PayPal Holdings Inc (PYPL.O), the world’s largest payments business, said it would pay $2.7 billion in cash for Japanese buy now, pay later (BNPL) startup Paidy, solidifying its position as the industry’s top in a pandemic-driven boom.
According to experts, rival Square Inc (SQ.N) agreed to buy the Australian BNPL success story Afterpay Ltd (APT.AX) for $29 billion last month, suggesting the start of market consolidation.
“The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third-largest e-commerce jobs market in the world, complementing the company’s existing cross-border e-commerce business in the country,” PayPal said in a statement on Tuesday.
Thanks to federal stimulus payments jobs, the BNPL business model has been extraordinarily effective during the epidemic and has upended consumer credit markets. These companies make money by charging shops a charge to give small point-of-sale loans that clients may pay back in interest-free installments without undergoing a credit check.
The latest heavyweights to be said to be working on their own version of the service are Apple Inc (AAPL.O) and Goldman Sachs (GS.N).
Paypal, a global leader in the BNPL industry, entered Australia last year, raising the stakes for smaller companies such as Sezzle Inc and Z1P.AX Co Ltd (Z1P.AX), whose stocks were trading down in the midday session on Wednesday.
The COVID-19 pandemic was one of the company’s major winners, as more people used its services to buy things online and pay bills rather than going out. Businesses forced to move their stores online flocked to PayPal, increasing their user base to more than 400 million active accounts worldwide.
In an investor presentation, PayPal said that purchasing Paidy would help it grow in Japan, where online shopping volume has tripled in the last ten years to $200 billion, but more than two-thirds of all purchases are still paid in cash.
Paidy is a Japanese payment service that allows customers to make online purchases and then pay for them monthly at a convenience store or bank transfer. It has a user base of over 6 million people. According to the Financial Times, Paidy was considering going public last month.
Soros Capital Management, Visa Inc (V.N), and Itochu Corp (8001.T), a Japanese trading corporation, are among the company’s backers. Following the acquisition, Paidy will continue to operate its current business while maintaining its name. According to the company, Russell Cummer, PayPal’s founder and chairman, and Riku Sugie, the company’s CEO, will remain in their posts.
As a result of the purchase, which is expected to close in the fourth quarter of 2021, PayPal’s adjusted earnings per share in 2022 will be minimally diluted. BofA served as PayPal’s financial adviser, while White & Case served as the deal’s primary legal counsel. Paidy was advised by Goldman Sachs, while legal guidance was supplied by Cooley LLP and Mori Hamada & Matsumoto.