PayPal to Buy Japan’s Paidy for $3.67 Billion

PayPal Holdings Inc. agreed to buy Japanese “buy now, pay later” startup Paidy Inc. for about $2.7 billion, in a move that will boost its business in the world’s third-largest e-commerce market.

The transaction adds to a flurry of activity involving companies that let consumers pay for purchases in instalments, as an alternative to traditional forms of credit. In August, Square Inc. said it would buy Australia’s Afterpay Ltd. for about $39 billion, while Affirm Holdings Inc. entered a partnership with Amazon.com Inc., sending the financial-technology group’s shares soaring.

U.S.-listed PayPal says it has more than 400 million consumers and merchants in more than 200 markets. Its business has grown rapidly with the shift from cash and in-store card spending to digital payments and e-commerce. PayPal has used the pandemic’s shift toward contactless payments to push into big chain stores via QR codes.

In the second quarter, PayPal handled more than $400 billion of payments for the first time in its history.

PayPal will pay for Paidy primarily in cash, it said late Tuesday. It expects the deal to close in the fourth quarter and to minimally dilute earnings per share, as measured on a non-GAAP basis, or not in line with generally accepted accounting principles.

Paidy lets Japanese shoppers make purchases online and then make monthly payments 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, and says its 3-Pay monthly installment offering has more than 6 million registered users.

Paidy will continue to operate its existing business, retain its own brand, and continue to be led by Russell Cummer, founder and executive chairman, and Riku Sugie, president and chief executive.

Paidy’s backers include George Soros’s sons Jonathan and Robert. In April, Paidy said it had raised a total of $120 million of so-called Series D funding from the two men’s family offices, JS Capital Management LLC and Soros Capital Management LLC, as well from the investment managers Tybourne Capital Management Ltd. and Wellington Management.

BofA Securities Inc. acted as financial adviser to PayPal, while Goldman Sachs Group Inc. advised Paidy.

Australia is in the midst of a ‘baby recession’ with preliminary estimates showing the number of births in 2023 fell by more than four percent to the lowest level since 2006, according to KPMG. The consultancy firm says this reflects the impact of cost-of-living pressures on the feasibility of younger Australians starting a family.

KPMG estimates that 289,100 babies were born in 2023. This compares to 300,684 babies in 2022 and 309,996 in 2021, according to the Australian Bureau of Statistics (ABS). KPMG urban economist Terry Rawnsley said weak economic growth often leads to a reduced number of births. In 2023, ABS data shows gross domestic product (GDP) fell to 1.5 percent. Despite the population growing by 2.5 percent in 2023, GDP on a per capita basis went into negative territory, down one percent over the 12 months.

“Birth rates provide insight into long-term population growth as well as the current confidence of Australian families,” said Mr Rawnsley. “We haven’t seen such a sharp drop in births in Australia since the period of economic stagflation in the 1970s, which coincided with the initial widespread adoption of the contraceptive pill.”

Mr Rawnsley said many Australian couples delayed starting a family while the pandemic played out in 2020. The number of births fell from 305,832 in 2019 to 294,369 in 2020. Then in 2021, strong employment and vast amounts of stimulus money, along with high household savings due to lockdowns, gave couples better financial means to have a baby. This led to a rebound in births.

However, the re-opening of the global economy in 2022 led to soaring inflation. By the start of 2023, the Australian consumer price index (CPI) had risen to its highest level since 1990 at 7.8 percent per annum. By that stage, the Reserve Bank had already commenced an aggressive rate-hiking strategy to fight inflation and had raised the cash rate every month between May and December 2022.

Five more rate hikes during 2023 put further pressure on couples with mortgages and put the brakes on family formation. “This combination of the pandemic and rapid economic changes explains the spike and subsequent sharp decline in birth rates we have observed over the past four years,” Mr Rawnsley said.

The impact of high costs of living on couples’ decision to have a baby is highlighted in births data for the capital cities. KPMG estimates there were 60,860 births in Sydney in 2023, down 8.6 percent from 2019. There were 56,270 births in Melbourne, down 7.3 percent. In Perth, there were 25,020 births, down 6 percent, while in Brisbane there were 30,250 births, down 4.3 percent. Canberra was the only capital city where there was no fall in the number of births in 2023 compared to 2019.

“CPI growth in Canberra has been slightly subdued compared to that in other major cities, and the economic outlook has remained strong,” Mr Rawnsley said. “This means families have not been hurting as much as those in other capital cities, and in turn, we’ve seen a stabilisation of births in the ACT.”

PayPal to Buy Japan’s Paidy for $3.67 Billion

It’s the latest in a flurry of deals involving ‘buy now, pay later’ companies

Continued stagflation and cost of living pressures are causing couples to think twice about starting a family, new data has revealed, with long term impacts expected