After the acquisition, the Japan-based company will continue to operate its existing business and maintain the brand and Paidy’s president and CEO Riku Sugie and founder and executive chairman Russell Cummer will retain their positions in the company.

Paidy aids Japanese shoppers to make purchases online, and then pay for them each month in a consolidated bill at a convenience store or via bank transfer. It uses proprietary technology to score creditworthiness, underwrite transactions and guarantee payment to merchants.

Paidy was launched in 2014 and at present, the firm has close to six million registered users. In April this year, the company raised $120 million in a Series D funding round. Japan is considered to be the third-largest e-commerce market in the world and this move by PayPal is significantly important to gain more market share both in the country and the region, specifically in the area of providing deferred payment services as an alternative to credit cards.

Peter Kevan, VP, head of Japan, PayPal, told the media, “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.”

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According to the parties involved, the technology will soon be put into use in industries such as tourism and cab services.

While there are concerns that customers might be unwilling to register their facial images in advance, the firms are developing a system under which facial image data will be stored on a server that cannot be accessed from the outside.

Meanwhile, Russia-based VTB Bank has launched a facial recognition payment solution, according to a press release. Vision, a contactless technology provider, is offering its O.Vision facial recognition app, which customers can link to their payment cards for contactless purchases.

Sergey Bezbogov, head of the department of management and coordination of technological changes, VTB Bank, said, “The pilot with O.Vision will allow us to test the facial recognition technology for payment, and evaluate the maturity, accuracy, and speed of recognition algorithms that ensure the security of payments.

“The solution has a built-in anti-spoofing system, which avoids the possibility of identity substitution when paying by facial biometrics. The identification algorithm analyses many parameters and minimises the probability of false admission.”

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The move follows the Bank of Japan’s recent announcement about its plan to experiment with issuing a digital yen. Japan has been working on the project for some time and the new development underscores a growing awareness of the need for Japan to catch up to rapid global advances in financial technology.

Hiromi Yamaoka, a former BOJ executive who chairs the group, said during an online briefing, “Japan has many digital platforms, none of which are big enough to beat cash payments. We don’t want to create another silo-type platform. What we want to do is to create a framework that can make various platforms mutually compatible.”

It is reported that cashless payments making up only 20 percent of total settlement which is well below when compared to other developed or developing countries such as the US or China. 

Recently, China has carried out pilot experiments when it comes to its own digital currency, the digital yuan. It could help China establish itself as a leader in the digital economy. With a population of around 1.3 billion and quick adoption of the digital yuan in emerging economies could make this a reality. However, Japan wants to challenge China with the digital yen.

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