Paidy considers listing as ‘buy now, pay later’ catches on in Japan

Fintech updates

Paidy, the Japanese fintech “unicorn”, is considering becoming a publicly listed company on the back of rapid growth driven by the “buy now, pay later” trend in one of the world’s most cash-obsessed societies, according to its founder. 

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The company, backed by trading house Itochu, PayPal and Goldman Sachs, is one of a handful of “unicorns” in Japan, commanding a valuation of $1.3bn when it raised $120m in March. 

Market players and investors expect Paidy to file for an initial public offering in Tokyo this year, although the company insists there is no concrete timetable for a listing.

“We have access to capital. In our business, it’s also important to have access to credit lines, which we do, but at the same time, every company does mature and get to the point where it also makes sense to be a public company,” Russell Cummer, Paidy’s founder, told the Financial Times. 

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According to the former Goldman Sachs credit trader who founded the start-up in 2008, BNPL was catching on in Japan, although at a slower pace than globally where its popularity has exploded due to the pandemic-driven boom in online shopping.

“It’s still early days for us in this market,” Cummer said. “But for the very first time, Japan has a true BNPL service.” 

Since 2014, Paidy has offered a post-payment service that allows shoppers to pay a month-worth of purchases in the following month. In October, it launched a service that allows consumers to split the cost of goods into three equal instalments with no interest — the first in Japan with zero interest.

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Roughly half of Paidy’s 6m account holders are women between the ages of 18 and 34, and the service is accepted by most ecommerce sites and merchants including Amazon, Shopify, Apple and Rakuten. 

Globally, BNPL is a crowded market with big players such as Sweden’s Klarna, Silicon Valley-based Affirm and PayPal. Payments company Square has also joined the competition with its $29bn all-stock deal to acquire Australia’s Afterpay, while Apple is also exploring the market. 

In Japan, however, the volume of transactions done through post-payment services was still relatively small at ¥882bn ($8bn) in fiscal 2020 although Yano Research Institute expects that amount to more than double to ¥1.88tn by fiscal 2024.

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The BNPL trend in Japan is based on a similar thesis globally that millennials and Gen Z consumers distrust traditional credit but still want to borrow money to buy goods. 

But reflecting the country’s cash addiction, Japanese consumers have adopted distinct ecommerce habits in which they often own credit cards but choose to settle online purchases with cash on delivery or via convenience stores and bank transfers.

The heavy dependence on cash on delivery has created a logistical nightmare for merchants, making refunds and return of goods difficult as well.

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Paidy has capitalised on this consumer behaviour, allowing shoppers to instantly open its account and gain access to short-term credit with simply an email and mobile phone number. Despite the simple credit check, the company claims late fees account for less than 5 per cent of its revenue, which is made up of merchant and settlement fees.

“Paidy is now a more fundamental piece of infrastructure of ecommerce in Japan than a typical BNPL,” Cummer said.

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