What's going on?
PayPal announced this week that it would buy Japanese buy-now-pay-later startup Paidy for $2.7 billion, and the US payment platform is good for it. Honest.
What does this mean?
PayPal started offering its own buy-now-pay-later service last year, and customers have since used it to make $3.5 billion worth of purchases. This deal, then, comes as part of the company’s longer-term plan to push further into the industry. And where better to take the next step than Japan: the Holy Grail of aspirational payment services is both home to the world’s third-biggest online shopping market, and a place where nearly 75% of all in-person purchases are made in cash. That makes it one of the few developed countries where notes still have the edge on digital payments, and means Paidy – which already has 6 million users – has plenty of room left to grow.
Why should I care?
For markets: Competition is kicking off.
Buy-now-pay-later companies can’t seem to put a foot wrong these days, with the market more than tripling in size in 2020 amid the pandemic-fueled ecommerce boom. And things aren’t showing signs of slowing down: Square agreed to buy Aussie buy-now-pay-later firm Afterpay for $29 billion just last month, while Sweden’s Klarna – now Europe’s most valuable startup – saw its valuation quadruple between September and June to hit $46 billion. But that kind of money draws a crowd, and this once-exclusive club is only going to get a whole lot busier…
For you personally: Buy now, pay… now?
Not everyone is delighted with the craze, mind you: regulators are worried that customers are forgetting the “pay later” part of the deal and racking up a pile of debt. And if the companies themselves don’t start doing more to prevent that from happening, those regulators might be more than happy to step in and roll out some profit-damaging measures of their own.