PayPal's $2.7 Billion Japan Deal Heats Up Buy Now, Pay Later Race

U.S. 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, Reuters reported. The deal tracks rival Square Inc.'s agreement last month to buy Australian BNPL success story Afterpay Ltdfor $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 for in cash, PayPal said in an investor presentation. Paidy, 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 via bank transfer. Japanese consumers have traditionally favored 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. Fuelled by federal stimulus checks, the BNPL business model has been hugely successful during the pandemic, especially in westerncountries. These firms make money by charging merchants a fee to offer small point-of-sale loans which shoppers repay in interest-free instalments, bypassing credit checks. Paypal, already considered a leader in the BNPL market, also entered Australia last year, raising the stakes for smaller companies such as Sezzle Inc. The U.S. payments firm is among the big winners of the pandemic as more people used its services to shop online and pay bills to avoid stepping out. Businesses, forced to move their stores online, also flocked to PayPal, boosting its customer base of active accounts to more than 400 million worldwide. Read more.