PayPal announced its intention to buy Japanese startup Paidy for 300 billion yen ($ 2.7 billion), being interested in promoting payment services in installments. The deal will close in the fourth quarter, the purchase will be paid mainly in cash.
Japan is the third largest online trading market in the world, but at the same time it remains one of the developed countries where cash payments are still preferred – up to 75% of payments are made in this format. This sets Paidy apart from other post-pay services – it allows Japanese consumers to place orders online and then pay in cash in installments, making monthly installments in person at local stores. The company was founded in 2010 and now has 4.3 million active accounts in its system.
PayPal clarified that after the takeover, Paidy executives will retain their posts: founder and executive chairman Russell Cummer and president and CEO Riku Sugie. The company will maintain its own brand and continue to operate the existing business.
Postpay systems or BNPL (Buy-now-pay-later) allow consumers to purchase goods by paying for them in installments in small payments without additional interest – they are collected from sellers with each installment. Such services have become popular with the advent of the pandemic and the explosive growth of e-commerce. In August, Twitter CEO Jack Dorsey Square’s company paid $ 29 billion for Australia’s Afterpay. And in the June round of financing, the Swedish Klarna Bank AB raised funds from SoftBank with an estimate of $ 45.6 billion. PayPal began providing BNPL services itself last year, and during this time consumers managed to buy goods for a total of $ 3.5 billion.
The initial investors in Paidy were Soros Capital Management, Visa Inc., and the Japanese trading house Itochu. In the March round of funding this year, the company raised $ 120 million and was valued by CB Insights at $ 1.2 billion. Canadian founder Russell Kammer established the service with experience as a credit trader in Goldman Sachs Tokyo. The provision of BNPL services began in 2014. The company is working with Amazon Japan, and in June it launched a joint project with Apple for consumers in Japan.
Bank of America acted as PayPal’s financial advisor in this transaction, while White & Case provided legal advice. Paidy had Goldman Sachs as financial advisor, while Cooley and MHN acted as legal advisors.