The Buy Now, Pay Later (BNPL) alternative payment method is the hottest trend in payments right now. Amazon announced a major partnership with Affirm, Square will acquire Australian BNPL provider AfterPay, and now PayPal will acquire Paidy for $2.7 billion. All of this activity occurred in about a 40 day span.
Paidy is more tailored to the Japanese eCommerce market. In addition to supporting bank account based payments to pay off the micro loan, consumers can pay their bill at a partner convenient store. This effectively makes Paidly a cash alternative payment method, as consumers can ultimately pay for online purchases in-person with currency. These convenient store payments for eCommerce purchases, known as “konbini” payments in Japan, are the second most used alternative payment method in the country.
Japan is the third largest eCommerce market in the world and Paidy has over 6 million users. PayPal and Paidy had an existing relationship as PayPal was a founding partner of Paidy Link, a digital wallet supporting Paidy for transactions.
PayPal’s acquisition of Paidy is their second major acquisition related to Buy Now, Pay Later services. The first was eBay’s, then parent company of PayPal, acquisition of Bill Me Later for nearly $1 billion in 2008. Bill Me Later was the first major credit terms alternative payment provider in the United States in what was just nascent market at that time. PayPal since rebranded Bill Me Later to PayPal Credit and now offers this as a ‘Pay Later’ payment option.
Flash forward to today and Klarna, the largest BNPL payment company in Europe, is valued at over $45 billion. Square announced they would pay $29 billion to acquire AfterPay. Amazon, far and away the largest eCommerce merchant in North America, has already started offering Affirm as a BNPL option to select customers, with plans to roll this out more broadly in the coming months. Now PayPal looks to expand their BNPL offerings to Japan through the $2.7 billion acquisition of Paidy, who is already entrenched in this market.
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