US payment giant PayPal Holdings, Inc announced on Wednesday that it has agreed to acquire Paidy, a two-sided payments platform and provider of buy now, pay later solutions in Japan, for 300 billion yen or approximately $2.7 billion, principally in cash.

The acquisition will expand PayPal’s capabilities, distribution, and relevance in the domestic payments market in Japan, the third-largest e-commerce market in the world, complementing the company’s existing cross-border e-commerce business in the country, PayPal said in a statement.

“Paidy pioneered buy now, pay later solutions tailored to the Japanese market and quickly grew to become the leading service, developing a sizable two-sided platform of consumers and merchants,” said Peter Kenevan, Vice-President, Head of Japan at PayPal.

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. Paidy helps consumers feel comfortable and safe while shopping online and drives increased conversion rates, average order values, and repeat purchases for merchants, according to the statement.

“There is no better home for Paidy to continue to grow and innovate than PayPal, which has been removing friction from online shopping for more than 20 years,” said Russell Cummer, founder and executive chairman of Paidy. “Japan has been a vibrant environment for our growth to date and we’re honored to have our team’s hard work and potential recognized by a global leader. Together with PayPal, we will be able to further achieve our mission of taking the hassle out of shopping.”

PayPal’s acquisition followed Square Inc’s agreement last month to buy Australian BNPL firm Afterpay Ltd for $29 billion. The deal also came as BNPL model has been gaining popularity in various countries. US e-commerce giant Amazon is teaming up with Affirm for its first partnership with an installment payment company on its e-commerce site, according to an earlier report last month.

Another payment giant Visa reportedly jumped into the BNPL market, rolling out APIs that let its clients offer installment payment products in July. iPhone maker Apple Inc and Affirm Holdings Inc’s PayBright are said to be planning to launch a BNPL program for Apple device purchases in Canada, Bloomberg News reported last month. The BNPL has also been gaining traction in Southeast Asian countries including Malaysia, Singapore, Indonesia, and Vietnam.

Following the acquisition, Paidy will continue to operate its existing business, maintain its brand and support a wide variety of consumer wallets and marketplaces. Cummer and Sugie will continue to lead the Paidy team, PayPal said.

Subject to customary closing conditions, including the receipt of regulatory approvals, the transaction is expected to close in the fourth quarter of 2021.

BofA Securities is acting as sole financial adviser to PayPal, and White & Case is acting as lead legal adviser with regard to the transaction. Goldman Sachs is acting as the sole financial adviser to Paidy, while Cooley LLP and Mori Hamada & Matsumoto are acting as its legal advisers.

Featured image credits: PayPal

Challenges and opportunities as Buy Now, Pay Later shopping gains traction in Malaysia