PayPal is buying the Japanese Paidy payment start-up and for good reason

The move came just weeks after another big fintech company, Square, announced it would give $29 billion to Afterpay.

PayPal acquires Japanese Paidy startup in fast-growing buy now, pay later companies. The U.S. giant said the deal was worth 300 billion Japanese yen (about $2.7 billion). PayPal said in a statement that the acquisition aims to “expand its capabilities, distribution and importance in the Japanese domestic payment market, the world’s third largest e-commerce market.”

The move came just weeks after another major fintech company, Square (SQ), announced it would give $29 billion for the Australian company Afterpay, which will also allow shoppers to pay in installments for their purchases. This acquisition is the largest acquisition of Square to date. Last month, Amazon (AMZN) also announced a partnership with a fintech provider called Affirm to introduce a buy now, pay later feature on some purchases over $50. The two companies said that although the service is still being tested, Amazon plans to make Affirm more widely available to its customers in the coming months. By the way, the CEO of Affirm is Max Levchin, who is also a co-founder of PayPal.

“Buy now, pay later” offers are becoming increasingly popular as they try to reach younger consumers and keep pace with the rapid transition to online shopping due to the pandemic. Payment analysts have pointed out that the trend is particularly popular among millennials and Generation Z, who are wary of taking on credit card debt.

PayPal recently increased its offering in this area, announcing last summer a tool that will allow retailers to accept payment even if shoppers choose to repay their purchase in installments over several weeks. value.

Paidy was founded in Tokyo in 2008 and later won the support of major investors such as Visa (V) and Goldman Sachs (GS). The company has since become a market leader in Japan, reaching more than 6 million users, allowing “Japanese shoppers to shop online and then pay on a consolidated account each month at a ‘general merchant’ checkout or by bank transfer,” PayPal said in a statement.

According to Russell Cummer, founder and CEO of Paidy, Japan has proven to be a vibrant environment for the company to grow as consumers there are receptive to new ways of paying. PayPal is already partnering with Paidy on an existing service that allows users to connect other digital payment systems to their Paidy account. PayPal said Paidy will continue to maintain its brand in Japan and the current management will remain at the head of the new unit.

“Paidy is still at the beginning of its journey. Joining PayPal will accelerate our plans to expand beyond e-commerce and build custom services as the new purchasing standard,” said Riku Sugie, president of startup. CEO in a statement.

Its $2.7 billion acquisition more than doubles Paidy’s latest known valuation, which was $1.2 billion in March this year, according to CB Insights. This puts it among Japan’s largest unicorns, that is, privately owned startups worth more than $1 billion. The deal is expected to close in the fourth quarter of this year.