PayPal to acquire Japanese unicorn Paidy in $2.7bn deal as the BNPL race heats up

PayPal is set to acquire Japanese buy now, pay later firm Paidy for $2.7bn in cash as the US payments company looks to expand its reach in the Asian country.

The transaction is expected to be completed in the October-December period.

Paidy’s founder and chairman Russell Cummer and president and chief executive Riku Sugie will continue to hold their roles at the company, PayPal said.

So far, PayPal’s focus for the Japanese market has been cross-border e-commerce payments for overseas products, and it has 4.3 million active accounts there. PayPal CEO Dan Schulman has listed Japan, the world’s third-largest e-commerce market, as one of its key regions. Japan, where cash is used for 70% of payments, has a lot of room for growth. By acquiring Paidy, which has 6 million members, PayPal aims to increase its presence in the domestic payment market.

Paidy offers a buy now, pay later service that does not require a credit card. It is one of the few unlisted startups in Japan with a market capitalization of over $1bn. In March, it raised a total of 13bn yen from a fund run by US investor George Soros’ family. That generated attention as one of the largest fundraisings ever for a Japanese unlisted company.

BNPL services becoming increasingly popular in Europe and the US. According to FIS, it accounted for 2.1% of global e-commerce payments in 2020, and that is expected to rise to 4.2% in 2024.

The competition in the buy now, pay later market is fierce, and it is becoming a game of capital strength. Sweden’s Klarna raised $639m in June from SoftBank Vision Fund 2 and others, boosting its valuation to about $46bn. Twitter Inc co-founder Jack Dorsey’s Square Inc announced its plans to buy Australia-based BNPL firm Afterpay Ltd for $29bn.

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