The PayPal-Paidy deal worth a whopping $2.7 billion- all you need to know about the ‘buy now, pay later’ space

PayPal: In today’s time, our country is witnessing huge investment prospects every single day. The investment prospects are rising at a very great pace with many companies investing in other businesses or even buying them. The after the pandemic period has been very great for the investors in the country as well as across the globe with the support of the new government policies.

The much-needed revival of our ailing economy, which has suffered a lot in the pandemic is also facilitated by these rising investment prospects. In this article, we will be discussing one such investment that recently took place in the country, and is a very big one. We are talking about the purchase of Paidy by the very popular PayPal. Why PayPal bought Paidy, what will the benefit of it to the company, will Paidy be successful in India and how this investment will impact the economy, we will be discussing all of it in this article. Let’s start from the beginning. 

The purchase

PayPal, a well known American giant which is used for the purpose of facilitating digital payments, is very popular across the globe. It is an American multinational financial technology company that is now operated in a lot of countries that support digital payments. In India, PayPal is widely used to facilitate day to day online transactions, which are currently on the rise with the growing modernisation in the country. PayPal, in order to grow and capture further market share, recently bought Paidy for a huge sum of $2.7 billion. 

Paidy:-

Paidy is a Buy Now Pay Later(BNPL) firm that is popular across the whole world. Paidy works on the basic principle of Buy Now Pay Later which has witnessed a very wide growth in recent years. Paidy, a Japanese company lets its users shop what they want and pay the amount as monthly payments in a form of a consolidated bill from a convenience store or through bank transfer. The purchase of Paidy by PayPal for a sum of $2.7 billion is a huge deal in this segment after Twitter CEO Jack Dorsey – run Square bought the American financial technology company Afterpay for $29 billion in the last month. 

Why is BYPL mode gaining so much popularity in recent years? 

The Buy Now Pay Later model has evolved in recent years as a mode of payment to buy goods and services online through the mode of small-sized credit. How does it work? In this model, unsecured loans are given to the customers on the lines of a credit card, however, the only difference being these are smaller in amount and have a much shorter schedule of repayment.

Therefore, it provides the customers to facilitate their purchases online and then pay the amount of purchase in small amounts, which are transacted monthly whether from a nearby convenience store or through the mode of bank transfer, therefore helping them to pay for the products that they have ordered in small amounts and therefore making the payment process easy for everyone. 

Over the last year, all the companies working on the model of Buy Now Pay Later have witnessed very high growth in their operations. Their businesses have grown by very high numbers.

The experts suggest that this is happening on the account of the stimulus money being pumped into the system by the government of the United States, particularly because of the reduced spending by people and the diminished demand during the COVID-19 pandemic. However, on the other hand, some economists think that the BNPL model will lead to a potential debt trap for millennials across the globe. 

How this purchase would benefit PayPal? 

According to the reports, the officials of PayPal said that this acquisition of Paidy by PayPal will benefit the company by a very large amount. This will help the company to expand its capabilities, distribution and relevance in the domestic payments market in Japan, which is the third-largest e-commerce market in the world, which will complement the company’s existing cross border e-commerce business.

It will benefit the company a lot like Japan, being the third-largest e-commerce market in the world, which will provide the company with a whole lot of new customers and users of its application. 

PayPal, the American company is already considered a great player in the Buy Now Pay Later market as it has bought stakes in many other companies working on this model, like Sezzle and Z1P.AX Co Ltd. Therefore, this step of acquisition of Paidy by PayPal will help the company to acquire a much greater BNPL market share. 

How is PayPal so sure that this acquisition of Paidy will be beneficial for them? 

In an investors report, PayPal said that the shopping volume in Japan has nearly tripled in the last ten years and has reached the level of $200 billion, evidencing the widespread growth of the shoppers. However, there is one thing.

Even today, nearly two-thirds of all the total purchases are paid for in cash, and therefore it poses a great opportunity for the company to establish and spread the BNPL model across the country and therefore acquire a huge market share, leading the company to grow. 

What about BNPL in India? 

In our country, there are several BNPL model-based companies providing BNPL wallets which are currently prevalent in e-commerce, food delivery and grocery shopping platforms. These BNPL wallets include PayU run LazyPay, ZestMoney, Amazon Pay and Paytm Postpaid.
Such several services are offered by many banks too, such as the ICICI bank. The growth of the BNPL network across the globe has started to rise. The current percentage of the BNPL network market is three per cent and is expected to grow to 9% by the year 2024.

Many economists have shown their interest in the BNPL model and have claimed its growth. Goldman Sachs, the very popular investment bank has said that the BNPL model is what the economy needed the most and will surely rise to become the biggest and fastest-growing online payment method. 

The widely known iPhone maker, Apple has also said to be in talks with Goldman Sachs to develop their own BNPL model, evidencing the bright future of this model. 

The Indian economy has suffered a lot during the pandemic, with no economic activity in the country. Even after the resume of the economic activities across the country, the economy had to face many problems. Now, with the economy started to revive back, the BNPL model will provide a boost to this economy.
How? With the growth of the BNPL network, more investments will take place in the country from within and outside the country, which boosts the development prospects in the country too, and also leads to more employment generation, therefore reducing the condition of unemployment in the country, which rose by large numbers during the pandemic as many people lost their jobs and livelihood.

Moreover, the income and expenditure of the people have been reduced, therefore the BNPL model will also help them to spend money on the things they need to buy and therefore pay in monthly instalments, making it very easy for them to sustain their livelihood. 

Edited by Sanjana Simlai.