PayPal’s $2.7b Japan deal heats up buy now, pay later race

US payments giant PayPal Holdings Inc said it would acquire Japanese buy now, pay later (BNPL) firm Paidy in a $2.7 billion largely cash deal, taking another step to claim the top spot in an industry experiencing a pandemic-led boom.

The deal tracks rival Square Inc’s agreement last month to buy Australian BNPL success story Afterpay Ltd for $29 billion, which experts said was likely the beginning of a consolidation in the sector.

Buying Paidy will help PayPal expand in a country where online shopping volume has more than tripled over the last 10 years to some $200 billion, but more than two-thirds of all purchases are still paid in cash, PayPal said in an investor presentation.

“I wouldn’t view this (deal) as impacting the US BNPL market but more as PayPal’s route into the Japanese market,” Kunaal Malde, analyst at Atlantic Equities, said.

Shares of the payments company were up 1% in heavy volumes in premarket trading, while those of rival Square were marginally lower.

Paidy, with more than six million registered users, offers payment services that allow Japanese shoppers to make purchases online, and then pay for them each month at a convenience store or via bank transfer.

Japanese consumers have traditionally favoured cash but that has changed in recent years, mostly in the cities, said Eiji Taniguchi a senior economist at think-tank Japan Research Institute Ltd.

“One of the notable things about Japan’s BNPL market compared to the United States or Europe is that most users clear their outstanding balance by the end of the month in one payment. In Japan accumulating debt is more frowned on.”

Published in The Express Tribune, September 9^th, 2021.

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