California-based payments giant PayPal has announced that it will acquire a Japanese payments platform, Paidy for $2.7 billion. Notably, this acquisition follows the major deal in the segment after Twitter CEO Jack Dorsey-run Square acquired Australian company Afterpay last month for $29 billion. The transaction would complete by the end of 2021.
Rise of ‘buy now-pay later’ trend
The ‘buy now-pay later’ model has evolved of late as it lets users buy goods and services online spending via small-sized credits. These are unsecured loans that are extended to online shoppers, but these involve smaller amounts and have shorter repayment schedules.
Over the past year, ‘buy now-pay later’ companies all over the world have witnessed a boom as there is a diminished spending habit among buyers due to the COVID-19 pandemic crisis. However, some economies consider this trend as a potential debt trap.
Why Paidy?
PayPal noted that shopping volume in Japan has witnessed 3x growth accounting for around $200 billion in the past decade. It noted that two-thirds of all purchases in the country are still paid for in cash. Eventually, there is a massive opportunity for the ‘buy now pay later’ to proliferate. As of now, Paidy caters to about six million registered users and 700,000 merchants. It connects them to each other online and offline and to payment channels like PayPal.
With the acquisition of Paidy, the ‘buy now-pay later’ company from Japan, PayPal will be able to focus on building its cross-border e-commerce business in the country. Already, the company is a key player in this market segment as it holds stakes in Sezzle and Z1P.AX Co Ltd. Post the acquisition, Paidy will continue to operate under the same brand. It will be led by Russell Cummer, its executive chairman and founder and Riku Sugie, its CEO.
