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The PayPal-Paidy Deal, and Interest in The ‘Buy Now, Pay Later’ Space

The PayPal-Paidy Deal, and Interest in The ‘Buy Now, Pay Later’ Space

Context:

  • PayPal is buying Paidy, a 'buy now, pay later' firm, for $2.7 billion.

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Key Details:

  • American payment giant PayPal has agreed to buy Japanese BNPL firm Paidy for $2.7 billion.

  • In recent times, this is second big deal for purchase of BNPL segment firm.

  • Last month Australia’s Afterpay was acquired by twitter CEO Jack Dorsey’s ‘Square’ for $29 billion.

What is Buy Now Pay Later (BNPL)?

  • BNPL model has evolved over the years as a payment option to buy goods & services online through small-sized credits.

  • In this model, unsecured loans are extended to online shoppers on the lines of a credit card but these are smaller in amount and have a shorter repayment schedule.

  • Over past year and half, due to pandemic BNPL companies across the world have seen a boom in their business.

  • Experts suggest this is happening on account of the stimulus money being pumped in the system by the US government, particularly because of diminished spending capabilities caused by Covid-19 pandemic.

Significance:

  • Over past few years, BNPL has become a prominent financing form.

  • It has emerged as a more convenient payment method essentially decreasing the financial burden on borrowers by offering no cost EMIs.

  • BNPL plays critical role in overcoming demand shock of economy.

  • Today, BNPL sector is present across the Globe & growing at a considerable pace.

Why PayPal bought Paidy?

  • This move will expand PayPal’s capabilities, distribution & relevance in the domestic payment market in Japan which is 3rd largest e-commerce market.

  • PayPal noted that shopping volume in Japan has more than tripled to around $200 billion in last decade, but more than 2/3rd of all purchase are still paid in cash, thereby presenting a huge opportunity for BNPL to proliferate there.

Is BNPL prevalent in India?

  • Yes, there are many BNPL wallets operating in India in various segments like e-Commerce, Grocery and food delivery platforms.

  • Some of these BNPL players are: Lazy Pay, Zest money, Paytm Postpaid, Simpl, Amazon Pay, ICICI Bank (Pay Later Service).

  • Goldman Sachs has predicted that BNPL will rise to become the fastest growing online payment option, with its market share growing from 3% now to 9% in 2024.

  • India’s e-commerce is poised to reach US$ 99 billion by 2024.

E-commerce is the buying and selling of goods and services over the internet.

Top e-Commerce market of the world-

  • China
  • USA
  • Japan
  • United Kingdom
  • Germany
  • France

Source: Indian Express