PayPal, Softbank to form Japan joint venture, launch PayPal Here service

The companies said they will each invest US$12.5 million in the newly formed "PayPal Japan"

PayPal and Softbank said Wednesday they will form a new joint venture to pursue online transactions business in the country.

The two companies said they will each invest ¥1 billion (US$12.5 million) in the newly established firm PayPal Japan which will be a 50:50 joint venture. The companies also said they would launch PayPal Here, a platform that uses small card swiping attachments to allow smartphones to be used as mobile credit card readers, in Japan.

For Softbank, which owns Yahoo Japan, a portal with dominant domestic auction and shopping properties, the deal will provide access to an established global e-payment platform. Yahoo Japan is largely independent from its troubled cousin in the U.S.

At a press conference in Tokyo, Softbank CEO Masayoshi Son emphasized PayPal's experience in online security and its massive user base, which includes over 110 million active accounts. He said the PayPal Here service, which has typically been presented as a solution for small businesses to easily offer credit card services, could also work for larger companies in Japan.

"At large electronics stores and supermarkets, dozens line up at cash registers, and customers have to wait. This allows workers at such stores to settle purchases immediately with their smartphones," he said. "So I think it will be adapted at larger stores, not just smaller ones."

Softbank is also well-known for its mobile operator business, Japan's third-largest by subscribers, and the first in the country to embrace the current smartphone craze. The operator was the first to offer Apple's iPhone and has grown much faster than rivals since introducing the device.

PayPal will gain a strong e-commerce partner in Japan, a country where parent company eBay famously failed to gain traction and withdrew a decade ago. PayPal has in recent years sought to diversify and grow beyond the business generated by transactions from the auction behemoth, and is trying to expand into in-store transactions from its traditional strengths of online and mobile.

Japan is the fifth country to launch the PayPal Here service, after the U.S., Canada, Hong Kong and Australia.

PayPal currently operates a fully-owned subsidiary in Japan. The details of the transition to the new joint venture are still being decided, a spokesman said.

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