PayPal (NASDAQ:PYPL) is acquiring Japanese start-up Paidy for $2.7 billion U.S. as it seeks to expand its buy-now-pay-later offerings.
The deal, which is expected to close in the fourth quarter of this year, will be paid for primarily with cash, PayPal said in a news release.
Japan is home to the world’s third-largest market for online shopping, but it is also one of the few developed markets where paper currency remains prominent. Nearly three-quarters (75%) of all purchases in the country are still paid for with cash.
Paidy is unusual among the world’s buy-now-pay-later providers because it allows Japanese consumers to purchase items online and pay them off each month in person at local convenience stores. The firm, founded in 2010, has 4.3 million active accounts.
PayPal said current management will continue to lead Paidy and that Paidy will continue to maintain its brand and operate its existing businesses.
Buy-now-pay-later options allow users to split purchases into smaller payments without charging interest, and instead make most of their money by collecting a small amount from merchants each time a consumer uses the product.
PayPal began offering a buy-now-pay-later service last year and customers have since used it to make $3.5 billion U.S. in purchases.
Paidy’s backers include Soros Capital Management, Visa and Japanese trading house Itochu. The start-up raised $120 million U.S. in its most recent funding round this past March, which took its valuation to $1.2 billion U.S.
Paidy began offering buy-now-pay-later services in 2014. They can be used on Amazon’s Japanese site and to make purchases from Apple in Japan.
