PayPal has announced it is to acquire Japanese buy now pay later (BNPL) firm Paidy in a deal that could be worth up to $2.7 billion.
Online shopping levels have more than tripled in the last decade in Japan and is now worth $200 billion.
Despite this, more than two-thirds of all purchases are still paid for in cash, PayPal said in an investor presentation.
“The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third largest ecommerce market in the world, complementing the company’s existing cross-border ecommerce business in the country,” PayPal said in a statement.
Paidy currently has over 6 million registered users and gives Japanese consumers the chance to purchase items online before paying for them each month at a convenience store or online.
Cash has traditionally been the preferred method of payment in Japan however this is starting to change, especially in urban areas according to senior economist at Japan Research Institute Ltd Eiki Taniguchi.
He added: “One of the notable things about Japan’s BNPL market compared to the United States or Europe is that most users clear their outstanding balance by the end of the month in one payment.
“In Japan accumulating debt is more frowned on.”
The deal will follow payment rival Square Inc. which agreed to purchase Australian BNPL company Afterpay for $28 billion.
Experts believe that these acquisitions are the start of consolidation in the BNPL industry.
BNPL schemes have been a popular method of payment in the west during the pandemic, with companies such as Klarna, Argos and Clearpay leading the sector in the UK.
PayPal is also planning a significant expansion in Europe as it scopes out growth opportunities.
According to Business Insider, PayPal is looking to expand its European business this year as the use of cash in the region is expected to fall within the coming years.
Cash made up 27.4 per cent of point-of-sale (POS) transactions last year however is expected to fall to 15.4 per cent by 2024.