PayPal to acquire Japan's Paidy for $2.7b

It comes within five months of a $120 million Series D round provided by JS Capital Management, Soros Capital Management, Tybourne Capital Management, and Wellington Management. Eight Roads Ventures Japan and Itochu Corporation joined PayPal, JS Capital, Soros, and Tybourne in an approximately $83 million Series C last year.

Overall equity and debt funding since inception in 2008 is $585 million, of which $337 million is equity. Early equity investors include Arbor Ventures, SIG Asia, SBI Investment, MS Capital, CyberAgent Ventures, 500 Startups, Cherubic Ventures, and Recruit Strategic Partners. Debt has been provided by the likes of Goldman Sachs, Mizuho Bank, and Sumitomo Mitsui Banking Corporation.

Paidy offers payment services that allow Japanese shoppers to pay for online purchases in monthly installments on a consolidated bill at convenience stores or via bank transfer. The platform is said to mobilize proprietary technology to score creditworthiness, underwrite transactions, and guarantee payment to merchants.

The company is considered a local pioneer in this financial technology niche, increasingly marketed as buy now-pay later (BNPL), which is said to create a two-sided platform serving both merchants and individual consumers.

It claims to have more than six million registered users, as well as partnerships with leading global brands and online marketplaces. An existing partnership with PayPal called Paidy Links allows users to link their BNPL accounts to digital wallets.

PayPal has positioned the proposed acquisition – expected to close in the fourth quarter of 2021 – as a way to expand its existing cross-border e-commerce business in Japan, the third-largest online shopping market globally. This will involve entering new areas of competency as a combined platform.

“Paidy is just at the beginning of our journey and joining PayPal will accelerate our plans to expand beyond e-commerce and build unique services as the new shopping standard,” Riku Sugie, president and CEO of Paidy, who will continue to lead the Paidy team, said in a statement. “PayPal was a founding partner for Paidy Link and we look forward to working together to create even more value.”

Fintech companies targeting growing Asian consumerism have seen significant traction realizing scale by taking a platform approach whereby new verticals are integrated into complex in-house ecosystems. In addition to BNPL and digital wallets, these verticals can include QR code systems, pre-paid gift cards, loyalty programs, and various credit services.

The trend has to some extent fueled a recent spate of large fintech acquisitions around the region. Earlier this month, PayU, a payments company owned by Naspers, agreed to acquired India’s BillDesk for $4.7 billion, setting up several private equity exits.

Meanwhile, US fintech giant Square has confirmed plans to acquire Australian BNPL player Afterpay in a $29 billion deal. Afterpay has received backing in recent years from Coatue Management and Matrix Partners.

“The ecosystem is going through a phase of consolidation. I think there will be a dozen $100 billion-plus fintechs that consolidate the market globally,” Jack Zhang, CEO of Hong Kong fintech provider Airwallex, told AVCJ last month. “For the global financial cloud, there will be two or three major players.”

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• Topics
• North Asia
• Financials
• Consumer
• Technology
• Exits
• Trade sale
• Japan
• Wellington Management
• Financial Services
• Fintech