Paypal Holdings (PYPL) on Wednesday said it’s acquiring Japanese “buy now, pay later” consumer financing startup Paidy for about $2.7 billion. PayPal stock rose on the move.
Buy now, pay later, or BNPL, installment payment services are encroaching on the credit card industry. Merchants offer BNPL financing to consumers primarily during checkout when they shop online.
Digital payment company Square (SQ) on Aug. 1 agreed to purchase buy now, pay later provider Afterpay in an all-stock, $29 billion deal. E-commerce giant Amazon.com (AMZN) announced Aug. 27 that it’s working with BNPL provider Affirm Holdings (AFRM), sending Affirm’s shares soaring.
Buy now, pay later services generally split payments into three or four equal installments over two months or less.
PayPal Stock: Getting Higher Fees Than Credit Cards
BNPL is a way to spread out interest-free payments for consumers. They also can avoid transaction fees if they pay on time. Meanwhile, merchants generally pay BNPL firms fees of 4% to 5%, offering a boost to PayPal stock and others in the game. That’s higher than the 2% transaction fees they pay credit card companies.
Roughly 80% of consumers use debit cards to pay off their BNPL transactions, deducting money from checking accounts rather than putting it on their credit cards.
Before acquiring Japan’s Paidy, PayPal developed its own buy now, pay later service, which it rolled out in the U.S. in late 2020.
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