If you ever tried a BNPL loan, you’d find that the process works well for consumers and merchants. BNPL does not trump credit cards for convenience and long-term planning, but high consumer take-up indicates that this payment function is a preferred option for many consumers. We’ve tried various BNPL versions, and that the process works well. Payment networks, platform service providers, and issuers seem to agree with homegrown solutions designed to compete with the fintech model.
In a few weeks, the global payments industry saw Affirm’s stock catapult with the recent Amazon alignment, PayPal entered the Australian market—the ground zero for BNPL—and Square acquired Afterpay. These actions all follow BNPL developments by Mastercard, Visa, and a wide array of others.
- PayPal, the US online payments company, has agreed to acquire Paidy, a Tokyo-based buy now, pay later group, for ¥300bn ($2.7bn) in the latest shake-up in the industry.
- The deal, announced late on Tuesday, will be paid for principally in cash. It deepens PayPal’s push into the crowded BNPL sector, in which consumers spread the cost of goods over a small number of payments, typically without interest and often without requiring a credit check.
- Paidy allows its 6m registered users to split the cost of goods into three equal installments with no interest. Users can pay off their balance using cash at convenience stores or bank transfers.
- The acquisition comes as PayPal rolls out its broader strategy to become a “super app” — incorporating payments, cryptocurrency investments and savings — drawing inspiration from under-one-roof Chinese apps such as WeChat.
Interestingly, Paidy is already an option on the Amazon Japan site, so that might be a good leverage point in PayPal’s effort to become the dominant consumer payment choice. Similar to many other BNPL options, the Amazon Japan site notes:
- Paidy Later (Paidy) is a payment method that uses a next-month consolidated payment service provided by the payment service company Paidy. This enables you to pay as a lump sum in the next month after use.
- About fee-free* 3-pay installments
- 3-Pay allows you to pay for a transaction in 3 equal installments that are due 1 month, 2 months, and 3 months after purchase.
- If you verify your identity and upgrade to Paidy Plus in the Paidy app, you will be able to use 3-Pay and also see your available credit limit in the Paidy app.
- You can choose 3-Pay in Amazon checkout or, after the purchase is complete, you can switch transactions made in the current month to 3-Pay in the Paidy app.
What’s Happening and What to Expect
- Will Stripe be doing something next? Their site indicates a relationship with Afterpay, but it is unrealistic to expect the relationship to continue with Square’s recent acquisition.
- What will happen to all the non-unicorns? Nine of Australia’s top players have not hit unicorn status yet. So is this a death knell for them or an opportunity?
- PayPal is in a unique position with its Pay-In-Four model, BNPL multi-country rollout, and now a leading platform. So is China in their scope? Techcrunch thinks so.
- There are still a few good acquisition targets out there. Openpay is undoubtedly one. So are Zip and Sezzle.
- Will the credit loss model ever come under regulatory scrutiny with some teeth? A few markets have anecdotal moves to improve BNPL credit quality. As companies roll up, will regulations play a more critical role? What about consumer protection?
One thing is for sure: this will not be the last big deal in BNPL during 2021.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group