Buy-Now, Pay-Later Market Consolidation Heats Up

PayPal Buys Paidy for $2.7 Billion

The buy-now, pay-later market is heating up with PayPal (PYPL) making the latest move, spending $2.7 billion to acquire Paidy, a Japanese BNPL startup. The deal comes a few weeks after Square (SQ) purchased Afterpay for over $29 billion. Meanwhile, late last month, Amazon (AMZN) struck a deal with Affirm (AFRM) to let customers make installment payments on purchases of $50 or more.

The BNPL market has been around for several years but has taken off during the pandemic as more people than ever shopped online. BNPL companies including Afterpay, Affirm, Paidy, and QuadPay charge merchants a fee to enable customers to make installment payments on small purchases at the point of sale.

PayPal Expands Its International Footprint

While PayPal is seen as one of the leaders in the BNPL space, its move to expand into Japan, the third largest ecommerce market in the world, may have been prompted by Square’s acquisition of Afterpay and resulting bigger presence in Australia. To maintain its lead, PayPal has to enter more large markets. Japan seems like a good place to start. Online shopping sales in the country have surged to $200 billion.

Paidy lets customers make purchases online and pay for them with cash in convenience stores located across Japan. They can also pay via a bank transfer through the service.

Currently, Paidy has more than 6 million registered users.

Dealmaking Heats Up

Once the deal closes, Paidy will operate as a standalone business, retaining its brand and management team. The company uses its in-house technology to gauge borrowers’ ability to pay back the short-term loans.

The BNPL market has been heating up in recent months as dealmaking and partnerships abound. This trend makes sense. Many younger consumers are reluctant to make purchases on credit, concerned about the idea of paying interest. BNPL provides an interest-free way to make a purchase in installments. With the popularity of BNPL poised for continued growth, it will be interesting to see which payment company strikes a deal next.

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ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

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