Japanese Fintech PayPay Looks to Enter the U.S. Via a Visa Partnership And an IPO

Japanese fintech PayPay Corp. is preparing a push into the United States through a partnership with Visa Inc. and an initial public offering. Through Visa, PayPay will develop new payment options for its mobile wallet beyond QR codes to broaden its wallet appeal to U.S. consumers. PayPay specializes in QR code-based payments and has 72 million users in Japan.

PayPay plans to integrate its PayPay Balance, PayPay Card, and PayPay Bank services into a single Visa credential. As a result, users will be able to select and manage multiple payment methods within the app based on their needs and usage scenarios, the company says.

PayPay Balance is a pre-charged, electronic-money payment method within the PayPay app that allows users to pay for goods, scan QR codes, make peer-to-peer payments, and pay utility bills. The PayPay Card is a credit card that integrates with the PayPay mobile-payment app and allows cardholders to earn rewards. PayPay Bank provides online banking services integrated into the PayPay app ecosystem.

PayPay and Visa will also say they will work to improve cross-border payment experiences across their respective networks in Japan and overseas.

Partnering with Visa is viewed as a critical step in PayPay’s plans to enter the U.S., as the card network’s brand and global scale can help smooth the path to entry in a highly competitive payments market, says Cliff Gray, principal at Gray Consulting.

“Having Visa as a partner provides PayPay with a big warm welcome to the U.S.,” Gray says. “Being a Visa partner says we’re a company that is connected to a truly global network, especially in a region PayPay wants to enter.”

To bolster its efforts to establish a beachhead in the U.S., PayPay is preparing to launch an IPO. The company recently filed its notice to go public with the Securities and Exchange Commission. Goldman Sachs & Co. LLC, J.P. Morgan, Mizuho Securities USA LLC, and Morgan Stanley & Co. LLC are acting as joint book-running managers for the planned IPO.

Becoming a publicly traded company in the U.S. will help PayPay establish fiscal legitimacy. Without that, “the company might look suspect,” Gray adds.

While PayPay has established a plan to enter the U.S. market, the move will not be a slam dunk, Gray adds. For a foreign company to become a successful player in the U.S. payments ecosystem, it must have a firm understanding of all the players in the system and the roles they play in it.

“[PayPay] needs to understand that processing and acquiring in the U.S. is different from other regions, largely because the U.S. market is a true four-party system involving the issuer, acquirer, processor, and network,” Gray says. “Other regions, Europe in particular, support a three-party system in which processors and acquirers are one in the same.”