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PayPal (PYPL) Agrees to Buy Paidy to Bolster BNPL Efforts

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PayPal (PYPL - Free Report) is gearing up to acquire a Japan-based buy now, pay later (BNPL) solution provider, Paidy.

Paidy operates a two-sided payment platform, which scores creditworthiness, underwrites transactions and guarantees payment to merchants via its technically advanced BNPL solutions.

We believe that the acquisition on completion will strengthen PayPal’s BNPL solutions offerings.

It will also expand the company’s presence in Japan’s digital payment market, wherein Paidy enjoys solid momentum among customers on the back of its innovative BNPL solutions. Customers in Japan can pay for their online purchases through monthly installments seamlessly with Paidy’s solutions.

The growing traction of Paidy 3-Pay monthly installment solution across leading global brands and online marketplaces remains noteworthy.

We note that the buyout under review is expected to close in fourth-quarter 2021. PayPal has agreed to pay $2.7 billion in cash for the acquisition.

Growing BNPL Efforts

The latest move bodes well for PayPal’s growing BNPL efforts. The move will strengthen the company’s global footprints.

Apart from the Paidy buyout, the company recently made Pay in 4service — its BNPL solution available to eligible customers in Australia. It is offering the solution free of any interest, payment fees and sign-up fees.

PayPal has also stopped charging late fees for missed payments on BNPL products. New customers availing Pay in 4 in the United States, Pay in 3 in the U.K., and Pay in 4X in France will not be charged late fees for missed payments from Oct 1.

We believe that all the endeavors make PayPal well-poised to capitalize on the growth prospects in the BNPL market.

Per a report from Allied Market Research, the global BNPL market is expected to hit $3.9 trillion by 2030, registering a CAGR of 45.7% between 2021 and 2030.

Competitive Advantage

The latest move of the company will help it in expanding its footprint in the point-of-sale lending services space. The space is growing rapidly as these services help customers in purchasing items with the ease of payment installments.

It will help PayPal to gain a competitive edge against Square (SQ - Free Report) , Mastercard (MA - Free Report) and VISA (V - Free Report) , which are also involved in this kind of service.

Notably, Square offers Square Installments, which enable small business clients such as hairdressers and car part sellers to offer the flexibility of payment in installments to their customers.

Customers are allowed to pay for their purchases ranging from $250 to $10,000 in fixed monthly installments over three, six and 12 months.

Square recently signed a Scheme Implementation Deed to acquire the Australian BNPL giant, Afterpay, for $29 billion to expand its presence in the BNPL market.

Meanwhile, Mastercard offers safe installment options, with higher value purchases.

VISA provides a BNPL facility called Visa Installments, which include three installment models namely Pre-Purchase, During Purchase and Post-Purchase to help customers with flexible payments.

Nevertheless, PayPal’s growing suite of Pay Later solutions, rising customer engagement on the PayPal platform, and flexible financing solutions and products, including Venmo, PayPal Credit and other alternative payment methods, are likely to sustain its strong market position.

Currently, PayPal carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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