Paidy raises additional $5M to give online shoppers instant credit

Japan is known around the world for its cutting-edge technology, but it remains a largely cash-based society. Avoiding credit cards might help big spenders stay out of debt, but online shopping options are severely limited without plastic. Exchange Corporation (ExCo) wants to change that with its Paidy service, which allows ecommerce shoppers to buy now and pay later without a credit card. The Tokyo-based fintech startup today announced that it has expanded its series A funding by US$5 million, bringing the total to US$8.3 million.

To make an online transaction, Paidy users simply share either an email address or their mobile phone number. The startup guarantees the payment to the merchant and bills the purchaser about two weeks later, assuming all risks involved like a traditional credit card company. Also similar to plastic is the option to break payments into monthly installments. The startup charges a flat 3 percent fee to the merchant, in line with competing credit card rates.

“More than 40 percent of all online transactions in Japan are non-credit card purchases.” Russell Cummer, ExCo’s CEO, tells Tech in Asia. “We are already seeing the biggest value to Paidy consumers is being able to have a simple checkout experience without having to use a credit card […] For merchants we are solving the many pain points of non-credit card purchases: the need to support several non-card methods, withholding stock until consumers pay by bank transfer or at the [convenience store], refunds, and general UX of a non-realtime customer experience.”

Approximately 200,000 merchants in Japan currently accept Paidy at checkout.

The Paidy team.

Mobile commerce push

Existing investor Arbor Ventures led the series A expansion and was joined by SIG Asia and MS Capital. Cummer explains that the additional capital will be used for product development and hiring.

We’re working to make Paidy available on all major platforms – web, mobile apps, and ecommerce platforms. We’re investing heavily in the development of web apps, mobile SDKs, ecommerce plugins, and language-specific bindings. We’re aggressively hiring the resources to achieve this. We are also building an A-class technical integration team to work closely with larger merchants to plan and help develop their integration throughout their entire process.

Paidy raised the first phase of its series A round last July. Arbor Ventures, CyberAgent Ventures, and 500 Startups contributed the first US$3.3 million. At present, it’s only available in Japan. The recent addition of SIG China managing director Tim Gong to the startup’s board of directors hints at the startup’s global intentions.

“While we are currently focused on winning the Japanese market and securing our place as the cardless payments company here, we do have plans already to compete in other markets, both in and outside of Asia,” Cummer adds. “The global experience of our board of directors and investors is a significant part of our plan.”