U.S. payments giant PayPal Holdings has agreed to acquire Japan’s buy now, pay later (BNPL) firm Paidy in a $2.7 billion largely cash deal.
The deal tracks rival Square’s agreement to buy Australia’s BNPL firm Afterpay for $29 billion, showing the start of a consolidation in the sector, Reuters reported.
The BNPL business model has been successful during the pandemic, fuelled by federal stimulus checks, and upended consumer credit markets.
These alternative credit firms make money by charging merchants a fee to offer small point-of-sale loans which shoppers repay in interest-free installments, bypassing credit checks.
iPhone maker Apple and investment firm Goldman Sachs will also be entering the BNPL market.
Paypal, already considered a leader in the BNPL market, also entered Australia last year, raising the stakes for smaller companies such as Sezzle and Z1P.AX.
The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third largest ecommerce market in the world, complementing the company’s existing cross-border ecommerce business in the country, PayPal said in a statement on Tuesday.
Paidy will continue to operate its existing business and maintain its brand. Founder and Chairman Russell Cummer and President and Chief Executive Riku Sugie will continue to hold their roles in the company, PayPal said.
BofA Securities was the sole financial adviser to PayPal on the deal, and White & Case was lead legal adviser. Goldman Sachs advised Paidy, and Cooley and Mori Hamada & Matsumoto provided it legal counsel.
