Digital wallet platform PayPal splashes their cash as they jump on the digital credit bandwagon in a bid to engage with more consumers.

PayPal returns to the top spot in the buy-now-pay-later (BNPL) competition, after purchasing Japanese loan platform Paidy.

The $2.7 billion partnership follows in the steps of rival Square after they scored their multibillion dollar deal with Afterpay earlier this year.

It comes at a time where the BNPL business model has been largely successful with consumers turning to virtual credit as they spend big online.

The cash deal will close in the fourth quarter of this year, with PayPal anticipating big things to come from its Japanese audience, which has the third largest e-commerce market in the world.

PayPal says the move will complement the company’s existing cross-border e-commerce business in the Asian country.

“The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan.”

A word on Paidy

Paidy will enable users of Paypal’s virtual wallet system to purchase items online and pay off their loans monthly.

But unlike Afterpay, Paidy enables its Japanese users to pay off their digital purchases in-store through a consolidated bill at local convenience shops or via bank transfer.

The company’s technology also has the ability to score creditworthiness, underwrite transactions and guarantee payment to merchants, setting up a safe platform for online consumer purchases.

“There is no better home for Paidy to continue to grow and innovate than PayPal, which has been removing friction from online shopping for more than 20 years,” says Russell Cummer, founder and executive chairman of Paidy.

“Together with PayPal, we will be able to further achieve our mission of taking the hassle out of shopping.”

Despite the acquisition taking place, Paidy will continue to operate under its existing business while maintaining its brand and supporting its consumers.

Founded in 2010, the BNPL firm currently has 4.3 million active accounts.

Written by Rebecca Borg