TOKYO, JAPAN: PayPal Holdings Inc. said it will acquire the Japanese upstart Paidy Inc. for 300 billion yen ($2.7 billion), a news release said.

The acquisition will be “minimally dilutive” to adjusted earnings per share in 2022, PayPal said Tuesday in a statement. The deal, which is expected to close in the fourth quarter, will be paid for principally with cash, PayPal said.

Japan is home to the world’s third-largest market for online shopping but it is also one of the few developed markets where paper currency is still king. Nearly three-quarters of all purchases in the country are still paid for in cash, PayPal said.

Paidy, then, is unusual among the world’s buy-now-pay-later providers because it allows Japanese consumers to purchase items online and pay them off each month in person at local convenience stores. The firm, founded in 2010, has 4.3 million active accounts.

 “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,” said Russell Cummer, founder and executive chairman of Paidy.

PayPal said Cummer and Riku Sugie, president and chief executive officer of Paidy, will continue to lead the business. Paidy will also maintain its brand and operate its existing businesses.

Buy-now-pay-later (BNPL) options allow users to split purchases into smaller payments without charging any interest, and instead make most of their money by collecting a small amount from merchants each time a consumer uses the product. Their usage is surging worldwide amid the pandemic-fueled e-commerce boom.

The Paidy deal comes after Jack Dorsey’s Square Inc. agreed last month to buy Australian BNPL firm Afterpay Ltd. for $29 billion. Sweden’s Klarna Bank AB raised funds in June at a valuation of $45.6 billion, with SoftBank Group Corp. leading the funding round. PayPal itself began offering a BNPL service last year and customers have since used it to make $3.5 billion in purchases.

Paidy’s backers include Soros Capital Management, Visa Inc. and Japanese trading house Itochu Corp. The startup raised $120 million in its most recent funding round in March, which research firm CB Insights said took its valuation to $1.2 billion.

Cummer, a Canadian, set up the firm after working as a credit trader at Goldman Sachs Group Inc. in Tokyo. Paidy began offering BNPL services in 2014. It can be used on Amazon.com Inc.’s Japanese site, and launched a tie-up with Apple Inc. in June for customers making purchases from Apple in Japan.

 “Paidy pioneered buy-now-pay-later solutions tailored to the Japanese market,” said Peter Kenevan, head of Japan at PayPal. “Combining Paidy’s brand, capabilities and talented team with PayPal’s expertise, resources and global scale will create a strong foundation to accelerate our momentum in this strategically important market.”

Bank of America Corp. served as sole financial adviser to PayPal, and White & Case was its lead legal adviser for the deal. Goldman Sachs was Paidy’s sole financial adviser, while Cooley and MHN were its legal advisers.