PayPal and KKR Enter €40Bn European BNPL Deal

PayPal and KKR have announced the signing of an exclusive multi-year agreement under which KKR will purchase up to €40 billion of buy now, pay later (BNPL) loan receivables originated by PayPal in France, Germany, Italy, Spain, and the United Kingdom.

Under the terms of the agreement, KKR's private credit funds and accounts will acquire substantially all the European BNPL loan portfolio held on PayPal’s balance sheet at the close of the transaction and will also acquire future originations of eligible BNPL loans.

PayPal will remain responsible for all customer-facing activities, including underwriting and servicing, associated with its European BNPL products.

Since launching its first BNPL offering in 2020, PayPal has become an industry leader with its PayPal Pay Later products, issuing more than 200 million loans to over 30 million customers in eight markets around the world.

In 2022, PayPal processed more than $20 billion of BNPL payment volume globally, up approximately 160% from 2021.

"Buy now, pay later has become a major asset to PayPal's checkout experience, driving engagement, payment volume growth, and repeat use while delivering high-value customers to our merchants," explains Gabrielle Rabinovitch, senior vice president, acting chief financial officer of PayPal.

"Our collaboration with KKR will allow us to accelerate our PayPal Pay Later originations alongside market demand in Europe while preserving free cash flow for other strategic initiatives. This transaction is yet another example of our disciplined approach to capital allocation."

KKR is funding the transaction through its private credit funds and accounts.

"Having the ability to work exclusively with a scaled and high-quality strategic partner like PayPal is a testament to the strength and maturity of our Asset-Based Finance business," continues Dan Pietrzak, global head of private credit at KKR.

"We look forward to growing our relationship further and serving the financing needs of consumers across Europe through this transaction."

Subject to certain conditions, this transaction is expected to close in H2 2023.

(Source: Payments Card & Mobile)