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With over 60 million users in 5 years, payment application PayPay may become Son's next IPO target

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Release: 2023-10-08 12:21:03
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News on October 8th, payment application PayPay has become one of the success stories of Masayoshi Son, founder of Japan’s SoftBank Group, and its users have grown from zero to more than 60 million in five years. The app is now looking to maintain double-digit growth with help from other SoftBank investment firms, according to the company's co-chief operating officer.

5 年用户数超 6000 万,支付应用 PayPay 或成孙正义下一个 IPO 目标
Headquartered in Tokyo, PayPay is taking a dominant position in Japan's cashless payments space thanks to Due to its active subsidy strategy and SoftBank’s support in signing contracts with merchants across Japan. Shortly after its debut in 2018, the company poured 10 billion yen (about $67 million) into a cash-back campaign in 10 days, winning over millions of users and even causing multiple outages of the PayPay system.

The startup, seen as SoftBank's next initial public offering (IPO) target, has two-thirds of the QR code payments market in Japan, where cash still dominates. Partnering with Line, a Japanese messaging service owned by SoftBank's telecom unit, will help PayPay gain an additional 30 million users in the coming years, according to PayPay co-chief operating officer Masamichi Yasuda.

Son encourages portfolio companies to collaborate with one another, and PayPay is one of the few fruitful moves in that strategy. SoftBank holds a majority stake in PayPay through its telecom unit, holding company and second Vision Fund. The company initially adopted India's Paytm payment technology. The first Vision Fund invested in Paytm in 2017. As of March this year, PayPay's gross merchandise volume (GMV, a key indicator of performance) exceeded 10 trillion yen, a year-on-year increase of 34%. Masamichi Yasuda said this is the growth rate PayPay hopes to maintain. He said the company would use its range of services, from credit cards to insurance to stock trading, to boost transactions and user growth.

PayPay's rapid growth has also benefited from the Japanese government's efforts to encourage digital payments, although Japanese people still prefer to use cash

. In 2022, cashless payments accounted for approximately 36% of total consumer transactions, according to Japan’s Ministry of Economic Affairs. While this figure lags behind neighboring countries, it is more than double what it was a decade ago.

PayPay acquired a stake in PayPay Card last year, with SoftBank’s telecom unit investing heavily in the startup in an internal transaction, according to calculations by Kirk Boodry, an analyst at Astris Advisory. The valuation is approximately 1 trillion yen. Analysts said the payments company's IPO would be good for SoftBank if investors agree to the valuation. Budley said: "They have done very well with PayPay because at the beginning of this business Before, they were little known in the fintech space. Now, they have managed to capture a large share of this market."

Payment by scanning QR codes is widely used in China, including WeChat Pay and Alipay , and now it is becoming more and more popular in Japan. Lower commissions compared to those charged by credit card providers continue to attract merchants.

However, PayPay is paying closer attention to its financial health. The company, which currently charges retailers a fee, reported profit before interest, taxes, depreciation and amortization for the first time in the second quarter ended June.

Masamichi Yasuda said the company hopes to improve its ability to use PayPay The average amount spent on a personal account, but he declined to elaborate further. PayPay is also considering expanding into business accounts and possibly offering overseas use through partnerships with local payment apps, he added.

In order to expand the coverage of PayPay, it will face fierce competition from Rakuten Group. Rakuten Group also offers a range of similar services, including Rakuten Payments, credit cards and brokerage services. The payments market is also becoming increasingly crowded, while credit cards still dominate high-value transactions such as luxury purchases

"We are gradually entering a different phase of growth," Yasuda said. PayPay will continue to invest, “but at the same time, we hope that profitability will become a sticky trend for us.”

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source:ithome.com
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