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Japanese startup Paidy may become part of financial giant PayPal
American payment service PayPal announced the acquisition of Japanese startup Paidy. The deal amounted to 2.7 billion dollars, most of it will be paid in shares. The purchase process is expected to be completed by the end of this year.
Fintech Paidy operates in the BNPL market segment, which meets the “buy now, pay later” principle. In other words, the service provides users with an installment service. The decision to acquire the startup was prompted by an analysis of Japan’s online shopping market. In the country, 74% of online shopping is paid in cash, which distinguishes Paidy from other local services. It allows users to order goods online and have their payments broken down into monthly payments. The latter need to be redeemed through local physical stores or through bank transfers. This shopping format appealed to the Japanese, and now Paidy has more than 6 million active customers. Amazon and Apple are among the fintech’s partners.
The service was founded in 2010 by Russell Kammer, who holds the position of executive director. The position of president of the company belongs to Rick Sugi. After the deal with PayPal, the managers will remain in their positions, and the brand itself will also be retained.
Among the investors of Paidy are Soros Capital Management, the financial corporation Visa, as well as the Japanese trading house Itochu. In March this year, the service held another round of financing, which managed to attract $120 million. At that time, the research company CB Insights estimated the fintech’s capitalization at $1.2 billion.
It should be noted that worldwide interest in BNPL services is rapidly increasing, a good impetus for this was the pandemic. Realizing the prospects of this direction, many Internet giants are introducing this function for their clients. Not so long ago, Amazon connected the BNPL system for users from the United States. In early 2020, the fashion conglomerate H&M introduced the ability to shop in installments for its customers, joining forces with Swedish fintech unicorn Klarna.
PayPal has not yet disclosed further plans for Paidy and its technology. However, experts note that the U.S. payment system will not be limited only to Japan, because not only here the majority of online purchases are paid in cash.
In addition, the deal will enable PayPal to expand its presence in the country, whose online market is rapidly growing. The volume of online shopping in Japan has grown 3 times in the last 20 years and reached $200 billion. Strengthening its position in this promising market will allow PayPal to strengthen its competitiveness and enter other markets in the region.