Mobile payment platform PayPay raised $419m in funding from SoftBank. This is a deal from a space that has seen much growth in terms of the corporate-backed deal flow in recent years.
Telecoms conglomerate SoftBank committed ¥46bn ($419m) to PayPay, a Japan-based mobile payment services provider. The investment was announced along with news that SoftBank intends to purchase up to $4.2bn worth of newly issued shares by Yahoo Japan, the other cofounder of PayPay, in order to increase its holding in it from 12% to 45%.
Launched in 2018 by SoftBank and Yahoo Japan, PayPay runs a platform which allows its users to transfer money online and pay for items using QR codes on mobile devices. The backbone of the platform was formed by the customer base of 40 million user accounts of Yahoo Japan’s Yahoo Wallet platform, which it replaced. Part of the technology used is based on India-based digital payment system operator Paytm, which has already received backing from SoftBank via its Vision Fund.
According to an earlier press release by SoftBank, the company PayPay was originally launched as a joint venture with Yahoo! Japan, in conjunction with current measures by the Japanese authorities aiming to encourage cashless payments. In Japan, cash payments are still dominant, while cashless ones are the preferred method of payment in only around 20% of all transactions. It is also noteworthy PayPay ran a 20% discount campaign, offering the discount off purchases at select Japan-based retailers in the height of the Christmas shopping season at the end of 2018. The campaign, according to Bloomberg, cost PayPay and its investors the equivalent of $88m.
PayPay is part of the broader payment tech space, which has seen much attention from corporate investors, as our GCV Analytics data suggested and as illustrated by the bar chart below. Corporate-backed rounds marked a peak in 2018, reaching 129 deals estimated to be worth $20.2bn, up from 100 deals worth an estimated $3.84bn in 2017. During the first quarter of this year, we have already registered 43 deals in this space, estimated to be worth a total of $1.24bn.