Japanese startup Paidy has received US$55 million to build a scheme allowing online shoppers to buys goods without a credit card.
The series-C funding was led by Goldman Sachs and Japanese trading house Itochu Corporation
Paidy was created because even though Japan’s credit-card penetration rate is high, their usage rate is relatively low, even for online purchases. “Instead, shoppers pay cash on delivery or at convenience stores, which function as combination logistics/payment centers in many Japanese cities.”
While that solution is convenient for cardholders worried about fraud, it inconveniences retailers because they have to maintain a pool of cash for merchandise not paid for.
“Paidy makes it possible for people to buy online without creating an account or using their credit cards”. Instead, if a merchant uses Paidy, its customers are able to check out by entering their mobile phone numbers and email addresses. Then Paidy authenticates them with a four-digit code sent through SMS or voice. Every month, customers settle their bills, which include all transactions they made using Paidy, at a convenience store or through bank transfers or auto-debits (installment and subscription plans are also available).