PayPal’s $ 2.7 billion Japan deal intensifies buy now, pay later race

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Sept. 8 (Reuters) – U.S. payments giant PayPal Holdings Inc (PYPL.O) announced it will acquire Japanese company Buy Now, Pay Later (BNPL) Paidy in a big deal part of $ 2.7 billion, taking a new step to claim first place in an industry experiencing a pandemic-induced boom.

The deal follows rival Square Inc’s (SQ.N) agreement last month to buy the Australian success story of BNPL Afterpay Ltd (APT.AX) for $ 29 billion, which experts said was likely the start of consolidation in the sector.

“The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third largest e-commerce market in the world, thereby complementing the company’s existing cross-border e-commerce business in the country. “PayPal said in a statement Tuesday.

Paydy’s purchase will help PayPal grow in a country where online shopping volume has more than tripled over the past 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.

Paydy, with more than 6 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 by wire transfer.

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

“One of the peculiarities of the Japanese BNPL market compared to the United States or Europe is that most users settle their outstanding balance by the end of the month in a single payment. In Japan, the accumulation of debt is more frowned upon. “

Fueled by federal stimulus checks, BNPL’s business model has seen tremendous success during the pandemic, especially in Western countries. These businesses make money by charging merchants a fee for offering small point-of-sale loans that buyers pay off in interest-free installments, bypassing credit checks.

Paypal, already considered a leader in the BNPL market, also entered Australia last year, upping the ante for smaller companies such as Sezzze Inc.

The US payments company is among the big winners in the pandemic, as more people have used its services to shop online and pay bills to avoid going out. Businesses, forced to move their stores online, have also flocked to PayPal, bringing its active account customer base to over 400 million worldwide.

Paidy, whose backers include Soros Capital Management, Visa Inc (VN) and Japanese trading house Itochu Corp (8001.T), will continue to operate its existing business and maintain its brand after the acquisition. Founder and Chairman Russell Cummer and CEO Riku Sugie will continue to serve with the company.

The Financial Times reported last month that Paidy was considering an initial public offering.

The transaction is expected to close in the fourth quarter and will have only a minimal impact on PayPal’s adjusted earnings per share in 2022.

BofA advised PayPal on the matter and Goldman Sachs advised Paidy. White & Case was senior legal counsel for PayPal and Cooley LLP and Mori Hamada & Matsumoto for Paidy.

Reporting by Sayantani Ghosh in Singapore and Tim Kelly in Tokyo, Additional reporting by Anirudh Saligrama in Bengaluru; Editing by Ramakrishnan M., Kim Coghill and Lincoln Feast

Our standards: Thomson Reuters Trust Principles.


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