What’s going on?

PayPal (US payment platform) announced that it would buy Paidy (Japanese buy-now-pay-late with 6m users) for $2.7b.

What does this mean?

• PayPal started offering its own buy-now-pay-later service in 2020, through which customers have made $3.5b worth of purchases. This deal comes as part of Paypal’s longer-term plan to push further into the industry.
• The best place to do exactly that shall be Japan (the Holy Grail of aspirational payment services), which is home to the world’s 3rd-biggest online shopping market, but also where ~75% of all in-person purchases are made in cash. That makes Japan one of the few developed countries left offering plenty of room for growth in digital payments.

Buy Now, Pay Later is a type of short-term financing that allows consumers to make purchases and pay for them at a future date, often interest-free.

Rebecca Lake (2021). Buy Now, Pay Later. Investopedia. Available at: https://www.investopedia.com/buy-now-pay-later-5182291REBECCA LAKE

Why should I care?

The bigger picture: The game is getting interesting

• The buy-now-pay-later market size tripled in 2020 as the pandemic fueled ecommerce boom. There aren’t any signs of its slowing down:
  • Square agreed to buy Afterpay (Aussie buy-now-pay-later firm) for $29b in Aug 2021
  • Klarna (Sweden’s now Europe’s most valuable startup) saw its valuation quadruple between September and June to hit $46b.

Zooming out: So it turns out that I have to pay?

Regulators are worried that customers are forgetting the “pay later” part and leaving behind a pile of debt, and they don’t mind stepping in and rollingout some profit-damaging measures if the companies don’t start doing something about that.

Content source: Finimize (2021) Debt Collector. Available at: https://www.finimize.com/wp/news/debt-collector/ [Accessed on Sep 9, 2021]