain its brand and continue its existing business even after the acquisition closes in the fourth quarter of 2021.
Written by John Paul Joaquin