US payments behemoth, PayPal Holdings Inc. announced that it would acquire Paidy, the Japanese buy now, pay later firm in a largely cash deal worth $2.7 billion. This is another step that will help the company in claiming the top spot in an industry that’s experiencing a boom led by the pandemic. The deal tracks the agreement struck by rival Square Inc. last month for purchasing Afterpay Ltd., the Australian BNP success story, for around $29 billion. According to experts, this deal was likely the start of consolidation in this sector. With the acquisition of Paidy, PayPal will be able to expand in a country that has seen its online shopping volume nearly triple in the last decade to a value of $200 billion.
However, PayPal said that almost two-thirds of the payments are still made in cash. Analysts said that this deal was more likely to be PayPal’s route for entering the Japanese market, rather than having any impact on the US BNPL space. There was a 1% increase in shares of the two firms in premarket trading, whereas the value of Square’s shares were slightly on the low side. With approximately 6 million registered users, Paidy offers payment services that can be used by Japanese shoppers for doing online shopping.
They can then pay the company every month via bank transfer, or at convenience stores. Traditionally, cash has been a favorite of Japanese customers, but recent years have led to some changes, especially in cities. Market experts said that one of the prominent things to note about the Japanese BNPL market is that unlike that of Europe or the United States, people in Japan tend to clear their outstanding balances at the end of the month in a single payment. This is due to the fact that accumulating debt is quite frowned upon in the country.
The BNPL model has proven to be quite a success during the pandemic, particularly in Western countries, because of the federal stimulus checks. These companies are able to make money by charging merchants a small fee for offering point-of-sale loans that can be repaid by shoppers in installments free of interest, thereby eliminating credit checks. Some market analysts said that the deal between Square and Afterpay had boosted the urgency of establishing BNPL positions, which could have accelerated PayPal’s acquisition of Paidy. They expect a number of such deals to happen in this sector.
Regarded as a leader in the BNPL market, PayPal made its way into Australia the previous year, which raised the stakes for smaller firms, such as Sezzle Inc. The US payments giant has come out as a winner during this pandemic because its services were widely used by people for shopping online and paying bills in order to avoid going out. Businesses that had to move their stores online also turned to PayPal, which gave its active accounts a boost and they reached more than 400 million. Paidy will continue to maintain its brand and operate its business after the acquisition.
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