By Dhirendra Tripathi
Investing.com – PayPal stock (NASDAQ:PYPL) traded 0.6% higher in Wednesday’s premarket after the digital payments company said it will buy Japan’s Paidy for 300 billion yen ($2.7 billion) to expand in the world’s third largest e-commerce market.
The target company is a two-sided payments platform and provider of ‘buy now, pay later’ solutions in Japan.
Paidy’s payment services allow Japanese shoppers to make purchases online, and then pay for them each month in a consolidated bill at a convenience store or via bank transfer. The company uses proprietary technology to score creditworthiness, underwrite transactions and guarantee payment to merchants.
PayPal will pay for Paidy primarily in cash. It expects the deal to close in the fourth quarter and to minimally dilute earnings per share on adjusted basis.
The BNPL ecosystem has seen a flurry of deals lately. That's a consequence of their rapid growth during the pandemic, which quickened the adoption of e-commerce in many parts of the world.
Last month, Square (NYSE:SQ) agreed to buy Australia's Afterpay in a cash and share deal that valued the loss-making payments group at $29 billion.
In another agreement, Affirm tied up with Amazon (NASDAQ:AMZN) to offer its ‘buy now, pay later’ option to the online retailer’s customers.
The ‘buy now, pay later’ option has been the mainstay of credit card companies for decades. However, most fintech BNPLs don't charge interest. Instead, they make their money on the difference between what they pay the merchant and what they subsequently recoup from the buyer. While the user-friendly model may juice sales for the merchant, concerns about the model have arisen due to the widespread lack of credit checks involved - despite the fact that the payments company is, effectively, providing credit.