Competition is heating up in the Asia-Pacific fintech sector between giants like PayPal and Square following several recent deals.
Fintech giant PayPal announced this week that it is acquiring Japan’s Paidy, a provider of ‘buy now, pay later’ (BNPL) services.
PayPal said the deal is for 300bn yen ($2.7bn), “principally in cash”, and should close in the fourth quarter of this year. Paidy will maintain its brand and operations after the acquisition.
The BNPL space is a growing and highly competitive one at the moment. Last month, PayPal rival Square acquired Australian BNPL service Afterpay for $29bn, while Swedish BNPL giant Klarna became Europe’s most valuable start-up earlier this year.
Commenting on the deal, PayPal’s vice-president and head of Japan, Peter Kenevan, described Paidy as operating in a “strategically important market”.
Snigdha Parida, senior analyst at analytics company GlobalData, added that the two recent acquisition deals in Asia-Pacific (APAC) from Square and PayPal represent “an increasingly prominent theme in the region”.
“An analysis of GlobalData deals database reveals that, among all the regions, the APAC banking and payments sector witnessed a staggering 167pc quarter-on-quarter growth, in terms of transaction value, to reach a total of $44bn in Q2 2021.”
Parida noted that the pandemic in particular had made digital banking “vital for consumers”.
“Banking and payments companies are engaging in mergers and acquisitions activity around fintech to add innovative services like BNPL to sharpen their competitive edge.”
PayPal has around 4.3m active accounts in Japan, and the company’s CEO Dan Schulman has described the country as a key region.
However, Japan is home to only about 1pc of PayPal’s customers currently. The company notes that approximately 70pc of all purchases in the country are still done in cash, even in e-commerce, despite a highly developed digital economy generally.
PayPal may see Japan as a market with very large potential for growth, which the acquisition of a domestic fintech start-up like Paidy could help it break into.
Riku Sugie, president and CEO of Paidy, said the company was “just at the beginning” of its journey and that joining PayPal would accelerate its “plans to expand beyond e-commerce and build unique services as the new shopping standard”.
PayPal launched its own BNPL service last year and said in May that it was growing in popularity. Such services allow customers to buy an item up to a price limit and pay for it in instalments over a period of time, typically around six weeks.
Updated, 1.10pm, 13 September 2021: A previous version of this article referenced “two recent acquisition deals in Asia-Pacific from Stripe and PayPal”. This was corrected as the two acquiring companies were Square and PayPal.