As filed with the U.S. Securities and Exchange Commission on March 2, 2026.

Registration No. 333-293410

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

Form F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

PayPay Corporation

(Exact name of Registrant as specified in its charter)

 

 

Not Applicable

(Translation of Registrant’s name into English)

 

Japan		7389		Not Applicable
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

Yotsuya Tower

1-6-1 Yotsuya

Shinjuku-ku

Tokyo 160-0004

Japan

+81-3-6885-8181

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Cogency Global Inc.

122 East 42nd Street, 18th Floor

New York, NY 10168

+1-800-221-0102

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

 

Takahiro Saito David C. Snowden Simpson Thacher & Bartlett LLP Ark Hills Sengokuyama Mori Tower 9-10, Roppongi 1-Chome Minato-ku, Tokyo, 106-0032, Japan +81-3-5562-6200		Christopher Kodama Davis Polk & Wardwell LLP Izumi Garden Tower 33F 1-6-1 Roppongi Minato-ku, Tokyo 106-6033, Japan +81-3-5574-2600

Approximate date of commencement of proposed sale to the public:

as soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the United States Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it solicit an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion. Preliminary Prospectus dated March 2, 2026.

54,987,214 American Depositary Shares

 

 

PayPay Corporation

Representing 54,987,214 Shares of Common Stock

This is an initial public offering of American depositary shares, or ADSs, representing common shares of PayPay Corporation.

We are offering 31,054,254 ADSs and the selling shareholder identified in this prospectus is offering 23,932,960 ADSs. Each ADS represents one common share, no par value. We will not receive any proceeds from the sale of ADSs by the selling shareholder.

We anticipate the initial public offering price per ADS will be between US$17.00 and US$20.00.

Prior to this offering, there has been no public market for the ADSs or our shares. We have applied to list the ADSs on the Nasdaq Global Select Market, or Nasdaq, under the symbol “PAYP.”

Qatar Holding LLC, Visa International Service Association and Abu Dhabi Investment Authority (collectively, the “Cornerstone Investors”) have, severally and not jointly, indicated an interest in purchasing up to an aggregate of $220 million of the ADSs offered in this offering at the initial public offering price and on the same terms and conditions as the other purchasers in this offering. Because these indications of interest are not binding agreements or commitments to purchase, the Cornerstone Investors may determine to purchase more, fewer, or no ADSs in this offering, or the underwriters may determine to sell more, less or no ADSs to the Cornerstone Investors. The underwriters will receive the same underwriting discount on any ADSs purchased by the Cornerstone Investors as they will from the other ADSs sold to the public in this offering.

Investing in the ADSs involves risks. See “Risk Factors” beginning on page 25 for additional information and factors you should consider before buying the ADSs.

PRICE US$    PER ADS

Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

		Per ADS		Total
Initial public offering price		US$		US$
Underwriting discounts and commissions(1)		US$		US$
Proceeds, before expenses, to the selling shareholder(2)		US$		US$
Proceeds, before expenses, to us(2)		US$		US$

 

(1)	For additional information on underwriting compensation, see “Underwriting.”

(2)	Assumes no exercise of the underwriters’ option to purchase additional ADSs.

We have granted the underwriters an option to purchase up to an aggregate of 8,248,081 additional ADSs from us at the initial public offering price less the underwriting discounts and commissions, for 30 days after the date of this prospectus to cover over-allotments, if any.

Upon the completion of this offering, 668,625,454 common shares will be issued and outstanding. Entities ultimately controlled by SoftBank Group Corp. will beneficially own common shares representing in the aggregate 91.78% of the voting power of our total issued and outstanding shares immediately after the completion of this offering, assuming the underwriters do not exercise their option to purchase additional ADSs. As a result, we expect we will be a “controlled company” within the meaning of applicable rules of Nasdaq. Under the applicable Nasdaq rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements. If we rely on these exemptions, our shareholders or the ADS holders will not have the same protections afforded to stockholders of companies that are subject to such requirements. See “Prospectus Summary—Implications of Being a Controlled Company.”

The underwriters expect to deliver the ADSs against payment in U.S. dollar in New York, New York on or about      , 2026.

(in alphabetical order)

 

Goldman Sachs & Co. LLC		J.P. Morgan		Mizuho		Morgan Stanley

 

 

 

Citigroup		Jefferies		BofA Securities		Societe Generale		Wolfe | Nomura Alliance

 

Cantor		Credit Agricole CIB		Daiwa Capital Markets		Deutsche Bank Securities		Natixis		SMBC Nikko

 

 

 

ING		Barclays		IMI – Intesa Sanpaolo		Santander

 

Prospectus dated    , 2026

 

 

TABLE OF CONTENTS

 

Prospectus Summary			1
Summary Consolidated Financial and Operating Data			21
Risk Factors			25
Special Note Regarding Forward-Looking Statements and Industry Data			76
Use of Proceeds			78
Dividend Policy			79
Capitalization and Indebtedness			80
Dilution			81
Enforcement of Civil Liabilities			83
Our History and Corporate Structure			84
Management’s Discussion and Analysis of Financial Condition and Results of Operations			87
Business			145
Management			196
Japanese Foreign Exchange Regulations			206
Regulations			210
Principal and Selling Shareholders			229
Related Party Transactions			232
Description of Share Capital			238
Description of American Depositary Shares			247
Shares Eligible for Future Sale			256
Taxation			258
Underwriting			266
Expenses Related to this Offering			278
Legal Matters			279
Experts			279
Where You Can Find More Information			280
Index to Financial Statements			F-1

Until    , 2026 (the 25th day after the date of this prospectus), all dealers that effect transactions in these ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

We, the selling shareholder and the underwriters have not authorized anyone to provide you with any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you, and neither we, the selling shareholder nor the underwriters take responsibility for any other information others may give you. We are offering to sell, and seeking offers to buy the ADSs, only in jurisdictions where such offers and sales are permitted. The information in this prospectus or any free writing prospectus is accurate only as of its date, regardless of its time of delivery or the time of any sale of the ADSs. Our business, financial condition, results of operations and prospects may have changed since that date.

Neither we, the selling shareholder nor the underwriters have done anything that would permit an offering of the ADSs or the possession or distribution of this prospectus or any filed free writing prospectus in any jurisdiction where other action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus or any free writing prospectus filed with the United States Securities and Exchange Commission, or SEC, must inform themselves about, and observe any restrictions relating to, the offering of the ADSs and the distribution of this prospectus or any filed free writing prospectus outside the United States.

 

i

PRESENTATION OF FINANCIAL INFORMATION AND CONVENTIONS THAT APPLY TO THIS PROSPECTUS

In this prospectus, terms such as “we,” “us,” “our,” “the Company” and “the Group” refer to PayPay Corporation and its consolidated subsidiaries or, if the context so requires, PayPay Corporation on a non-consolidated basis.

In this prospectus, “SoftBank Group companies” refer to companies other than us or our consolidated subsidiaries whose ultimate parent is SoftBank Group Corp., including, but not limited to our four current shareholders (B Holdings Corporation, SVF II Piranha (DE) LLC, SoftBank Corp. and LY Corporation), Yahoo Japan Corporation and LINE Corporation (prior to their merger to form LY Corporation), PayPay Insurance Service Corporation (a wholly-owned subsidiary of LY Corporation) and PayPay SC Corporation, which is also an equity-method affiliate of ours.

In this prospectus, references to “U.S. dollars,” “USD” and “$” refer to the lawful currency of the United States and those to “yen,” “JPY” and “¥” refer to the lawful currency of Japan.

In this prospectus, where information is presented in thousands, millions or billions of yen or U.S. dollars, as the case may be, amounts of less than one thousand, one million or one billion, as the case may be, have been rounded unless otherwise specified. In this prospectus, where information is presented as percentages, amounts less than one-tenth of one percent or one-hundredth of one percent, as the case may be, have been rounded unless otherwise specified. Accordingly, the totals of columns of figures presented in tables in this prospectus may not be equal to the totals of the individual items.

Our consolidated financial statements included elsewhere in this prospectus consist of our audited financial statements as of March 31, 2024 and 2025 and for the years ended March 31, 2023, 2024 and 2025, and our unaudited condensed consolidated financial statements as of December 31, 2025 and for the nine months ended December 31, 2024 and 2025, which have each been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board, or IFRS. Unless otherwise indicated, all financial information included in this prospectus is presented using IFRS, which differs from accounting principles generally accepted in Japan, or Japanese GAAP, and from accounting principles generally accepted in the United States, or U.S. GAAP.

On April 1, 2025 and April 11, 2025, we acquired shares of PayPay Securities Corporation and PayPay Bank Corporation, respectively, which had been under the common control of SoftBank Group Corp., and made them subsidiaries of ours. The acquisitions of shares of PayPay Securities Corporation and PayPay Bank Corporation were accounted for under the pooling of interest method as business combinations under common control. As a result, the Group’s consolidated statements of financial position as of April 1, 2023 and March 31, 2024, consolidated statements of profit or loss, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years ended March 31, 2023 and 2024 were retrospectively adjusted for the consolidation of the financial statements of PayPay Securities Corporation, PayPay Bank Corporation and their respective subsidiaries from April 1, 2022.

On November 15, 2025, we effected a stock split of one share into 200 shares (the “Stock Split”). The Stock Split did not affect total equity or the proportional interests of the shareholders. Unless otherwise indicated, all numbers of shares underlying stock options, the corresponding exercise prices and fair value of those stock options, and other per-share calculations presented in this prospectus have been retroactively adjusted to reflect the Stock Split.

 

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RISK FACTORS

Investing in ADSs representing shares of our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest. The risks and uncertainties described below may not be the only ones we face. Our business, financial condition, results of operations or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. If any of the risks actually occur, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the market price of ADSs representing shares of our common stock could decline, and you could lose part or all of your investment. See also the sections titled “Special Note Regarding Forward-Looking Statements and Industry Data.”

Risks Related to Our Business

If we fail to manage our growth effectively, we may be unable to execute our business plan or maintain high levels of service and satisfaction, and our business, results of operations, financial condition, cash flows and prospects could be adversely affected.

We have experienced significant expansion of our business since the launch of our PayPay app and anticipate that we will continue to grow our merchants and our user base and to launch new services to take advantage of market opportunities. Following our acquisition of PayPay Card Corporation in October 2022 and the recent consolidation of PayPay Bank Corporation and PayPay Securities Corporation, we expect to achieve even more significant growth as we leverage newly gained synergies and expand our array of service offerings. We are investing in our operational capabilities, including by increasing our product development costs and expenses related to our internal IT systems, in order to support such growth and initiatives, but if we do not maintain our current rate of growth or realize our targeted growth, our business, results of operations, financial condition, cash flows and prospects could be materially and adversely affected. Many factors may contribute to a decline in our growth rates, including increased competition, slowing demand for our services from existing and new users, reduced market acceptance of our existing services, transaction volume and mix, lower sales by our merchants, our merchants seeking to reduce the fees we charge to them, general economic conditions, including a decline in consumer spending power as a result of rising interest rates, government actions and policies or a failure by us to continue capitalizing on growth opportunities. With the development of our business, having captured a large market share for code-based payment settlement services, we may face challenges to continue growing the scale of our business and Total GMV as we have targeted with respect to our payment settlement services business and to grow our financial services business in line with our expectations. Even if we grow as targeted, we cannot assure you that our current and planned systems, policies, procedures and controls, personnel and third-party relationships will be adequate to support our future operations. It may become increasingly difficult to manage our growth as our operations continue to grow and become increasingly complex. Our failure to manage growth effectively could seriously harm our business, results of operations, cash flows and financial condition.

To effectively manage operations and personnel growth, we will need to continue to grow and improve our operational, financial, and management controls and our reporting systems and procedures. We will require the allocation of valuable management resources to expand our systems and infrastructure, particularly in connection with hiring and training engineers and other personnel, without any assurances that our revenue will increase. We also believe our corporate culture has been and will continue to be a valuable component of our success. As we expand our business and mature as a listed company, we may find it difficult to maintain our corporate culture, including our innovative and entrepreneurial spirit. Failure to manage our anticipated growth and organizational changes while preserving our corporate culture could reduce our ability to recruit and retain personnel, innovate, operate effectively, and execute on our business strategy, potentially adversely affecting our business, results of operations, cash flows and financial condition.

 

25

If we fail to attract new users, retain our active users or expand the scope of our relationship with our active users, our business, results of operations, financial condition, cash flows and prospects could be materially and adversely affected.

Our success depends, in part, on our ability to attract new users to our payment settlement and other financial services, including for our PayPay app as well as our service offerings by PayPay Card Corporation, PayPay Bank Corporation and PayPay Securities Corporation, in order to increase revenue. Our success also depends on our ability to retain our active users. We generate revenue when users use our services, such as when they transact and pay for products and services using our PayPay app. If we are not able to continue to grow our user base and retain our active users, we will not be able to continue to grow our merchant network or our business effectively. The attractiveness of our platform and services to users depends upon, among other things: the number and variety of merchants and the mix of services available through our platform; our brand and reputation; user experience and satisfaction; consumer trust and perception of our solutions, including with respect to privacy and security; consumer trust and perception of payment applications and other financial products, including credit cards, loans and securities accounts; technological innovation; the rate or return to our users with respect to PayPay Points; and products and services offered by competitors. Our marketing efforts currently include digital and print marketing and the extensive use of promotional discounts and offers to our merchants and users. In order to increase revenue, we have aggressively used financial incentives to encourage customers to use our services. While our marketing and promotion expenses as a percentage of our revenue have been decreasing, decreases in the incentives we offer could negatively impact the use of our services by customers and result in a decrease in revenue. For example, on February 4, 2026, we announced some changes to our PayPay Points reward program, which will narrow some of the ways users will be able to earn PayPay Points from June 2026. See “Business—PayPay Points—Changes to PayPay Points Rewards Program.” In that event, we may need to introduce new incentives or other marketing initiatives, and our marketing initiatives may become increasingly expensive and generating a meaningful return on these initiatives may become difficult. Some of our affiliated companies, our merchants and government entities also grant PayPay Points as incentives to increase sales of their own products and services or to promote cashless payment, and as a result, the majority of the cost of PayPay Point incentives are borne by third parties (principally affiliated companies but also our merchants and local governmental agencies in Japan). If in the future such third parties decrease their use of PayPay Points as consumer incentives, our user acquisition and retention could be adversely affected. See “—We may not be able to maintain and strengthen the ecosystem effects of our platform, which could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.” for a further discussion on the network effects and risks related to collaborations with our affiliated companies. With respect to our PayPay app, because we already have acquired a user base of approximately 72 million registered users as of December 31, 2025, we may not be able to continue increasing our number of users at the same rate as previously, which may also contribute to difficulty in generating a meaningful return on new marketing initiatives. If we do not continue to attract new users to our platform or services or are unable to retain our active users, our business, results of operations, financial condition, cash flows and prospects could be materially and adversely affected. As we continue to grow our business, we expect the rate at which we increase the number of new users to decrease as we shift our focus to our active users.

Our future growth also largely depends on our ability to generate increased usage across all of our services and higher transaction volume from our active users. If we are unable to successfully implement our latest initiatives to increase the value of transaction volume utilizing our services by existing users, including incentivizing PayPay Card holders to use their cards as their primary credit card and growing PayPay Bank deposit accounts and PayPay Securities investment accounts, our revenue growth may be adversely affected. From September 2023, we started to charge an additional fee to users that load their PayPay Balance through the SoftBank/Y! Mobile mobile carrier billing service twice or more per month. As a result of such changes and similar changes in the future, we may lose a certain percentage of our existing users that are inconvenienced by these changes in our services and our fee structure. Furthermore, other external factors such as rising interest rates and as a result users electing to keep their funds in deposit accounts with other financial institutions which pay interest instead of deposited with us as PayPay Money may negatively affect our ability to increase our transaction volume.

 

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Our ability to retain and grow our user base depends on the willingness of users to continue using our platform and services. If we fail to retain our relationship with existing users or if we do not continually expand transaction volumes from users on our platform or services, our business, results of operations, financial condition, cash flows and prospects would be materially and adversely affected.

If we are unable to attract new merchants to utilize our services, grow our relationships with our existing merchants, and increase transaction volumes across our payment settlement services, our business, results of operations, financial condition, cash flows and prospects could be materially and adversely affected.

Our growth in payment settlement services substantially depends on our ability to acquire new merchants, maintain and grow our relationships with existing merchants and increase the volume of transactions processed using our services. We rely on the continuing growth of our merchant relationships and our distribution channels in order to expand our GMV and our operations. Additionally, having a diversified mix of merchants is important to mitigate risk associated with changing consumer spending behavior, economic conditions and other factors that may affect a particular type of merchant or industry. We derive revenue for our payment settlement business primarily from the fees earned from merchants for our payment settlement services. If we are not able to attract new merchants and retain existing merchants or increase transaction volumes of our payment settlement services, our payment platform may struggle to gain wider acceptance among new merchants, which in turn may impede our ability to grow our revenue. The attractiveness of our payment settlement services to merchants and their willingness to partner with us depend upon, among other things: the variety and quality of service offerings; payment options offered to users; the degree of consumer penetration; the strength of our brand and reputation; the amount of fees that we charge; our ability to sustain our value proposition to merchants for consumer acquisition by demonstrating higher conversion at checkout; the attractiveness to merchants of our technology and data-driven platform; and our competitors’ offerings. Because our PayPay app is mostly used to purchase everyday items that are relatively low in price per transaction, it is critical that we continue to increase the volume of transactions processed with our services, including by leveraging revolving and installment payments provided by PayPay Card Corporation, in order to achieve our targeted GMV. In recent years, because the amount of online payments by consumers has increased as a result of the growth of e-commerce, we intend to focus in particular on increasing the volume of online transactions processed with our services. However, there is no guarantee that we will increase the volume of online transactions in the manner that we anticipate. In addition, if the average price per transaction and the frequency of transactions per user do not increase in line with our expectations, we also may not be able to achieve our targeted GMV.

Moreover, we may experience attrition of our merchant relationships due to several factors, some of which are outside our control, including business closures, bankruptcy, financial distress, transfers of merchants’ accounts to our competitors, cancellations and account closures that we initiate due to heightened credit risks relating to contract breaches by merchants or a reduction in sales, which could have a material adverse effect on our business, financial condition, cash flows and results of operations. In addition, our results of operations and growth to date have been partially driven by the growth of our merchants’ own businesses and the resulting growth in GMV. Should the rate of growth of our merchants’ businesses slow or decline, this could have an adverse effect on transaction volumes and therefore an adverse effect on our financial condition, cash flows and results of operations.

Further, we acquire merchants both directly as well as through third-party agencies. Our contracts with merchants typically have a term of one year with automatic renewal, and the terms of such contracts allow these merchants to terminate the contracts without cause by giving notice as per the terms of the agreement. In addition, our contracts with merchants that sign up with us through third-party agencies are terminated if our agreement with the third-party agency is terminated. We have no guarantee of income under these agreements or minimum requirements for the use of our services. Merchants may seek price reductions when expanding or changing their products and services with us and/or when the merchants’ businesses experience significant volume changes. In addition, because introduction costs of other payment settlement services are relatively low,

 

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and our contracts with merchants are non-exclusive, our merchants often have arrangements with multiple payment service providers, primarily in order to mitigate certain risks, such as downtime, delayed response time or default by a payment service provider, as well as to maximize conversion by offering a complete array of payment methods available. Therefore, these merchants could shift business away from us at any given time without necessarily terminating their contracts with us. If our contracts with our merchants are terminated or if these merchants shift business away from us, or if we are unsuccessful in achieving high renewal rates and favorable contract terms, our business, financial condition, cash flows and results of operations could be materially and adversely affected. In particular, our larger merchants, such as convenience store chains and major drug store chains may develop and prioritize the use of their own payment services, or may terminate their contracts with us and exclusively use their own payment services, in the future, which could materially and adversely affect our results of operations. With respect to our contracts with merchants of our credit card merchant acquiring business, the term is typically one year with automatic renewal for an additional year, unless terminated. If we are unable to maintain high renewal rates as well as favorable terms for these contracts, our business, financial condition, cash flows and results could also be materially and adversely affected.

If we fail to retain any of our larger merchants or a substantial number of our smaller merchants, if we do not acquire new merchants, if we do not increase transaction volumes on our platform, if merchants do not adopt payment settlement services we offer or if we do not attract and retain a diverse mix of merchants, our business, results of operations, financial condition, cash flows and prospects would be materially and adversely affected.

We may face challenges in maintaining and expanding synergies between our code-based payment settlement services and our credit card payment services.

As part of our efforts to increase the volume of transactions of our payment settlement services and grow our business overall, we acquired PayPay Card Corporation, including the credit card merchant acquiring business of Yahoo Japan, from Yahoo Japan Corporation (currently LY Corporation) in October 2022. PayPay Card Corporation was primarily focused on offering credit cards to users of Yahoo Japan’s shopping platforms. We aim to continue expanding the synergies between our PayPay app payment settlement services and our credit card payment services. For example, upon successful completion of the application process, a virtual PayPay Card is made available to users directly on the PayPay app to give users the option of selecting credit card-based payment, and this has led to an increase in the use of our credit card payment services by PayPay app users. We expect our expanding PayPay app user base will enable us to continue increasing the number of users of PayPay Card. However, we may not be able to continue to maintain and expand these synergies or to expand our credit card business in line with our expectations or at all.

A significant portion of our targeted revenue growth is dependent on increasing consumer and business spending on credit cards issued by PayPay Card Corporation and growing the amount of revolving credit, installment sales, credit balances and cash advances. We have invested in a number of related growth initiatives, including to attract new card members, retain existing card members and capture a greater share of customers’ total spending and borrowings. In order to fully execute such initiatives, for a period of time, we significantly increased the number of PayPay Card Corporation’s employees. In addition, we changed our credit card approval criteria in order to increase the approval rate, and as a result, our current credit card approval rate for new applicants of PayPay Card has increased to over 70%. However, this increase in our credit approval rate could result in us extending credit to users with greater credit risk, and may increase our exposure to credit risk as well as increase the delinquency rates of our credit card receivables, which could materially and adversely affect our results of business, results of operations, cash flows and financial condition.

Despite our investments in growth initiatives, including the adoption of generative AI to increase our operational efficiency, there can be no assurance that our investments towards growing our credit card business will continue to be effective or that we will be able to achieve the targeted increase in Total GMV of our payment settlement services as a result of expanding our credit card business. In addition, if we develop new credit card

 

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products or offers that attract customers looking for short-term incentives rather than incentivize long-term loyalty, card member attrition and costs could increase. Further expanding our service offerings, maintaining cost synergies across all of our services, adding user acquisition channels and forming new partnerships or renewing current partnerships could increase in cost in the future, adversely impact our average discount rate or dilute our brand, any of which could have a material adverse effect on our results of business, results of operations, cash flows and financial condition.

Our ability to continue to successfully operate and grow PayPay Credit is subject to several risks.

PayPay Credit, our payment service integrated in our PayPay app, allows users to pay for goods and services at participating merchants by using credit extended through PayPay Card Corporation. Users of the PayPay app who have applied for and have been approved for PayPay Card can then access PayPay Credit directly in the PayPay app as one of their payment options. PayPay Credit users can opt to pay for their purchases made during a given month in a lump sum in the following month for no additional fee or can pay for their purchases on a revolving basis, in which case interest is charged to the user in the same manner as with other credit card balances. GMV of PayPay Credit accounted for 22.0% of our Total GMV for the year ended March 31, 2025, and we aim to increase the proportion of GMV generated with PayPay Credit as part of our growth initiatives to expand our credit portfolio and increase interest income. However, there can be no assurance that we will be able to continue to grow PayPay Credit and increase its contribution to total revenue in the long term.

Our ability to continue to successfully operate and grow PayPay Credit is subject to our exposure to credit risk, as described below in “—We are exposed to credit risk and the ability of various counterparties to pay us, which could have a material adverse effect on our results of operations, cash flows and financial condition” as well as the following risks:

 

•

Integration with the PayPay app. Because PayPay Credit is integrated in our PayPay app, any issues with our PayPay app could prevent PayPay app users from using PayPay Credit, which would negatively affect our results of operations and could damage our reputation. A decrease in the number of users of our PayPay app, whether due to issues or concerns in the app itself or as a result of changes in user preferences, could also negatively impact our PayPay Credit user base and our results of operations.

 

•

Competition. Our PayPay Credit payment service competes against credit card companies as well as providers of “buy-now-pay-later” services in Japan, and such competitors may offer more convenient or attractive services to their customers, including lower interest rates, longer installment payment periods or longer payment deferral periods. Intense competition could prevent us from attracting new users of PayPay Card, which is a condition to access PayPay Credit, which could have a direct impact on our ability to grow our PayPay Credit user base. See “—We participate in markets that are competitive with continuously evolving technology and consumer needs, and if we do not compete effectively with established companies and new market entrants, our business, results of operations, cash flows and financial condition could be materially and adversely affected.”

 

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Regulatory compliance risk. In offering our PayPay Credit service, we must operate in compliance with applicable regulatory restrictions related to permissible interest rates and other terms relating to the extension of consumer credit. Ensuring compliance with such laws and regulations can be time consuming and costly. See “—Risks Related to Laws, Regulations and Compliance—Failure to comply with the existing laws and regulations applicable to our business could subject us, or our subsidiaries or our associates, as applicable, to enforcement actions and penalties and otherwise harm our business, as well as divert our management’s attention and resources and result in increased costs.”

 

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Any failure to successfully integrate PayPay Bank Corporation and PayPay Securities Corporation with our group could materially and adversely impact our future business and operations.

In April 2025, upon the completion of a series of transactions, PayPay Bank Corporation and PayPay Securities Corporation became consolidated subsidiaries of ours. The integration of PayPay Bank Corporation and PayPay Securities Corporation into our operations may be a complex and time-consuming process and may not be successful. Potential risks stemming from these transactions include:

 

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the assumption of unknown or underestimated liabilities, including if we are unable to enforce indemnity provisions in the transaction agreements;

 

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the challenge of managing larger and more complex operations and facilities, and employees from a variety of corporate cultures;

 

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inability to hire and retain key management personnel and employees of the acquired businesses;

 

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inability to realize cost and operating synergies or other expected benefits;

 

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an increase in overall cost as a result of an increase in compliance risk and costs related to the regulated nature of the acquired businesses, especially due to the highly regulated nature of the industry the acquired businesses operate in, which could also result in the inability to achieve the integration that was anticipated; and

 

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a reduction or perceived reduction in our financial strength.

While we already collaborated with both PayPay Bank Corporation and PayPay Securities Corporation prior to these transactions, we believe that these consolidations will allow us to diversify our financial services offerings and further grow our business. However, even if we successfully integrate these businesses into our operations, there can be no assurance that we will realize the anticipated benefits and synergies resulting from the acquisitions. Our failure to successfully integrate these businesses or to realize the anticipated benefits and synergies resulting from the acquisitions as expected, or at all, may have a material adverse effect on our future business and operations.

If we fail to successfully integrate PayPay Bank Corporation and PayPay Securities Corporation into our operations, our business may be adversely affected, or we may suffer reputational damage as a result. For example, if we experience a disruption in our services that is linked to post-merger integration measures such as a significant reduction in our workforce, this could have an adverse impact on the effectiveness of our operation or our reputation. In addition, depending on the severity of the service disruption, we could receive a business improvement order from the Financial Services Agency of Japan, or the FSA, which could require us to implement costly and time-consuming remediation measures. Complying with such business improvements order could also divert our management’s attention and resources and may have a material adverse effect on our business and results of operations.

We may not be able to realize the anticipated benefits, synergies and efficiencies from the integration of PayPay Bank Corporation and PayPay Securities Corporation.

The integration of PayPay Bank Corporation and PayPay Securities Corporation into our business is an integral part of our strategy to generate sustainable growth and expand our ability to deliver comprehensive financial services to our users. To that end, we aim to realize benefits, synergies and efficiencies related to, among other things, increases in cross-selling opportunities among our payment and financial services, increases in total revenue, increased user acquisition, the integration of the financial services offered by PayPay Bank Corporation and PayPay Securities Corporation directly in our app, and lower customer acquisition costs. See “Business—Our Growth Strategies.” However, there can be no assurance that we will be able to realize the

 

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benefits, synergies and efficiencies that we anticipate. Specifically, the expected benefits, synergies and efficiencies resulting from the integration of PayPay Bank Corporation and PayPay Securities Corporation are subject to, among other things, the following uncertainties:

 

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a gap between the needs of the users of our payment settlement services and the financial services offered by PayPay Bank Corporation and PayPay Securities Corporation;

 

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our inability to market our financial services effectively to our payment services user base in order to grow our financial services;

 

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issues with any of our payment or financial services, whether caused by us or third parties, which could adversely affect our users, negatively impact our reputation and discourage our users from using our other services, thereby diminishing cross-selling opportunities;

 

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a lack of competitiveness of the services that we offer through our app, which could hinder cross-selling among our services;

 

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our failure to or any difficulty in effectively promoting the adoption of our eKYC passport in order to drive user acquisition;

 

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our inability to fully leverage our proprietary data-driven credit model, which could hinder our ability to assess borrower risk in line with our expectations;

 

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uncertainties regarding the growth of internet banking and securities brokerage services in Japan, which could negatively impact our ability to grow our financial services; or

 

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our inability to effectively reduce customer acquisition costs, which could in turn negatively impact our profitability.

Our failure to successfully realize the anticipated benefits, synergies and efficiencies as expected or at all could have a material adverse effect on our future business and results of operations.

We may not be able to maintain and strengthen the ecosystem effects of our platform, which could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

Our users and merchants interact with each other in our ecosystem to create very strong network effects which drives our further growth. Our collaboration with LY Corporation, with respect to the LINE app as well as Yahoo! Japan’s ecommerce platform, and other affiliated companies, such as SoftBank Corp., to extend PayPay Points to their user bases strengthens these effects. There can be no guarantee that these companies will maintain the same level of promotion and collaboration in the future. The extent to which we are able to maintain and strengthen these network effects depends on our ability to:

 

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maintain a high level of engagement and activity of users and merchants on our platform;

 

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improve the quality of our consumer insights;

 

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consistently innovate and improve the services offered on our platform;

 

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increase the effectiveness of features enabling businesses and partners to engage with users on our platform, including by enabling merchants to offer coupons and incentives in the form of PayPay Points; and

 

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provide users more opportunities to receive and use PayPay Points.

 

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In addition, changes that we implement to our platform to improve the user and merchant experience may not have the intended effect, which could adversely impact certain groups of users or merchants. To the extent we are not able to address the needs and demands of any particular participant group, those participants may spend less time and resources on our platform and may conduct fewer transactions or use alternative platforms, any of which could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects. Changes in the level of our collaboration and cross-promotion with LY Corporation or other affiliated companies could also significantly affect the user activities of our platform. See “—Risks Related to SoftBank Group Corp. and SoftBank Group Companies—We collaborate with SoftBank Group companies in the provision of our services. Any failure by such companies to continue to support our services, or a material change in our relationship with such companies, could adversely impact our services and could impact our overall business, financial condition, cash flows and results of operations.”

There is no assurance that our alliances with the shareholders of our consolidated subsidiaries and equity-method affiliates will be successful.

We currently have alliances with the shareholders of PayPay Bank Corporation and PayPay Securities Corporation, which are both consolidated subsidiaries of ours, and shareholders of PayPay SC Corporation, which is an equity-method affiliate of ours. Specifically, we currently hold 75.5% of the common shares of PayPay Bank Corporation, while Sumitomo Mitsui Banking Corporation, Fujitsu Ltd., Taiju Life Insurance Company Limited and Sumitomo Life Insurance Company hold 21.5%, 2.4%, 0.2% and 0.2% of the common shares, respectively. Similarly, we currently hold 75.2% of the common shares of PayPay Securities Corporation, while Mizuho Securities Co., Ltd. holds 24.8% of the common shares. In addition, we hold 34% of the common shares of PayPay SC Corporation, while SB Payment Service Corporation and SB C&S Corp. holds 33% and 33% of the common shares, respectively. PayPay SC Corporation was a joint venture that was established in 2024 to further expand the use of PayCAS, a unified cashless payment terminal with POS integration functionalities.

The success of our alliances depends on our ability to cooperate strategically with the other shareholders of PayPay Bank Corporation, PayPay Securities Corporation and PayPay SC Corporation. However, we may encounter difficulties in managing relationships with such shareholders. For example, they may have economic or business interests or goals that are inconsistent with ours; take actions contrary to our instructions, requests, policies or objectives; be unable or unwilling to fulfill their obligations; have financial difficulties; or have disputes with us as to their rights, responsibilities and obligations. In addition, because the other shareholders of PayPay Bank Corporation and PayPay Securities Corporation include major traditional financial institutions, they may be unable or unwilling to make decisions regarding our alliances quickly and efficiently. Any of these factors may have a material adverse effect on the performance of PayPay Bank Corporation or PayPay Securities Corporation. If relationships deteriorate to a level that is beyond repair, the affected alliance may need to be terminated or there may be a change in shareholding of the affected entity.

In addition, because PayPay Bank Corporation, PayPay Securities Corporation and PayPay SC Corporation are currently not wholly owned subsidiaries of ours, we may decide in the future to acquire additional shares of PayPay Bank Corporation, PayPay Securities Corporation or PayPay SC Corporation to make them wholly owned subsidiaries of ours. With respect to PayPay SC Corporation, we may first decide to acquire additional shares to make PayPay SC Corporation a consolidated subsidiary of ours, resulting in business combination under common control, which may require retrospective consolidation, in which case we may need to restate our financial statements for prior periods. We may not be successful in completing such transactions to acquire additional shares in PayPay Bank Corporation, PayPay Securities Corporation and PayPay SC Corporation if negotiations with the other shareholders do not prove to be successful. In addition, such potential acquisitions with respect to PayPay Bank Corporation and PayPay Securities Corporation may be subject to strict scrutiny by regulators, which may make the acquisitions costly and time consuming.

 

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If the cashless payments industry and the digital financial services industry in Japan do not continue to expand and develop as we expect, our business, financial condition and results of operations could be adversely affected.

Because we operate primarily in the cashless payments industry, the expansion of this industry, in terms of numbers of users using our services and numbers of and relationships with our merchants and other business partners, and the continued adoption of cashless payments by consumers and merchants are essential to our growth strategy and our ability to increase our revenue and expand our operations. Our business, financial condition and results of operations could be materially and adversely affected if the growth of the cashless payments industry in Japan does not continue in line with our expectations. In particular, the cashless payments industry may not expand or develop as we expect due to factors specific to Japan, including potentially higher resistance to the adoption of cashless payment by individual users or merchants in Japan as compared to other markets. Although the Japanese government and Japanese local governments have encouraged the use of cashless payments by both consumers and merchants and are promoting ways to further increase the adoption of cashless payments in order to promote a cashless society, some of the more significant measures implemented to promote the use of cashless payments such as MyNaPoint (a point redemption incentive to encourage the use of MyNumber social security cards—a government-issued social security card that can be used as, among other things, a health insurance card and for online income tax return filing, etc.—in Japan) have been discontinued, and Japanese users of cashless payments have generally had security concerns with respect to the adoption of such services and continue to rely on cash for a significant proportion of day-to-day transactions. As a result, Japan has a lower rate of adoption of cashless payment services as compared to other developed economies, such as South Korea, China, the United States or some countries in Europe, and there can be no guarantee that the use of cashless payment services in Japan will grow to the same extent as that seen in other advanced economies.

The termination of subsidies to promote cashless settlement may also result in a slowdown of the growth of the cashless payment industry in Japan. In addition, initiatives by the Japanese government and Japanese local governments to promote the use of cashless payments may also not result in or continue to result in the anticipated benefits. For example, the introduction of the payment of employees’ wages by employers with cashless settlement may not become widely accepted. Furthermore, since April 2023, the Bank of Japan has been proceeding with a pilot program for the “digital yen,” and if in the future the Bank of Japan decides to issue a central bank digital currency, this may significantly impact the cashless payments industry in Japan and force us to make significant changes to our business model. The Bank of Japan has already taken preliminary steps in considering the issuance of a central bank digital currency by establishing the Central Bank Digital Currency Forum in July 2023, which consists of 60 entities from various industries, including the banking, payment services and fintech industries. The forum held its fourth general meeting in June 2025 and continues to work on the development of a pilot program for a central bank digital currency system in Japan.

Moreover, the expansion of the digital financial services industry is also essential to our growth strategy and our ability to increase revenue. Our business, financial condition and results of operations could be adversely affected if the growth of the digital financial services industry as a whole decelerates. In particular, while we believe there is room for further growth in the digital financial services industry in Japan based on the growing number of users of the internet and smartphones generally, the industry may not expand or develop as we expect due to increasing saturation of online services markets or other factors. If growth of the digital financial services industry slows or ceases and we are unable to expand our business as a result, our results of operations and overall growth prospects could be materially and adversely affected.

The development and growth of the Japanese cashless payment industry and digital financial services industry could also be affected by regulations that inhibit the use of such services, growing concerns around information security and privacy issues, especially in relation to personal information, adverse economic trends, increasing competition, development of disruptive or competing technologies, costs incurred by merchants to introduce cashless payment systems or other factors.

 

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We had a history of losses in the past and we only recently achieved profitability, which we may not be able to maintain, and we may record losses and negative cash flow in the future.

We achieved profit for the year of ¥39.2 billion for the year ended March 31, 2025 and profit of ¥103.3 billion for the nine-month period ended December 31, 2025. However, we had recorded loss for the year every year since our inception through the year ended March 31, 2024. Historically, we invested in significant promotional expenses to expand our merchants and our user base and our business strategy is to continue to maintain a significant scale in terms of GMV, users and merchants and to achieve sustainable profitability through revenue diversification and effective cost management. Maintaining profitability will depend on our ability to continue our positive growth trajectory in terms of merchants, users and GMV while controlling our expenses, such as user acquisition costs. If we are unable to achieve our targeted GMV growth or adequately manage the level of our promotional and other expenses even if we achieve our GMV targets, there is no assurance that we will be able to maintain profitability in the future. Because the market for our payment and financial services is evolving, it is difficult for us to predict our future results of operations or the extent of our market opportunity. We expect our operating expenses to increase as we hire additional personnel, broaden our marketing efforts and promotional activities, expand our operations and infrastructure, continue to enhance our brand, expand our services, and expand and improve our interface. These initiatives may be more costly than we expect and may not succeed in achieving our targeted growth in GMV and revenue. In addition, because we have only recently acquired the shares of PayPay Bank Corporation and PayPay Securities Corporation to make them consolidated subsidiaries of ours, we are actively working on the integration of PayPay Bank Corporation and PayPay Securities Corporation with our existing operations. We have developed new initiatives in connection with the anticipated synergies from the integration of PayPay Bank Corporation and PayPay Securities Corporation, such as cross-selling opportunities, to further grow our business and increase our profitability, but these initiatives may not be successful. If these initiatives are unsuccessful, we may not be able to increase our revenue to exceed our increased operating expenses, which would have a negative impact on our overall profitability. Furthermore, when we become a listed company, we will incur additional significant legal, accounting and other expenses that we did not incur as an unlisted company. Any failure to increase our revenue sufficiently to keep pace with our initiatives, investments, and other expenses could prevent us from maintaining profitability or positive cash flow on a consistent basis in future periods and could have a material adverse effect on our ability to continue as a going concern. We cannot assure you that we will maintain our profitability and may record losses again in the future.

Our ability to increase revenue and profitability, particularly for our Payment segment, depends on our pricing strategy and the expansion of our service offerings, both of which we may not be able to implement successfully.

Our pricing strategy for our payment settlement services constitutes a key component of our business plan to achieve a significant scale to enable us to continue to achieve profitability. Our pricing strategy previously focused on aggressive marketing of our PayPay app in order to acquire new merchants by reducing or eliminating payment settlement fees that the merchants would normally remit to us during initial promotional periods. We allowed small- and medium-sized merchants to utilize our PayPay app payment settlement services without having to pay us any payment settlement fees until October 2021. Since then, we have started to collect payment settlement fees from all participating merchants, although we sometimes offer reduced fees to newly joining large merchants that are strategically important for our business through negotiations on a case-by-case basis, and this pricing strategy results in lower revenue than what we would recognize if we collected payment settlement fees without such reduction in fees from all newly joining merchants. Because we no longer offer the type of incentives we previously offered, higher payment settlement fees or lack of or reduced incentives upon becoming a new PayPay merchant could also negatively impact our ability to acquire new merchants, which may decide to opt for the cashless payment services of our competitors if they offer more incentives, lower payment settlement fees or are otherwise more broadly used by consumers. Some competitors, in particular those providing code-based payment settlement services similar to ours as well as those providing other forms of cashless payment services, may be able to offer lower prices to merchants for similar services by cross-

 

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subsidizing their payment services through other services they offer. Such competition may result in the need for us to alter the pricing we offer to our merchants and could reduce our potential revenue. In addition, as we grow, merchants may demand more customized and favorable pricing from us. Our competitors are continuously investing to innovate, grow their businesses and enhance consumer reach and engagement, and may outcompete us in any of these areas. Increased investments made, lower prices or innovative services offered by our competitors, as well as the low barriers to entry prevailing in our industry, may require us to divert significant managerial, financial and human resources in order to remain competitive, and ultimately may reduce our market share and materially and adversely impact our revenue growth, profitability, cash flows and financial condition.

We derive a majority of total revenue from our payment settlement services in our Payment segment. For the year ended March 31, 2025, revenue from payment settlement services in the Payment segment accounted for 61.7% of total revenue of our Payment segment. Our efforts to expand our sources of revenue depend on, among other things, our ability to broaden the scope of the services we offer, develop new technologies, enhance the functionality of our services and respond to the needs of our merchants and users. One element of our business strategy is to target revenue growth from the provision of additional services to our merchants and from the provision of additional financial services to our users. In particular, we have expanded the financial services we offer to our users through PayPay Bank Corporation and PayPay Securities Corporation. We aim to grow our revenue by offering convenient services to our users, such as PayPay Debit, which allows accountholders to make payments with merchants that accept PayPay code-based payments directly from their PayPay Bank deposit accounts. We also aim to grow the balance of deposit accounts for PayPay Bank Corporation by offering competitive interest rates to our users as well as the balance of investments that PayPay app users hold with various offerings through PayPay Securities Corporation, but there can be no assurance that we will be able to successfully implement such initiatives. In addition, such expansion of our financial services will increase our operating costs, which may negatively impact our profitability.

New services we introduce may be subject to technological challenges, including a shortage of engineers to build them, or regulatory requirements that are different than those for our existing businesses and with which we have limited or no experience. If we are unable to respond to those challenges or meet those requirements or we experience service disruptions, failures, or other issues, our business may be materially and adversely affected. Our failure to broaden the scope of our services that are attractive may inhibit the growth of our business, as well as increase the vulnerability of our core payments business to competitors.

We participate in markets that are competitive with continuously evolving technology and consumer needs, and if we do not compete effectively with established companies and new market entrants, our business, results of operations, cash flows and financial condition could be materially and adversely affected.

We face significant competition from companies that operate in the cashless payments industry and digital financial services industry. As the number of internet and smartphone users increase, many companies are moving into internet-related services across a wide spectrum or product categories and service formats.

Payment Segment

Our code-based PayPay app had a user base of approximately 72 million registered users as of December 31, 2025 but we face intense competition from other code-based payment settlement services as well as other forms of cashless payment, including credit cards, “buy-now-pay-later” services and e-money services of major transportation companies and retailers. We believe the principal competitive factors in our markets include industry expertise, platform scale and service features and functionality, ability to build new technology and keep pace with innovation, scalability, extensibility, service pricing, security and reliability, brand recognition, agility and speed to market. We compete in markets characterized by vigorous competition, rapidly changing and disruptive technology, changing merchant and consumer needs, evolving industry standards and frequent introductions of new services. We strive to use our technical expertise in developing a high-quality user interface and user experience, or UI/UX, to remain competitive and expand our business. We expect competition to remain

 

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intense as existing and new market entrants seek to enhance their cashless payment services to take advantage of increasing penetration of such services in the Japanese economy. Within our industry, there are low barriers to entry and the cost of switching between offerings is low. Users may have a propensity to shift to the provider offering the largest incentives, including those engaged in aggressive promotional campaigns, or services with the best UI/UX and commonly use more than one payment service. We compete with domestic and international companies and some of these companies may have greater financial resources and broader business lines than we do, which may provide them with competitive advantages. These companies may devote greater resources to the development, promotion, and sale of services, and they may offer lower prices or more effectively introduce their own innovative services that adversely impact our growth. In addition, if major traditional financial institutions decide to pool their resources to develop a new technology that is more convenient than our code-based payment app and renders the services we offer obsolete, our business may suffer irreparable harm. Further, as we and our competitors introduce new offerings and as existing offerings evolve, we expect to become subject to additional competition. For example, collaborations between convenience store chains and telecommunication companies, such as the collaboration between the telecommunications company KDDI and the convenience store chain Lawson, which is a jointly controlled entity accounted for under the equity method of KDDI, and offers a payment settlement service called “au PAY,” could negatively impact our business by reducing the use of our payment app at convenience stores that offer such collaborations due to other more attractive offerings. In addition, our current market position could change drastically if a new market entrant or any existing competitor were to introduce a new and attractive service incorporating more advanced technologies, such as biometric authentication or AI, that gains widespread acceptance. Increased competition could result in, among other things, a reduction of the revenue we generate from the use of our services, the number of participants on our platform or the frequency of use of our platform. Certain merchants have longstanding exclusive, or nearly exclusive, relationships with our competitors to accept payment cards and other services that we offer. These relationships may make it difficult or cost-prohibitive for us to conduct material amounts of business with them. On the other hand, our merchant agreements are non-exclusive, therefore allowing merchants to move to similar services offered by our competitors. Competing services tied to established brands may engender greater confidence in the safety and efficacy of their services. If we are unable to differentiate ourselves from and successfully compete with our competitors, our business, results of operations, cash flows and financial condition could be materially and adversely affected.

A major part of our business strategy is to grow the market share, GMV and Take Rate of our credit card business through PayPay Card Corporation, including through growth in use of PayPay Credit, but we face significant competition in Japan’s credit card services market, including from competitors with a larger existing market share. Our competitors in the credit card services market are well-established and have strong existing customer bases and there is no assurance that we will be able to increase our market share and achieve our targeted synergies between our PayPay app payment settlement services and our credit card payment services to increase the number of PayPay Card holders and Total GMV of our credit card business. See “—We may face challenges in maintaining and expanding synergies between our code-based payment settlement services and our credit card payment services.” Some of our competitors may be able to offer lower prices to merchants for similar services by cross-subsidizing their payment services through other services they offer, and such competitors may be engaged in a broader range of businesses than we are.

Financial Service Segment

Our internet banking business that we operate through PayPay Bank Corporation faces significant competition from other internet banking providers as well as from traditional Japanese banking institutions, including commercial banks and regional banks, that have expanded their internet banking services and broadened their retail asset management and retail lending services. Our competitors include Rakuten Bank, Ltd., SBI Sumishin Net Bank, Ltd., Sony Bank, Inc. and au Jibun Bank Corporation. These competitors may provide loans or other products with more attractive terms than we do, such as lower interest rates, or offer a more comprehensive range of banking products than we offer and may have stronger brand recognition, larger

 

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customer bases, greater financial resources, more effective online or physical networks and more developed marketing, asset management and risk management capabilities relative to us.

Our online securities business that we operate through PayPay Securities Corporation faces direct competition from several other online securities firms as well as from full-service securities firms in Japan, many of which are cooperating closely with their affiliated commercial banks. We consider our primary competitors to include other online securities firms in Japan, such as Rakuten Securities, Inc., SBI Securities Co., Ltd., Matsui Securities Co., Ltd., Monex, Inc. and Mitsubishi UFJ eSmart Securities Co., Ltd. The full-service securities firms that we compete with include Nomura Securities Co., Ltd., Daiwa Securities Co. Ltd. and SMBC Nikko Securities Inc. In order to maintain and expand our user base, we must compete with other securities firms on factors such as commission rates, fees, UI/UX and the strength and attractiveness of our lineup of products and services. These competitors may provide a more comprehensive range of services and may be able to offer more competitive products, such as products with lower brokerage commissions, than we are able to provide.

In addition, while we believe that our ecosystem provides tangible benefits to our financial services customers, certain of our bank and securities firms competitors are part of corporate groups that provide similarly attractive membership and loyalty programs including point programs, including Rakuten Group, Aeon Group and NTT Docomo Group, and competition based on the attractiveness of such ecosystems is fierce.

Our business depends on a strong and trusted brand, and any failure to maintain, protect, and enhance our brand, or any unfavorable media coverage, could materially and adversely affect our reputation, business, financial condition, results of operations, cash flows and prospects.

We have developed a prominent brand that has contributed significantly to the success of our business. We enable participants in commercial and financial activities, including users and customers, merchants and financial institution partners to build and strengthen trust among each other. Maintaining, protecting, enhancing and promoting the trust in us, our products and services and our brand is critical to expanding the base of users and customers, merchants and financial institution partners of our products and services, as well as increasing their engagement with our products and services. Any negative publicity about our industry or us, the quality and reliability of our products and services, our risk management processes, changes to products or services, our ability to effectively manage and resolve merchant and user complaints, our privacy and security practices, litigation, regulatory activity, and the experience of merchants and buyers with our products and services, could materially and adversely affect our reputation and the confidence in and use of our products and services. In addition, because the “PayPay” brand is owned by us but used by other SoftBank Group companies pursuant to licenses or sublicenses to promote and market certain product and service offerings, any issues encountered with the provision of such offerings could potentially adversely impact our brand and reputation. For example, PayPay Insurance Service Corporation is a wholly-owned subsidiary of LY Corporation and is not under our direct control. See “—Risks Related to SoftBank Group Corp. and SoftBank Group Companies—We collaborate with SoftBank Group companies in the provision of our services. Any failure by such companies to continue to support our services, or a material change in our relationship with such companies, could adversely impact our services and could impact our overall business, financial condition, cash flows and results of operations.”

Many factors could undermine or damage the trust in us, our products and services or our brand, including, failure by us or our partners to satisfy expectations of our product or service and quality; inadequate protection of sensitive information; compliance failures and claims; employee misconduct; and misconduct by our partners, service providers, or other counterparties. For example, we may receive negative user reviews as a result of our recently announced changes to our PayPay Points reward program, which will narrow some of the ways users will be able to earn PayPay Points from June 2026, and this could have an overall negative impact on user confidence and trust in our products and services. See “Business—PayPay Points—Changes to PayPay Points Rewards Program.” In addition, with respect to our credit card business (including users of PayPay Credit to whom credit is extended through PayPay Card Corporation as well as credit extended through PayPay Bank Corporation), our credit collection activities could lead to reputational issues. Moreover, under the agreements

 

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with our merchants, the merchant is responsible for quality, quantity, timely delivery and price of the services offered by it and is further responsible for related customer support and dispute resolution services. However, instances of unsatisfactory services provided by one or more merchants may damage the trust that our users have in our brand and our services. We may receive negative reviews from users and become subject to legal notice and/or action, which may materially and adversely affect our reputation and the confidence in and use of our services. Such reputational damage can result even from incidents where we ultimately face no legal liability. If we do not successfully maintain the trust in us, our business, financial condition, results of operations, cash flows and prospects would be materially and adversely affected.

Unfavorable publicity could materially and adversely affect our reputation. Such negative publicity could also harm the size of our network and the engagement and loyalty of merchants, users and other participants that utilize our products and services, which could materially and adversely affect our business, cash flows, financial condition, and results of operations. As our products and services continue to scale and public awareness of our brand increases, any future issues that draw media coverage could have an amplified negative effect on our reputation and brand. In addition, negative publicity related to key brands we have partnered with or by any influencers may damage our reputation, even if the publicity is not directly related to us. For example, there have been news articles published about our PayPay app being used as part of certain fraud schemes. Although these fraudulent activities are completely unrelated to our business, any such negative publicity that we may receive could diminish confidence in, and the use of, our products and services and may result in increased regulation and legislative scrutiny of industry practices as well as increased litigation, which may further increase our costs of doing business and materially and adversely affect our brand. As a result, any impairment or damage to our brand, including as a result of these or other factors, could materially and adversely affect our business, reputation, cash flows, results of operations and financial condition. Many social media platforms publish their subscriber’s or participant’s content, often without filters on accuracy. The dissemination of inaccurate information regarding our business, brand and services online could materially and adversely affect our business, reputation, prospects, financial condition and operating results, regardless of the information’s accuracy. The damage may be immediate without affording us an opportunity for redress or correction.

We depend on key management, as well as our experienced and capable employees, and any failure to attract, motivate, and retain our employees could harm our ability to maintain and grow our business.

Our future success is significantly dependent upon the continued service of our executives and other key employees. If we lose the services of any member of management or any key personnel, we may not be able to locate a suitable or qualified replacement, and we may incur additional expenses to recruit and train a replacement, which could severely disrupt our business and growth.

To maintain and grow our business, we will need to identify, hire, develop, motivate, and retain highly skilled employees. Identifying, recruiting, training, integrating, and retaining qualified individuals requires significant time, expense and attention. In addition, from time to time, there may be changes in our management team that may be disruptive to our business. If our management team, including any new hires that we make, fails to work together effectively and to execute our plans and strategies on a timely basis, our business could be harmed. Competition for highly skilled personnel, especially software engineers, is intense. We have established a subsidiary for product development in India, PayPay India Private Limited, in order to recruit talented software engineers, but there can be no assurance this initiative will succeed in securing qualified personnel over the long term. The rate of attrition of our software engineers is higher than our other employees, so we may need to invest significant amounts of cash and equity to attract and retain employees, particularly for software engineers, and we may never realize returns on these investments. As part of our efforts to attract and retain highly skilled employees, we have implemented a “Hybrid Style” policy, which in principle offers our employees the flexibility to work from anywhere in Japan. However, this remote work system may subject us to certain risks, including ineffective or inadequate training and supervision, reduced productivity, difficulty in maintaining our corporate culture and data security-related risks, among others. In addition, measures we take to reduce such risks may only be temporarily effective or not effective at all. If we are not able to add and retain employees effectively, our ability to achieve our strategic objectives will be adversely affected, and our business and growth prospects may

 

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be materially and adversely affected. Furthermore, compared to prior years, we have started to encourage our employees to return to the office to the extent possible, and this policy change could lead to an increase in attrition rate if our employees or candidates are not amenable to the shift away from remote work.

One tool we use to attract and retain talented and high-performing employees, including members of our senior management, is the grant of stock options under a trust-type stock option plan, which our shareholders approved in August 2022. In light of the announcement on May 30, 2023 by the National Tax Agency of Japan regarding the tax treatment of stock options under trust-type stock option plans, stock options under such plans are subject to income tax upon the exercise of the options, which may result in a higher tax rate than originally expected, which could adversely affect the effectiveness of our stock option plan as a recruiting and retention tool. In light of such potential adverse effect on trust-type stock option plans, in April 2025, our shareholders approved plans to grant stock options to our directors, corporate officers and employees through tax qualified-type stock options and one-yen-exercisable at retirement-type stock options.

The “part-time” status of a majority of our directors or their positions in other companies may prevent them from devoting full attention to our company’s affairs, which could result in conflicts of interest and hinder our corporate governance.

The vast majority of our directors serve on a part-time basis, which means that they are not required to be constantly available to work at the company during business hours, are not subject to a duty of exclusive devotion to the company, and are responsible for monitoring the actions of executive directors and officers rather than executing business operations. In addition, the vast majority of our directors maintain significant positions in other companies. Accordingly, they do not devote their full-time attention to our company’s operations. This limited commitment could make them unavailable at critical times and may result in delays in making important business decisions. In addition, their involvement in other companies creates the potential for conflicts of interest in allocating time and effort between our company and their other obligations. There can be no assurance that any such conflicts, should they arise, will be resolved in our favor. Part-time directors might also be less able to effectively monitor management and provide oversight compared to full-time executives, which could weaken our governance practices. If our directors cannot dedicate sufficient time and focus to our affairs, our decision-making processes, strategic oversight, and overall business performance could suffer, potentially materially and adversely affecting our results of operations.

We rely on our suppliers and partners for our hardware, software and cloud services and any impediment in procuring these in a timely manner and at competitive costs, or at all, may have a material adverse effect on our business, operations, financial condition, and cash flows. We could also be subject to monetary and other penalties from payment card networks with respect to high-risk merchants.

Our ability to remain competitive depends, in part, on our ability to source and maintain a stable and sufficient supply of hardware, software and cloud services at desired prices. Many of our key hardware devices, key software services and cloud services come from a limited number of partners and suppliers located in Japan and overseas. We also rely on SoftBank Group companies in the provision of some of these services, which subjects us to certain risks. See “—Risks Related to SoftBank Group Corp. and SoftBank Group Companies—We collaborate with SoftBank Group companies in the provision of our services. Any failure by such companies to continue to support our services, or a material change in our relationship with such companies, could adversely impact our services and could impact our overall business, financial condition, cash flows and results of operations.” For example, we collaborate with SB C&S Corp., a wholly-owned subsidiary of SoftBank Corp. and the supplier of PayCAS, a unified cashless payment terminal with point-of-sale, or POS, integration functionalities, which we began leasing to select merchants in 2022 and made available to all merchants in April 2023. We also outsource the printing and delivery of our credit cards to third parties, and any production or sourcing issues could have an adverse impact on our ability to grow our credit card business. Furthermore, PayPay Bank Corporation utilizes various vendor resources for the core banking systems and data warehouse system related to its banking operations under our direction and supervision. If such vendors

 

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unexpectedly increased the prices for their services, this would result in an increase in costs for us and we may not be able to find an alternative vendor that offers comparable services at a lower price, which may have a material adverse effect on our financial condition and cash flows. In the event these partners and suppliers fail to provide hardware and services adequately, including as a result of errors in their systems or events beyond their control, or refuse to provide hardware and services on terms acceptable to us or at all, and we are not able to find suitable alternatives, our business may be materially and adversely affected.

In addition, our credit card business is reliant on payment card networks, which establish their own rules and standards that allocate liabilities and responsibilities among the payment networks and their participants. These rules and standards, including the Payment Card Industry Data Security Standard, govern a variety of areas, including how users may use their cards, the security features of cards, security standards for processing, data protection and information security and allocation of liability for certain acts or omissions, including liability in the event of a data breach. The payment card networks could adopt new operating rules or interpret or reinterpret existing rules that we might find difficult or even impossible to follow or costly to implement. These changes may be made for any number of reasons, including as a result of changes in the regulatory environment, to maintain or attract new participants or to serve the strategic initiatives of the networks, and may impose additional costs and expenses on or be disadvantageous to us. Such changes may impact our ongoing cost of doing business, and we may not, in every circumstance, be able to pass through such costs to our users. If we fail to make such changes or otherwise resolve the issue with the payment card networks, the networks could disqualify us from processing transactions if satisfactory controls are not maintained. If we are unsuccessful in establishing or maintaining mutually beneficial relationships with these payment card networks, banks, and acquiring processors, our business may be materially and adversely affected.

We could be subject to monetary and other penalties from payment card networks if we fail to detect that merchants are engaging in activities that are illegal, contrary to the payment card network operating rules, or considered “high risk.” We must either prevent high-risk merchants from using our services or register such merchants with the payment card networks and conduct additional monitoring with respect to such merchants. Penalties could be material and could result in termination of our ability to accept payment cards or could require changes in our process for registering new merchants. This could materially and adversely affect our business.

Acquisitions, strategic investments and entries into new businesses could disrupt our business, divert our management’s attention, result in additional dilution to our shareholders, and materially and adversely affect our financial performance.

We have completed many acquisitions and strategic investments in the past in order to grow our business and will continue to actively acquire or invest in shares, businesses, apps, or technologies in financial-related and other industries that we believe could complement or expand our services, enhance our technical capabilities, or otherwise offer growth opportunities. In the ordinary course of business, we consider a broad range of potential opportunities, which may result in our pursuing significant acquisitions or other strategic transactions, including as a means to expand our business into industries or regions in which we have limited or no prior experience. However, we may be unable to find suitable target candidates or co-investors or may be unable to complete acquisitions on favorable terms, or at all, in the future and thus be unable to achieve our strategic objectives. If we complete such acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, and any acquisitions we complete could be viewed negatively by customers or investors. Moreover, an acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures, including disrupting our ongoing operations, diverting management from their primary responsibilities, subjecting us to additional liabilities, increasing our expenses and adversely impacting our business, results of operations, cash flows and financial condition. In addition, we may be exposed to unknown liabilities and the anticipated benefits of any acquisition, investment or business relationship may not be realized, if, for example, we fail to successfully integrate such acquisitions, or the technologies associated with such acquisitions, into our company. We also may not achieve the anticipated benefits from the acquired businesses due to a number of factors, including difficulties resulting from the integration of technologies, IT systems,

 

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accounting systems, culture or personnel; disagreements with or termination of relationships with co-investors; diversion of management’s attention; litigation; use of resources; or other disruption of our operations. Regulatory constraints, particularly competition regulations, may also affect the extent to which we can maximize the value of our acquisitions or investments. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt. In general, the more significant a transaction is, including if we acquire shares or businesses of target companies with assets and liabilities that are substantial relative to our own, the more significant such challenges could become, and our results of operations and financial condition could be materially and adversely affected as a result. In addition, if an acquired business fails to meet our expectations, our business may be materially and adversely affected. From time to time, we may also explore potential strategic opportunities outside Japan. For example, we are currently in discussions with Visa Inc. (“Visa”) to enter into a business alliance to explore collaboration in Japan and the United States by leveraging our QR code-based payment platform and Visa’s global payment network and digital payment technologies. For more details, see “Business—Alliances with our Partners.” Though basic terms have been agreed upon, there can be no assurance that discussions will progress, that we will enter into any definitive agreements, or that any such collaboration, if pursued, will be implemented on terms favorable to us or at all. The business alliance relates to new strategic business initiatives, and the outcome of any implementation of such initiatives is highly uncertain. In the event such new strategic business initiatives are successful in their initial stages, we may require a sizeable upfront investment, and the potential expansion of our business abroad could divert our management’s attention and resources, which may have a material adverse effect on our business and results of operations. In addition, because our current management’s experience is focused in Japan, we may be unable to fully leverage our strengths and the know-how that we have accumulated towards operating a digital finance platform outside of Japan.

On September 16, 2025, we completed the acquisition of 40.0% of the issued and outstanding shares of common stock of Binance Japan Inc., or Binance Japan, through a third-party allotment of new shares. Prior to the acquisition, Binance Japan was a wholly owned subsidiary of Binance (AP) Holdings Limited, an affiliate of Binance, which is the operator of one of the largest cryptocurrency exchanges. Binance Japan operates a cryptocurrency exchange business in Japan based on the global infrastructure offered by Binance group. We may not be able to successfully realize the anticipated strategic benefits from the acquisition, including integrating Binance Japan’s business into our ecosystem, and developing compliant crypto-related services in Japan. In addition, the high volatility and uncertainty of crypto currencies could result in a loss in this business. In addition, Binance, as a group, has been the subject of various legal and regulatory actions in multiple jurisdictions, including criminal proceedings involving its founder in the United States and fines imposed by U.S. and other regulators. Although the criminal case against the founder in the United States has ended due to the issuance of a pardon, such actions and proceedings may negatively affect us or subject us to increased regulatory attention, all of which could have an adverse impact on our results of operations. Furthermore, because our investment in Binance Japan currently represents a minority interest, we have limited control or influence over Binance Japan’s operations, governance and compliance practices. Pursuant to the terms of the definitive agreement that we had entered into with Binance Japan and Binance (AP) Holdings Limited, Binance Japan and Binance (AP) Holdings Limited are obligated to discuss with us in good faith for our acquisition of additional shares of common stock of Binance Japan, following which Binance Japan could become a consolidated subsidiary of ours, which would be subject to prior consultation with the FSA. There is no guarantee that we will acquire any additional shares of Binance Japan or that Binance Japan and Binance (AP) Holdings Limited would agree to such acquisition. As a result, our ability to monitor and influence Binance Japan’s operations and protect our interests may be limited, and this could negatively affect the value of our investment and our results of operations.

We may not be able to obtain financing on favorable terms or at all to support our operation and satisfy our cash requirements.

We may require additional cash resources due to future growth and development of our business, including growth in our extension of credit to users for PayPay Card Corporation and PayPay Bank Corporation,

 

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or any investments or acquisitions we may decide to pursue. For example, by extending additional credit to credit cardholders of PayPay Card Corporation and users of PayPay Credit, our outflow of cash to merchants increases, which occurs before collecting those amounts from our users, which may result in us needing additional cash resources to cover such additional outflow of cash to merchants. If our cash resources are insufficient to satisfy our cash requirements, we may seek to issue additional equity or debt securities or obtain new or expanded credit facilities. With respect to PayPay Card Corporation, we consider the liquidation or securitization of receivables, the issuance of commercial papers, overdraft protection loans and short-term and long-term borrowings to supplement operating cash. With respect to PayPay Bank Corporation, we consider the issuance of corporate bonds and call money loans if deposits do not sufficiently cover its operating cash requirements.

Our ability to obtain external financing in the future is subject to a variety of uncertainties. Incurring indebtedness would subject us to increased debt service obligations and could result in operating and financial covenants that would restrict our operations. Our ability to access international and domestic capital and lending markets may be restricted at a time when we would like, or need, to do so, especially during times of increased volatility and reduced liquidity in global financial markets and stock markets, including due to policy changes and regulatory restrictions, or other financial market turmoil which could limit our ability to raise funds. Our access to external financing may also be affected by developments with respect to affiliated companies. There can be no assurance that financing, including through an equity offering, will be available in a timely manner or in amounts or on terms acceptable to us, or at all. Any failure to raise needed funds on terms favorable to us, or at all, may impact our liquidity as well as have a material adverse effect on our business, cash flows, financial condition and results of operations. In addition, a portion of our borrowings has been and may be subject to market interest rates. If market interest rates increase, the applicable interest rate on our floating interest rate debt will increase, resulting in an increase in our interest expenses. On the other hand, when market interest rates increase, our interest income in connection with certain of PayPay Bank Corporation’s assets could increase, which could partially offset increases in our interest expenses. However, because we are aiming to increase the amount of credit issued and revolving payments with PayPay Card Corporation as well as increase deposits and loans with PayPay Bank Corporation, our exposure to the volatility of interest rates may increase in the future. We maintain an appropriate balance between our floating interest rate debt and fixed interest rate debt, but market interest rates could fluctuate beyond the rates we anticipate. We also access liquidity, including securitization, backed by our credit card receivables, which also subjects us to interest rate risk. Furthermore, some of our borrowings are from SoftBank Group companies and external financing with similar terms in a timely manner may not be available to us. Developments with respect to other SoftBank Group companies could also affect the availability of financing to us from sources which monitor their exposure to SoftBank Group companies in the aggregate. See “Related Party Transactions” for a discussion of our borrowings from SoftBank Group companies.

Our indebtedness could limit the cash flow available for our operations and expose us to risks that could adversely affect our business, operating results, and financial condition.

As of December 31, 2025, borrowings on our consolidated statement of financial position were ¥568,309 million (including ¥351,325 million of borrowings in the Payment segment mainly related to PayPay Card Corporation’s credit card business operations). We may also incur additional indebtedness to meet future financing needs. Our indebtedness could have significant negative consequences for our shareholders and our business, operating results, and financial condition by, among other things: (i) increasing our vulnerability to adverse economic and industry conditions; (ii) limiting our ability to obtain additional financing; (iii) requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; (iv) limiting our flexibility to plan for, or react to, changes in our business; (v) placing us at a possible competitive disadvantage with competitors that are less leveraged than we are or have better access to capital.

Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, and our cash needs may increase in the future. In

 

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addition, future indebtedness that we may incur may contain financial and other restrictive covenants that limit our ability to operate our business, raise capital, or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.

We may have to recognize impairment losses on our long-lived assets and goodwill, which could materially and adversely affect our operations and financial condition.

As of December 31, 2025, we had ¥66,928 million in intangible assets (including ¥61,044 million in software and ¥3,819 million in software in progress), ¥18,139 million in customer incentives, ¥11,138 million in incremental costs of obtaining a contract and ¥15,157 million in goodwill, representing 1.3%, 0.4%, 0.2% and 0.3%, respectively, of our total assets. Whenever events or changes in circumstances indicate that the carrying value of a particular long-lived asset, a group of long-lived assets and/or goodwill may not be recoverable, we are required to perform an impairment test to determine whether such particular asset, group of long-lived assets and/or goodwill have become impaired, and we conduct an impairment test every year with regard to long-lived assets and goodwill, regardless of any such indication. If the amount at which we carry a group of assets, including our long-lived assets or goodwill on our statement of financial position exceeds the recoverable amount related thereto, we would be required to recognize an impairment loss. Any impairment losses and/or additional amortization expenses for long-lived assets or goodwill we recognize will increase our expenses and could materially and adversely affect our results of operations and financial condition.

We recognize deferred tax assets to the extent that it is probable that future taxable income, which we estimate on a reasonable basis, will be available against which deductible temporary differences and net operating loss carryforwards can be utilized. As of December 31, 2025, we had recognized deferred tax assets of ¥105,226 million and unrecognized deferred tax assets of ¥102,140 million. If significant changes occur that affect the estimate of future taxable income, we may need to unrecognize deferred tax assets and our results of operations would be materially and adversely affected.

We are exposed to many types of operational risk, including the risk of misconduct and errors by our employees and other service providers.

We are exposed to many types of operational risk, including the risk of misconduct, oversight and errors by our employees and other service providers. Our business depends on our employees and service providers to process a large number of transactions, including transactions that involve significant amounts and extensions of credit that involve the use and disclosure of personal and business information. We could be adversely affected if transactions were redirected, misappropriated, or otherwise improperly executed, personal and business information was disclosed to unintended recipients, or an operational breakdown or failure in the processing of other transactions occurred, whether as a result of human error, a purposeful sabotage or a fraudulent manipulation of our operations or systems. It is not always possible to identify and deter misconduct or errors by employees or service providers, and the precautions we take to detect and prevent these activities may not be effective in controlling unknown or unmanaged risks or losses. Our resources, technologies and fraud prevention tools may be insufficient to accurately detect and prevent fraud. Any of these occurrences could diminish our ability to operate our business, increase our potential liabilities to users and merchants, and may lead to an inability to attract future users and merchants, cause reputational damage, attract regulatory intervention, and cause financial harm, any or all of which could materially and adversely affect our business, results of operations, cash flows, financial condition, and prospects.

We track certain operational metrics with internal systems and tools. Certain of our operational metrics are subject to inherent challenges in measurement which may materially and adversely affect our business, reputation and results of operations.

We track certain key operational metrics, such as Total GMV, Payment Segment GMV, Take Rate, Cost Rate, PayPay MTU and PayPay Number of Transactions, among others, with internal systems and tools and

 

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which may differ from estimates or similar metrics published by third parties due to differences in sources, methodologies, or the assumptions on which we rely. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Financial Performance, Key Metrics and Financial Highlights” for a discussion of certain operational metrics. Our internal systems and tools have a number of limitations, and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our metrics, including the metrics we publicly disclose, and we may revise or cease reporting metrics if we determine that such metrics are no longer appropriate measures of our performance. If the internal systems and tools we use to track these metrics undercount or overcount performance or contain algorithmic or other technical errors, the data we report may not be accurate. While these numbers are based on what we believe to be reasonable estimates of our metrics for the applicable period of measurement, there are inherent challenges in measuring how our products and services are used across large populations. For example, the accuracy of our operating metrics could be impacted by fraudulent use by users of our services, and further, we believe that there are users who have multiple accounts, even though this is prohibited in our terms of service and we implement measures to detect and prevent this behavior. Users using multiple accounts may cause us to overstate the number of users using our services. In addition, limitations or errors with respect to how we measure data or with respect to the data that we measure may affect our understanding of certain details of our business, which could affect our long-term strategies. If our operating metrics are not accurate representations of our business, if investors do not perceive our operating metrics to be accurate, if there are reports challenging the accuracy of our operating metrics, whether or not true, or if we discover material inaccuracies with respect to these figures, we expect that our business, reputation and results of operations would be materially and adversely affected.

Our quarterly results of operations may fluctuate significantly and could fall below the expectations of analysts and investors, resulting in a decline in the trading price of the ADSs.

Our quarterly results of operations fluctuate and may continue to fluctuate for a variety of reasons, many of which are beyond our control. These fluctuations may cause our quarterly results of operations to fall below the expectations of analysts or investors, which could cause the price of the ADSs to decline. As a result, you should not rely upon our past quarterly results of operations as indicators of our future performance. You should also take into account the risks and uncertainties frequently encountered by companies in rapidly evolving markets. Our financial results in any given quarter or fiscal period can be influenced by numerous factors, including the various risk factors described in this section, as well as the following:

 

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fluctuations in revenue generated by sales at the merchants that offer our payment settlement services, including as a result of the seasonal trends in consumer spending patterns in Japan;

 

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our success in retaining existing users and attracting new users of our payment settlement services;

 

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the amount and timing of increases in our promotional and other expenses to promote our products and services and retain and add new users and customers;

 

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the timing and success of new services and features we introduce, as well as the timing and level of monetization;

 

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the impact of changes in our competition and the effectiveness of our response;

 

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disruptions or defects in our services, including as a result of privacy or data security breaches;

 

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unforeseen legal developments affecting our business, such as changes in or the introduction of laws and regulations, adverse litigation judgments, settlements or other litigation-related expenses; and

 

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economic and market conditions, particularly those affecting the cashless payments industry and digital financial services industry.

 

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We identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain proper and effective internal control over financial reporting. If we fail to establish and maintain proper internal control over financial reporting, our ability to produce accurate financial statements or comply with applicable regulations could be impaired. As a result, shareholders could lose confidence in our financial reporting, which could result in litigation or regulatory enforcement actions and would harm our business and the trading price of the ADSs.

We will be required to comply with the management certification requirements of Section 302 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) in our annual report on Form 20-F for our first annual report that is filed with the SEC (subject to any change in applicable SEC rules). We will be required to comply with Section 404 in full (including an auditor attestation on the effectiveness of internal control over financial reporting) in our annual report on Form 20-F for the fiscal year following our first annual report required to be filed with the SEC (subject to any change in applicable SEC rules). As a public company, we will be required to report, among other things, control deficiencies that constitute a “material weakness” or changes in internal controls that, or that are reasonably likely to, materially affect internal controls over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A “significant deficiency” is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

While preparing our consolidated financial statements for the year ended March 31, 2025, we identified the following material weaknesses related to control activities in our internal control over financial reporting at our consolidated subsidiaries, PayPay Bank Corporation and PayPay Securities Corporation, that were acquired in April 2025. These material weaknesses were related to the following controls:

(1) the control that secures the accuracy and completeness of certain information used for financial reporting processes at PayPay Bank Corporation and PayPay Securities Corporation; (2) the control over assessment in capitalization of intangible assets arising from software development at PayPay Bank Corporation; (3) the controls that evaluate the effectiveness of controls maintained by certain service organizations we relied on in our internal controls over the financial reporting processes at PayPay Bank Corporation; and (4) the control over privileged-level access, which manages configuration and security administrations within the IT system at PayPay Securities Corporation.

To address the material weaknesses in the year ending March 31, 2026, we have developed a remediation plan and are currently taking the following actions:

 

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Enhancing the guidelines that secure accuracy and completeness of certain information used in financial reporting processes executed by PayPay Bank Corporation and PayPay Securities Corporation.

 

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Ensuring newly developed software at PayPay Bank Corporation is reviewed for proper capitalization.

 

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Designing and implementing controls at PayPay Bank Corporation to enhance and support our ability to rely on information provided by the service organizations.

 

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Enhancing controls over privileged-level access within the IT system at PayPay Securities Corporation.

We will not be able to fully remediate these material weaknesses until these actions have been completed and have been operating effectively for a sufficient period of time. The actions that we are taking are subject to ongoing review by our executive management and are subject to the oversight of the Audit and

 

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Supervisory Committee. Although we intend to complete this remediation plan as quickly as practicable, we provide no assurances to the timeline for implementing effective remedial measures, and our initiatives may not prove to be successful in remediating the material weaknesses or preventing additional material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

To comply with the requirements of being a public company, we have undertaken various actions and may need to take additional actions. Further, when evaluating our internal control over financial reporting, we may identify additional material weaknesses that we may not be able to remediate in time to meet our filing deadline. If we or our auditors identify additional material weaknesses in our internal control over financial reporting, we may be required to make restatements of our historical financial statements and/or not be able to file our reports in a timely manner. As a result, investors may lose confidence in our financial statements, the price of the ADSs could decline and we may be subject to litigation or regulatory enforcement actions. In addition, if we are unable to meet the requirements of Section 404, we may not be able to remain listed on Nasdaq.

If we fail to develop or maintain an effective system of disclosure controls and procedures, our ability to comply with applicable regulations could be impaired.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of Nasdaq. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly and place significant strain on our personnel, systems, and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.

We are exposed to credit risk and the ability of various counterparties to pay us, which could have a material adverse effect on our results of operations, cash flows and financial condition.

We engage in consumer credit and commercial lending activities and insurance services, which exposes us to the risk that the creditworthiness of our various counterparties may deteriorate and that they may be unable to make principal or interest payments on their loans or debt securities.

Payment Segment

In our Payment segment, we are exposed to individual credit risk, principally from revolving credit, installment sales credit and cash advances extended to PayPay Card holders, including users of PayPay Credit. A user’s ability and willingness to repay us can be negatively impacted not only by economic, market, political and social conditions but also by a user’s other payment obligations, and increasing leverage can result in a higher risk that users will default or become delinquent in their obligations to us. Other third parties may also default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. General economic factors, such as changes in gross domestic product, unemployment, inflation and interest rates, may result in greater delinquencies that lead to greater credit losses.

We rely principally on users’ creditworthiness for repayment of loans or receivables and therefore often have no other recourse for collection. Although users are subject to a credit check in order to be approved for PayPay Card and use our credit card and PayPay Credit payment services, the credit check may not be sufficient to accurately assess their creditworthiness, and users may be unable or unwilling to pay for the goods and services for which we have already provided payment to the merchants through such services. Our ability to

 

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assess creditworthiness may also be impaired as a result of changes in our underwriting practices or if the criteria or models we use to manage our credit risk prove inaccurate in predicting future losses, which could have a negative impact on our results of operations. This may be exacerbated to the extent information we have historically relied upon to make credit decisions does not accurately portray a user’s creditworthiness, including as a result of increasing inflation or an economic slowdown. In addition, we have changed our approval criteria to increase our approval rate in connection with our growth initiatives, and this could result in us extending credit to users with greater credit risk, and may increase our exposure to credit risk as well as increase the delinquency rates of our credit card receivables. Any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on our results of operations, cash flows, financial condition and reputation. Although we record a loss allowance to provide for expected credit losses in our financial assets measured at amortized cost, including credit card receivables from cardholders, our loss allowance is based on credit risk associated with those financial instruments and, as a result, in the event that the rates of default and non-payment increase unexpectedly following initial recognition, our loss allowance for financial assets may not be sufficient to cover such losses. For example, if the financial condition of financial institutions in Japan worsens due to unforeseen circumstances, such as a global financial crisis, the financial situation of our borrowers is negatively affected such that they are unable to make timely payments on the loans we extended to them, this could cause rates of default and non-payment to increase. In addition, the information we use in managing our credit risk may prove inadequate to predict future losses. Furthermore, we expect our exposure to credit risk to increase over time as we expand our credit card business through PayPay Card Corporation and the proportion of payments using the PayPay app which utilize PayPay Credit.

We are also subject to credit risk in our Payment segment for PayPay Funding, which is a merchant financing service that allows selected PayPay merchants to receive future sales proceeds that they expect to earn in advance when they are in need of operating capital. For additional information on PayPay Funding, see “Business—Our Products and Services—Other Value-Added Services—To Merchants.” Because repayments from merchants for any financing received from PayPay Funding are deducted directly from merchant PayPay accounts and merchants must satisfy stringent criteria to receive PayPay Funding, we consider our exposure to credit risk related to our merchants to be relatively low.

Financial Service Segment

In our Financial service segment, our internet banking business operated through PayPay Bank Corporation, is exposed to credit risk in connection with consumer and commercial lending to retail borrowers as well as business borrowers. As of December 31, 2025, the total loan amount and loss allowance of PayPay Bank Corporation was ¥1,098,277 million and ¥1,888 million, respectively. For our retail loans, we are exposed to credit risk only for the portion of the loans which are not guaranteed by a credit guarantee company, which accounted for 0.4% of the total outstanding retail loans as of December 31, 2025, and for our mortgages, we are exposed to credit risk only for the unsecured portion, which accounted for 31.1% of the total outstanding mortgage loans as of December 31, 2025. However, as we expand our retail loan and mortgage business in the future, we may reduce the portion of our loans that is guaranteed by a credit guarantee company, which will increase our exposure to credit risk. We have established an allowance for doubtful accounts in connection with loans in our banking business based on our evaluation of borrowers’ creditworthiness, our historical loan loss experience, the value of collateral and other factors. We are also exposed to credit risk in connection with our securitized credit card receivables of PayPay Card as part of the investment portfolio of PayPay Bank Corporation. We are also subject to the risk of unexpectedly high levels of fund outflows in the event of a deterioration in economic conditions.

Although we review our credit exposure to specific counterparties that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to foresee or detect, such as fraud. In addition, our ability to manage credit risk or collect amounts owed to us may be adversely affected by legal or regulatory changes (such as restrictions on collections or changes in bankruptcy laws and minimum payment regulations). Increased credit risk, whether resulting from underestimating the credit losses inherent in our

 

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portfolio of receivables, deteriorating economic conditions, increases in the level of loan balances, changes in our mix of business or otherwise, could require us to increase our provisions for losses and could have a material adverse effect on our results of operations, cash flows and financial condition.

We are exposed to interest rate risk and other market risks, including foreign exchange risk, that could materially and adversely affect our financial condition, cash flows and results of operations.

We have certain financial assets and liabilities due to the nature of certain of our product and service offerings, which are affected considerably by interest rate fluctuations. We maintain an appropriate balance between our floating interest rate debt and fixed interest rate debt, but market interest rates could fluctuate beyond the rates we anticipate. In an effort to manage our exposure to interest rate risk and other market risks, including foreign exchange risk, due to our financial product and service offerings through PayPay Card Corporation and PayPay Bank Corporation, we engage in asset liability management, or ALM, which considers the long-term balance between assets and liabilities in an effort to ensure stable returns. Any failure to appropriately conduct our ALM activities, or any significant changes in market conditions beyond what our ALM could reasonably address, could have a material adverse effect on our financial condition, cash flows and results of operations. For PayPay Bank Corporation, rises in interest rates may require us to record a loss on sale or a fair value loss through either profit or loss or other comprehensive income, depending on the classification of assets, in connection with its securities portfolio. In addition, new applications for mortgage loans generally decrease when interest rates increase. For PayPay Card Corporation, because interest rates that we offer on our card loans are capped due to the legal maximum for credit card interest rates, whereas interest rates to fund our operations fluctuate with the market, in the event of a sharp increase in market interest rates, our margin could decrease significantly, which would result in a material and adverse impact on our financial condition, cash flows and results of operations. See “—Failure to comply with the existing laws and regulations applicable to our business could subject us, or our subsidiaries or our associates, as applicable, to enforcement actions and penalties and otherwise harm our business, as well as divert our management’s attention and resources and result in increased costs.” Furthermore, if the consumption tax rate increases, this could negatively impact the volume of transactions by our users due to the rise in overall costs of living of consumers resulting in an overall decrease in spending by our users.

In the event that our payment processing charges payable to financial institutions increase significantly, and we are not able to pass on these higher processing charges to our merchants or users, we may not be able to improve our profitability and our business could be materially and adversely affected.

We are required to pay payment processing charges to financial institutions, payment processing networks and card networks for processing transactions on our platform, including when our users transfer funds to their PayPay Balance or make payments using PayPay Card. These costs depend on the category of merchant and the payment instrument used by the user. From time to time, financial institutions, payment processing networks and card networks have increased, and may in the future increase, charges levied for processing transactions on our platform, or card networks may reduce the amount of interchange fees to be received by credit card issuers. These charges vary for each payment instrument and we may not be able to pass on these costs to our merchants or users. Accordingly, any increase in payment gateway charges could make our pricing less competitive, lead us to change our pricing model, or materially and adversely affect our margins and prevent us from improving our profitability. In addition, financial institutions may not agree to renew our agreements with them on commercially reasonable terms or at all, which could also adversely impact our financial condition, cash flows and results of operations. From September 2023, we started to charge an additional fee to users that load their PayPay Balance through the SoftBank/Y! Mobile mobile carrier billing service twice or more per month. The initiatives we have taken and other initiatives we may take in the future to reduce our payment-related costs may not have the desired effect of improving our profitability in the event that they result in the loss of users or a material reduction in the use of our payment settlement services.

 

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We are subject to compensation liability risk in case of fraud and chargeback and refund liability risk when our merchants refuse to or are unable to reimburse transactions that are charged back and refunds resolved in favor of their customers. Any increase in compensation we provide or chargebacks and refunds not paid by our merchants may adversely affect our business, financial condition, cash flows or results of operations.

With respect to fraudulent payments made using our PayPay app, we have a compensation policy which provides that users will be fully reimbursed and merchants will be fully paid by us unless such fraudulent payments are attributable to users’ or merchants’ gross negligence or willful misconduct. We also have a compensation policy for fraudulent payments made using our credit cards, under which we will either refund or not process the fraudulent charge to cardholders and will not collect chargebacks from merchants provided that certain criteria are satisfied, including a condition that transactions are verified by 3D Secure, an online payment authentication standard maintained by various payment card servicers. Such compensations are not covered by any of our insurance policies and therefore there is a risk that the amount of compensation that we will bear the loss for will increase as we expand our business.

In addition, we are exposed to certain risks associated with chargebacks and refunds in connection with fraud or relating to the products or services provided by our merchants. The majority of fraud-related chargebacks and refunds in recent years are cases in which our user’s PayPay app account, a user’s credit card number, expiration date and security code, which are pre-registered for PayPay app, or a PayPay Card holder’s credit card number, expiration date and security code are improperly accessed and fraudulently used as a result of phishing scams.

In the event that a billing dispute between a user and a merchant is not resolved in favor of the merchant, including in situations in which the merchant is engaged in fraud, the transaction is typically “charged back” to the merchant and the purchase price is credited or otherwise refunded to the user. In certain circumstances where we are unable to collect transactions that are charged back to the merchant or refunds from the merchant’s account, or if the merchant refuses to or is unable to reimburse us for a transaction charged back or refunds due to closure, bankruptcy, or other reasons, we may bear the loss for the amounts paid to the user. However, in a scenario where PayPay Card Corporation is the credit issuer, but not the acquirer, we do not bear the loss for the amounts paid to the user because the acquirer reimburses us and bears the loss. The risk of transactions being charged back is typically greater with merchants that promise future delivery of products and services rather than delivering products or rendering services at the time of payment, and any customer disputes linked to rendering of such services from our merchants may adversely impact our ability to retain and attract our users.

We do not collect and maintain reserves from our merchants to cover these potential losses, including in the case of customer and merchant disputes. For our credit card merchant acquiring business, if we are unable to maintain fraudulent transactions, billing disputes or chargebacks at acceptable levels, the payment network providers could fine us or increase our transaction fees. Any increase in our transaction fees or liability for incorrect charges could damage our business, and if we were unable to accept payment cards, our business would be negatively affected. Any increase in chargebacks not paid by our merchants could have a material adverse effect on our business, financial condition, cash flows or results of operations. Furthermore, while we believe we have been able to maintain a relatively low rate of fraudulent payments, if the rate of fraudulent payments using our PayPay app increases in the future, this could damage our reputation and the trust our users and merchants have in our services, which could result in a material adverse effect on our business, financial condition, cash flows or results of operations.

Our risk management policies and procedures may not adequately protect us from unidentified or unanticipated risks, which could result in a material and adverse effect on our business or result in losses.

We have organized risk management policies and procedures to address a range of risks, including market risk, credit risk, liquidity risk, counterparty risk and a variety of other risks. Many of our methods of managing risks and exposures are based on our use of observed historical market behavior or statistics based on

 

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historical data. We may not be able to use those methods to accurately predict future losses, which could be significantly greater than indicated by the relevant historical data. Other risk management methods depend in part on our evaluation of publicly available information regarding markets, customers or other matters, and such information may not always be accurate, complete, up-to-date or properly evaluated. In addition, our risk management procedures depend in part on information gathered from numerous other sources, and errors may be introduced during the process of gathering and compiling such information. In addition, operational risk is inherent in our business and can manifest itself in various ways, including inappropriate internal processes, human error, employee misconduct, systems malfunction and other internal or external factors. Management of operational risk requires, among other things, policies and procedures to properly record, verify and inspect a large number of transactions and events, and our policies and procedures may not be entirely effective. Any failure or ineffectiveness of our risk management policies or procedures could materially and adversely affect our business, financial condition and results of operations.

As we expand our product and service offerings, our use and merchant base and our GMV, we may have difficulty achieving the administrative, systems and risk management improvements necessary to manage the risks associated with new business activities and increased scale. The risk management policies and procedures we adopt may not be effective in preventing losses related to the various types of risks that we face in our businesses. Failure or ineffectiveness of these policies and procedures could materially and adversely affect our business or result in losses.

Risks Related to SoftBank Group Corp. and SoftBank Group Companies

We collaborate with SoftBank Group companies in the provision of our services. Any failure by such companies to continue to support our services, or a material change in our relationship with such companies, could adversely impact our services and could impact our overall business, financial condition, cash flows and results of operations.

We collaborate with SoftBank Group companies in branding and marketing as well as for a variety of other services and arrangements, including:

 

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Joint promotional activities: we engage in joint promotions with SoftBank Group companies such as LY Corporation and SoftBank Corp. to encourage users to utilize the PayPay app, apply for PayPay Credit card accounts and open PayPay Bank accounts, including by offering PayPay Points and other incentives. Such promotional activities with affiliated companies are a major source of our customer referrals and help create network effects. Online shops utilizing the Yahoo! Japan e-commerce platform were also early adopters of our payment settlement services.

 

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Outsourcing of services: we partly outsource sales and marketing efforts targeting merchants nationwide to SoftBank Corp. and the provision of payment infrastructure and services to our participating merchants to its subsidiary, SB Payment Services. We also outsource sales and marketing efforts targeting merchants to PayPay SC Corporation, an equity-method affiliate of ours. We hold 34% of the common shares of PayPay SC Corporation, while SB Payment Service Corporation and SB C&S Corp., both subsidiaries of SoftBank Corp., hold 33% and 33% of the common shares, respectively.

 

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Financial services: we offer financial services operated by SoftBank Group companies, including PayPay Insurance Service Corporation, a wholly-owned subsidiary of LY Corporation, which have insurance agency and other licenses, to our users by entering into referral fee and revenue/profit-sharing arrangements with them. There are uncertainties as to how to implement these arrangements to provide both a secure operating environment and compliance by our partners, and our offerings made in collaboration with them, with all applicable financial regulations, including those related to policy opening procedures and marketing of financial products. It is possible that we will encounter

 

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challenges and risks that impact our users and operations that we do not currently anticipate. If we do not adequately coordinate with PayPay Insurance Service Corporation to provide financial services in compliance with all applicable regulations, it is possible we or they could be subject to regulatory action and be held liable for damages to our users, which could delay our growth initiatives and adversely affect our results of operations and financial condition.

 

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Loan agreements with LY Corporation: PayPay Card Corporation and LY Corporation have entered into certain loan agreements in order to improve funding efficiency through group financing. PayPay Card Corporation and LY Corporation have entered into six loan agreements and PayPay Card Corporation has an outstanding balance on three of those agreements as of the date of this prospectus. See “Related Party Transactions—Loans to PayPay Card Corporation from LY Corporation (previously Z Holdings Corporation).”

 

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Secondments and directors dispatched from SoftBank Group companies: PayPay Corporation, PayPay Card Corporation, PayPay Bank Corporation and PayPay Securities Corporation have employees seconded from SoftBank Group companies, including SoftBank Corp. and LY Corporation. Such seconded employees provide us with expertise in a range of areas and therefore the termination of such secondments could negatively affect our business. See “Business—Employees.” In addition, we have directors who are dispatched from SoftBank Group companies. As of the date of this prospectus, we have four directors that were dispatched from SoftBank Group companies.

The joint promotions we engage in with SoftBank Group companies as well as the services, licenses and arrangements described above are critical to our operations and enable us to grow and retain our merchant base and user base in addition to accessing technology infrastructure, human resources and licensed financial services providers that we do not possess directly. Any change in the level of promotional activities engaged in by these affiliated companies or any failure by these affiliated companies to continue to provide services or licenses to us may impact the attractiveness of our services or interrupt our ability to provide some of the services to our merchants and users, which could have a material adverse impact on our operations and adversely affect our growth potential. In addition, because SoftBank Group Corp., SoftBank Corp. and LY Corporation are listed companies with minority shareholders, their obligations to their respective shareholders may not always be aligned with what is in our best interest. For additional information on related party transactions, see “Related Party Transactions.”

After the completion of the offering, our current shareholders will continue to collectively hold substantial shareholdings and exercise influence over our operations.

As of the date of this prospectus, our current shareholders, B Holdings Corporation (49.99%), SVF II Piranha (DE) LLC (34.00%), SoftBank Corp. (8.01%) and LY Corporation (8.01%), will together own 91.78% of our outstanding shares upon completion of the offering (assuming full exercise of the over-allotment option). As a result, such shareholders, which are all ultimately controlled by SoftBank Group Corp., may continue to influence fundamental decisions such as the appointment and removal of our directors, the approval of mergers or other business combination transactions, the sale of material assets or businesses, amendments to our articles of incorporation and the declaration of dividends. Moreover, SoftBank Corp. and LY Corporation, each of which holds 50% of the voting rights of B Holdings Corporation, which will hold 47.67% of our voting rights upon the completion of the offering (assuming full exercise of the over-allotment option), are public companies listed on the Tokyo Stock Exchange that have fiduciary duties to their own shareholders as well.

Pursuant to an agreement between SoftBank Corp. and LY Corporation, LY Corporation is entitled to nominate a majority of the directors of B Holdings Corporation. Furthermore, pursuant to an agreement between B Holdings Corporation and us, as long as we are a consolidated subsidiary of LY Corporation, the prior written approval of B Holdings Corporation is required for us to (a) take any action to issue or grant our shares, stock

 

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options, convertible bonds or any other rights to acquire our shares (including disposal of treasury shares or treasury stock acquisition rights) if as a result of such action the percentage of voting rights held by B Holdings Corporation would be 50% or less (on a fully diluted basis assuming the exercise of all outstanding stock options, convertible bonds and rights to acquire our shares) and (b) sell, transfer, assign, grant a security interest in or dispose of assets, including shares and businesses owned by us or our consolidated subsidiaries, which account for 20% or more of the book value of our total assets on a consolidated basis as of the latest fiscal year-end, to a third party. As a result, LY Corporation has substantial control over us by holding the majority of our voting rights directly and indirectly. The interests of such shareholders with respect to our operations and other matters over which they may have influence may differ from the interests of our other shareholders.

We have other ongoing business transactions with our shareholders and their affiliates as described above under “—We collaborate with SoftBank Group companies in the provision of our services. Any failure by such companies to continue to support our services, or a material change in our relationship with such companies, could adversely impact our services and could impact our overall business, financial condition, cash flows and results of operations.” In the future, as their shareholding level decreases, it is possible there could be changes in our business relationships with our current shareholders and their affiliates that are adverse to us.

SoftBank Group Corp. and funds it sponsors, including the SoftBank Vision Fund and SoftBank Vision Fund 2, invest in a broad range of companies, both in Japan and globally. Due to our ongoing business transactions with SoftBank Group companies, it is possible that events affecting SoftBank Group Corp. or its other investee companies, even if not directly related to our operations, could influence investor perception of us and the price of the ADSs.

Risks Related to Technology, Information Systems and Intellectual Property

Failure to maintain or improve our technology infrastructure could harm our business and prospects and materially and adversely affect our business and reputation.

It is critical to our success that users and merchants are able to access our platform, at all times. Our systems, or those of third parties upon which we rely, may experience service interruptions or degradation or other performance problems because of hardware and software defects or malfunctions, unexpected high volume of transactions, distributed denial-of-service and other cyberattacks, infrastructure changes, human error, earthquakes, hurricanes, floods, fires, natural disasters, power losses, disruptions in telecommunications services, unauthorized access, fraud, military or political conflicts, terrorist attacks, computer viruses, ransomware, malware, or other events. Although we have a business continuity plan in place, which features the use of multiple data centers in Tokyo and redundancy provided by our backup data center in another region of Japan, there can be no assurance that our plan will be effective in the event we experience such service interruptions or degradation or other performance problems. Our systems also may be subject to break-ins, sabotage, theft and intentional acts of vandalism, including by our own employees, all of which would impact our ability to provide secure and seamless access to our platform, which would have an adverse impact on our operations and reputation. In the event we experience any such incidents, we may not be able to continue providing our services to our merchant and users.

The software underlying our platform as well as the various systems that support our financial services business is complex and may contain undetected errors or vulnerabilities, some of which may only be discovered at a subsequent stage or may not get discovered at all. Our practice is to release frequent software updates. However, any errors, vulnerabilities or infringements discovered in our code or from third-party software after release could result in negative publicity, a loss of users or loss of revenue, legal proceedings or regulatory action, and access or other performance issues. Such vulnerabilities could also be exploited by malicious actors and result in exposure of data of the users or merchants on our platform, or otherwise result in a security breach or other security incidents. Any failure to timely and effectively resolve any such errors, defects, or vulnerabilities could materially and adversely affect our business, reputation, brand, financial condition, cash

 

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flows and results of operations. We have experienced and will likely continue to experience system failures and other events or conditions from time to time that interrupt the availability or reduce or affect the speed or functionality of our platform. These system failures generally occur either as a result of software updates being deployed with unexpected errors or as a result of temporary infrastructure failures related to storage, network, or computing capacity being exhausted. However, they may be caused by other reasons. For example, in December 2018, a system overload occurred due to a large-scale promotional campaign that we were conducting, and as a result of that system overload, we experienced software failures, payment delays and some instances of duplicated payment processing. In addition, in May 2024, another system overload occurred with our relay server due to a high-intensity data verification process, and as a result of the system overload, we experienced system failures where certain users were unable to use their PayPay app for several hours. Further, in some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time.

Any failure to maintain and improve our technology infrastructure could result in unanticipated system disruptions, slower response times, impaired user experience, delays in reporting accurate operating and financial information and failures in risk management. The risks of these events occurring are even higher during certain periods of peak usage and activity, such as on or around various shopping festivals or other promotional events, when transaction volume is significantly higher on our payment network compared to other days of the year. If we experience problems with the functionality and effectiveness of our software, interfaces or platform, or are unable to maintain and continuously improve our technology infrastructure to handle our business needs, our business, financial condition, cash flows, results of operations and prospects, as well as our reputation and brand, could be materially and adversely affected. In addition, we could be subject to liability for damages as a result of system disruptions in certain scenarios.

Furthermore, our technology infrastructure and services, including our service offerings, incorporate third-party-developed software, systems and technologies, as well as hardware purchased or commissioned from outside and overseas suppliers. For example, Paytm Labs Inc., a subsidiary of One97 Communications Limited, has granted us licenses for its software, which enables us to provide our PayPay My Store Service, fraud prevention solutions for our operations and solutions for our marketing strategy while providing us with related software support services. We also intend to incorporate data-driven solutions to develop new services in collaboration with PayPay Card Corporation and incorporate AI as part of our cost reduction efforts. As our technology infrastructure and services expand and become increasingly complex, we face increasingly serious risks to the performance and security of our technology infrastructure and services that may be caused by these third-party-developed components, including risks relating to incompatibilities among these components, service failures or delays or back-end procedures on hardware and software. We also need to continuously enhance our existing technology. Otherwise, we face the risk of our technology infrastructure becoming unstable and susceptible to security breaches. This instability or susceptibility could create serious challenges to the security and uninterrupted operation of our platform and services, which would materially and adversely affect our business and reputation.

Our use of artificial intelligence technologies may not achieve their intended benefits and may expose us to operational, legal and reputational risks.

We increasingly integrate artificial intelligence (“AI”) tools into our operations, including the use of AI-enabled coding assistants in our engineering processes, generative AI platforms to support corporate functions, such as translation and document summarization, and proprietary AI models trained on our proprietary datasets to enhance the accuracy of credit-decisioning. While these tools are intended to improve efficiency, productivity and decision-making, there can be no assurance that their use will produce consistent or reliable results. Generative AI may produce inaccurate or biased outputs, which could impair the quality of our services, increase operational risks or expose us to potential liability. In addition, our reliance on proprietary data to train AI models may raise data privacy, security and regulatory compliance concerns, particularly as laws and standards governing AI continue to evolve. The adoption of AI also introduces risks of overreliance on automated processes, potential misuse of confidential information, and heightened scrutiny from regulators, customers and other stakeholders. If we are unable to effectively manage these risks, our operations, reputation, and financial results could be materially and adversely affected.

 

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We rely on mobile operating systems and application marketplaces to make the PayPay app available to participants that utilize our platform, and if we do not effectively operate with or receive favorable placements within such application marketplaces, our usage or brand recognition could decline and our business, financial results, cash flows and results of operations could be materially and adversely affected.

We are dependent on the ability of our services to integrate with a variety of third-party operating systems, as well as web browsers that we do not control. Any changes in these third-party systems that degrade the functionality of our services, impose additional costs or requirements on us, or give preferential treatment to competitive services, including their own services, could materially and adversely affect usage of our services. In addition, we rely on app marketplaces to drive downloads of our mobile app. App marketplaces regularly make changes to their marketplaces, and those changes may make access to our services more difficult. In the event that it is difficult for our merchants to access and use our services, our business may be materially and adversely affected.

We also depend, in large part, on search engines, social media platforms, digital app stores, content-based digital marketing and other online sources for traffic to our platform. Our ability to maintain and increase the number of users directed to our platform is not entirely within our control. Search engines, social media platforms and other online sources often revise their algorithms and introduce new advertising services based on data feedback. If one or more of the search engines or other online sources on which we rely for traffic to our platform were to modify its general algorithm for how it displays our advertisements or keyword search results, resulting in fewer users clicking through to our platform, our business or results of operations may suffer. In addition, if our online display advertisements are no longer able to reach certain users due to users’ use of ad-blocking software, our business or results of operations could be materially and adversely affected.

As new mobile devices and mobile platforms are released, there is no guarantee that certain mobile devices will continue to support our platform or effectively roll out updates to our applications. Additionally, in order to deliver high-quality applications, we need to ensure that our platform is designed to work effectively with a range of mobile technologies, systems, networks, and standards. We may not be successful in developing or maintaining relationships with key participants in the mobile industry that enhance users’ experience. If participants that utilize our platform encounter any difficulty accessing or using our applications on their mobile devices or if we are unable to adapt to changes in popular mobile operating systems, we expect that our user growth and engagement to be adversely affected, which may materially and adversely affect our business and results of operations.

Any privacy or data security breach, cyber-attacks or internal misconducts could damage our reputation and brand and substantially harm our business and any actual or perceived failure by us to comply with laws or regulations or any other contractual obligations relating to privacy or the protection or transfer of data relating to individuals, could materially and adversely affect our business.

As a technology-based platform and provider of digital financial services, our business generates and processes a large quantity of personal, transaction, billing, behavioral and demographic data. We face risks inherent in handling and protecting large volumes of data, including protecting the data hosted in our system, detecting and prohibiting unauthorized data share and transfer, preventing attacks on our system by outside parties or fraudulent behavior or improper use by our employees, preventing inadvertent access to, disclosure of, or loss of data due to human error, and maintaining and updating our database. We need to manage the risk of unauthorized and fraudulent access to user accounts for our PayPay app, with PayPay Card Corporation, with PayPay Bank Corporation and with PayPay Securities Corporation. Any system failure, security breach or third-party attacks or attempts to illegally obtain the data that result in any actual or perceived release of user data could damage our reputation and brand, deter current and potential users from using our services, damage our business, and expose us to potential legal liability. We currently do not have any cybersecurity insurance policies that are intended to mitigate financial losses resulting from such cyber-attacks or data breaches.

 

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The techniques used to obtain unauthorized, improper, or illegal access to our systems, our or our users’ data, or to disable or degrade service or sabotage systems, are constantly evolving, may be difficult to detect quickly, and may not be recognized until after they have been launched against a target. We may be unable to anticipate these techniques, react in a timely manner, or implement adequate preventative or remedial measures. Unauthorized parties may attempt to gain access to our systems or facilities through various means, including, among others, hacking into our or our partners’ or users’ systems or facilities, or attempting to fraudulently induce our employees, partners, users or others into disclosing usernames, passwords, or other sensitive information, which may in turn be used to access our information technology systems and gain access to our or our users’ data or other confidential, proprietary, or sensitive information. Pursuant to our internal policy, we audit our security practices and procedures for handling sensitive personal data or information, and we evaluate the related risks as part of our internal audit procedures. If our internal audit reports identify such risks, we may incur costs for addressing them, suffer the diversion of management’s attention or become subject to regulatory actions.

We are also required to comply with several international standards, including the Payment Card Industry Data Security Standard (PCI-DSS), Cross-Border Privacy Rules (CBPR), Information Security Management System (ISMS) and the standards imposed by the National Institute of Standards and Technology (NIST), as applicable to the transactions undertaken on our platform. Our failure, or the failure by our third-party providers or merchant partners on our platform, to comply with applicable laws or regulations or standards or any other contractual obligations relating to privacy, data protection, or information security, may cause a leak of users’ data, materially and adversely affect our reputation and lead to termination of our agreements with the affected merchants. Under our agreements with our merchants, our merchants and we are required to ensure proper encryption and security measures at our respective websites, mobile applications and billing systems to prevent any hacking into information pertaining to transactions. We are also required to protect and keep confidential all information related to the credit/debit cards, net banking facilities or other payment data of users who are carrying out transactions with such merchants through our platform. We cannot assure you that our merchants or we will be able to prevent all attempts of hacking and/or unauthorized disclosures of user data. Any future compromise of security or cyber-attack that results in unauthorized access to, or use or release of personally identifiable information or other data relating to users, or other individuals, or the perception that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing users from using our platform, or result in fines, investigations, or proceedings by governmental agencies and private claims and litigation, any of which could materially and adversely affect our business, financial condition, cash flows and results of operations.

We may be unable to sufficiently obtain, maintain, protect, or enforce our intellectual property and other proprietary rights, which could adversely affect our business, results of operations, financial condition and future prospects.

Intellectual property and other proprietary rights are important to the success of our business. Our ability to compete effectively is dependent in part upon our ability to obtain, maintain, protect, and enforce our intellectual property and other proprietary rights, including our proprietary technology, and to obtain licenses to use the intellectual property and proprietary rights of others. We rely on a combination of trademarks, copyrights, patents, domain names, and agreements with employees and third parties to protect our intellectual property and other proprietary rights. Nonetheless, the steps we take to obtain, maintain, protect, and enforce our intellectual property and other proprietary rights may be inadequate. Despite our efforts to protect these rights, unauthorized third parties, including our competitors, may duplicate, mimic, reverse engineer, access, obtain, or use the proprietary aspects of our technology, processes or services without our permission. Our competitors and other third parties may also design around or independently develop similar technology or otherwise duplicate or mimic our services such that we would not be able to successfully assert our intellectual property or other proprietary rights against them. We cannot assure that any future patent, trademark, or service mark registrations will be issued for our pending or future applications or that any of our owned or licensed current or future patents, copyrights, trademarks, or service marks (whether registered or unregistered) will be valid, enforceable, sufficiently broad in scope, provide adequate protection of our intellectual property or other proprietary rights, or provide us with any competitive advantage.

 

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We may be unable to prevent competitors or other third parties from acquiring or using trademarks, service marks, copyrights, patents or other intellectual property or other proprietary rights that are similar to, infringe upon, misappropriate, dilute, or otherwise violate or diminish the value of our owned or licensed trademarks, service marks, copyrights, patents and our other intellectual property and proprietary rights. The value of our owned or licensed intellectual property and other proprietary rights could diminish if others assert rights in or ownership of our intellectual property or other proprietary rights, or in trademarks or service marks that are similar to our trademarks or service marks. In addition, we cannot guarantee that we or our licensors have entered into agreements containing obligations of confidentiality with each party that has or may have had access to proprietary information, know-how, or trade secrets owned or held by us or our licensors. Moreover, our or our licensors’ contractual arrangements may be breached or may otherwise not effectively prevent disclosure of, or control access to, our confidential or otherwise proprietary information or provide an adequate remedy in the event of an unauthorized disclosure. The measures we or our licensors have put in place may not prevent misappropriation, infringement, or other violation of our or our licensors’ intellectual property or other proprietary rights or information and any resulting loss of competitive advantage, and we or our licensors may be required to litigate to protect our intellectual property or other proprietary rights or information from misappropriation, infringement, or other violation by others, which may be expensive, could cause a diversion of resources, and may not be successful, even when our or our licensors’ rights have been infringed, misappropriated, or otherwise violated.

As the number of services in the software industry increases and the functionalities of these services further overlap, and as we acquire technology through acquisitions or licenses, we or our licensors may become increasingly subject to infringement claims, including patent, copyright, and trademark infringement claims. We or our licensors may be accused of infringing intellectual property or other proprietary rights of third parties, including serial trademark and patent individual squatters, including their copyrights, trademarks, or patents, or improperly using or disclosing their trade secrets, or otherwise infringing or violating their proprietary rights. Our success depends in part on our ability to conduct our business without infringing the intellectual property rights of third parties. However, as the features and content of our services continue to grow, there is an increasing possibility that we may be subject to litigation involving claims of patent, copyright or trademark infringement or other violations of intellectual property rights of third parties. Existing or future claims against us, whether valid or not, may be time consuming, distracting to management and expensive to defend. Any of the foregoing could adversely affect our business, results of operations, financial condition and future prospects.

Some aspects of our platform include open source software, and our use of open source software could negatively affect our business, results of operations, cash flows, financial condition, and prospects.

Aspects of our platform include software covered by open source licenses. The terms of open source licenses are open to interpretation, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our platform. In such an event, we could be required to re-engineer all or a portion of our technologies, seek licenses from third parties in order to continue offering our services, discontinue the use of our platform in the event re-engineering cannot be accomplished, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and services. If portions of our proprietary software are determined to be subject to an open source license, we could also be required to, under certain circumstances, publicly release or license, at no cost, our services that incorporate the open source software or the affected portions of our source code, which could allow our competitors or other third parties to create similar services with lower development effort, time, and costs, and could ultimately result in a loss of transaction volume for us. We cannot ensure that we have not incorporated open source software in our software in a manner that is inconsistent with the terms of the applicable license or our current policies, and we may inadvertently use open source in a manner that we do not intend or that could expose us to claims for breach of contract or intellectual property infringement, misappropriation, or other violation. If we fail to comply, or are alleged to have failed to comply, with the terms and conditions of our open source licenses, we could be required to incur significant legal expenses defending such allegations, be subject to significant damages, be enjoined from the sale of our services, and be required to comply with onerous conditions or restrictions on our services, any of which could be materially disruptive to our business.

 

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In addition to risks related to license requirements, usage of open source software can lead to risks because open source licensors generally do not provide warranties or other contractual protections regarding infringement, misappropriation, or other violations, the quality of code, or the origin of the software. Many of the risks associated with the use of open source software cannot be eliminated and could materially and adversely affect our business, results of operations, financial condition, and prospects. For instance, open source software is often developed by different groups of programmers outside of our control that collaborate with each other on projects. As a result, open source software may have security vulnerabilities, defects, or errors of which we are not aware. Even if we become aware of any security vulnerabilities, defects, or errors, it may take a significant amount of time for either us or the programmers who developed the open source software to address such vulnerabilities, defects, or errors, which could negatively impact our services, including but not limited to, by adversely affecting the market’s perception of our services, impairing the functionality of our services, delaying the launch of new services, or resulting in the failure of our services, any of which could result in liability to us or our service providers. Further, our adoption of certain policies with respect to the use of open source software may affect our ability to hire and retain employees, including engineers.

Risks Related to Laws, Regulations and Compliance

Failure to comply with the existing laws and regulations applicable to our business could subject us, or our subsidiaries or our associates, as applicable, to enforcement actions and penalties and otherwise harm our business, as well as divert our management’s attention and resources and result in increased costs.

Our business is subject to regulation by various statutory and regulatory authorities, including, but not limited to, the FSA, the METI and other authorities responsible for enforcing compliance with privacy and data protection related laws, intellectual property laws, consumer protection laws, anti-money laundering laws and anti-corruption and anti-bribery laws. Some laws and regulations that we are subject to involve matters central to our business, including newer laws and regulations focused on our industry, internet, privacy, data protection and information security.

Payment Segment

Under the Payment Services Act of Japan (Act No. 59 of 2009, as amended), or the Payment Services Act, because we are registered as a fund transfer service provider to offer PayPay Money, a refundable type of PayPay Balance deposited by users, we are required to provide guarantee deposits to the Tokyo Legal Affairs Bureau for the higher of (i) ¥5 million and (ii) the amount calculated based on the sum of (a) the amount of outstanding obligations pertaining to funds transfer transactions borne by the funds transfer service provider and (b) the expenses associated with the exercise of rights as creditors of fund transfer services. Also under the Payment Services Act, because we are registered as an issuer of prepaid payment instruments for third-party businesses to offer PayPay Money Lite, a non-refundable type of PayPay Balance pre-loaded through advance payments by users, we are also required to provide guarantee deposits to the Tokyo Legal Affairs Bureau for an amount that is at least half of the total unused balance of PayPay Money Lite as of March 31 or September 30 every year if the balance of our PayPay Money Lite on such date exceeds ¥10 million. Such guarantee deposits totaled ¥219,466 million as of March 31, 2025. For details on the calculation of our required guarantee deposits, see Note 10 to our audited consolidated financial statements included elsewhere in this prospectus. The Director of the Kanto Local Finance Bureau of the Ministry of Finance has the authority to issue a business improvement order or a business suspension order, or cancel our registration, if we fail to comply with these regulations. We may be also subject to criminal sanctions if we fail to comply with certain obligations under the Payment Services Act.

In addition, PayPay Corporation is registered as a financial instruments intermediary service provider, an electronic payment service provider and a credit card number, etc. handling contractor. Also, PayPay Corporation obtains a license of a bank agency service provider and is designated as a designated funds transfer service provider. Furthermore, PayPay Corporation and PayPay Card Corporation are designated as specified

 

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essential infrastructure service providers, in connection with our funds transfer business and third-party prepaid payment instruments issuing business under the Payment Services Act and in connection with PayPay Card Corporation’s intermediation business of comprehensive credit purchases under the Installment Sales Act of Japan (Act No. 159 of 1961, as amended), or the Installment Sales Act, respectively.

PayPay Card Corporation is also registered as a money lender, a comprehensive credit purchase intermediary and a credit card number-handling contractor. Credit payment services provided by PayPay Card Corporation are classified as an intermediation of comprehensive credit purchases and providing cash advances requires registration as a money lender. PayPay Corporation, PayPay Card Corporation, PayPay Bank Corporation and PayPay Securities Corporation are required to perform certain verification procedures of customer identifications in accordance with the Act on Prevention of Transfer of Criminal Proceeds of Japan. Furthermore, because we have a dominant position in code-based payment settlement markets which is an important financial infrastructure in Japan, we need to comply with the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade of Japan (Act No. 54 of 1947, as amended), or the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade when we make changes to our operations and offer new services.

In Japan, both the Interest Rate Restriction Act of Japan (Act No. 100 of 1954, as amended), or the Interest Rate Restriction Act, and the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates of Japan (Act No. 195 of 1954, as amended), or the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates, regulate maximum interest rates, and any amounts exceeding these limits are deemed void and subject to sanctions. As a result of having two regulations that regulate maximum interest rates, there was a surge in cases where loans were made at interest rates that exceeded the maximum interest rate specified in the Interest Rate Restriction Act, but that did not exceed the maximum rate specified in the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates, which became to be known as a social issue called “gray-zone interest rates.” To address this social issue, the Japanese government gradually lowered the maximum interest rate specified in the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates to eliminate gray-zone interest rates for newly issued card loans. PayPay Card Corporation provides cash advances services and revolving credit services. Cash advances services are regulated by the Interest Rate Restriction Act and the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates, and while revolving credit services for purchases are not regulated by either the Interest Rate Restriction Act or the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates, PayPay Card Corporation, through self-regulation, provides revolving credit services within the limits of the maximum interest rates specified in these regulations. The current maximum interest rate under the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates is 20%, and there is no guarantee that the Japanese government will not lower the maximum interest rate in the future. If the maximum interest rate is lowered, our revenue growth, profitability, cash flows and financial condition may be adversely affected.

Financial Service Segment

PayPay Bank Corporation is a licensed bank and is subject to regulation by the FSA under the Banking Act of Japan (Act No. 59 of 1981, as amended), or the Banking Act. PayPay Bank Corporation’s failure to comply with the terms of its banking license or applicable laws and regulations, including those for consumer protection, could lead to the cancellation of its banking license and other licenses and approvals to engage in our businesses, governmental inspections and enforcement actions, claims from or litigation with customers or business partners, including due to breach of contractual terms, or the inability to implement our business strategy.

PayPay Bank Corporation is also subject to the requirement that it maintain risk-adjusted capital adequacy ratios above the levels specified in the capital adequacy standards stipulated by the FSA, based on Basel III. As a Japanese bank that does not have overseas operations, PayPay Bank Corporation is subject to the domestic standard for capital adequacy. As of March 31, 2025, PayPay Bank Corporation’s consolidated risk-adjusted capital adequacy ratio was 16.76% compared to the minimum risk-adjusted consolidated capital

 

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adequacy ratio of 4.0%. PayPay Bank Corporation may be unable to continue to satisfy the capital adequacy requirements if its core capital decreases or risk-weighted assets increase for any reason, including as a result of the realization of any of the risks described elsewhere in this “Risk Factors” section, or if capital adequacy standards are amended to be more stringent. If PayPay Bank Corporation’s capital adequacy ratios fall below required limits, the FSA could require PayPay Bank Corporation to take corrective actions, including, depending upon the level of deficiency, submission of an improvement plan or suspension of a portion of its business operations. PayPay Bank Corporation may also need to alter its business strategy or operations if its capital adequacy ratios decline to unacceptable levels. In addition, we are subject to restrictions on the aggregate amount of loans to any single customer or customer group under the Banking Act. As a result, loans to SoftBank Group companies are subject to restrictions. For a discussion of our capital adequacy ratios and the related regulatory standards, see “Regulations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Capital Requirements.” In addition, we voluntarily calculate metrics under certain international standards, including those related to leverage ratios, liquidity coverage ratios and interest rate risk in the banking book.

PayPay Securities Corporation is a registered financial instruments business operator and subject to extensive regulation by the FSA and self-regulatory organizations. Our online brokerage operations must comply with, among other rules, capital adequacy, customer protection and market conduct requirements. Securities regulatory agencies regularly review the operations of online brokerage companies, including PayPay Securities Corporation. Under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA, and related regulations, PayPay Securities Corporation is required to meet strict capital adequacy requirements. If PayPay Securities Corporation fails to maintain the required level of regulatory capital, the FSA, may order changes in its operations or the deposit of assets, temporary suspension of its business or revocation of its registration as a securities company. As of March 31, 2025, PayPay Securities Corporation had a regulatory capital adequacy ratio of 301.7%, which was above the required minimum ratio of 120%.

We are also subject to certain regulatory restrictions as a bank’s major shareholder with respect to PayPay Bank Corporation and as a principal shareholder of PayPay Securities Corporation, under which the FSA may request the submission of reports or materials from, or may conduct inspections of, us in certain circumstances, and may order us to take such measures as the FSA deems necessary, including resigning from our respective positions as shareholders of PayPay Bank Corporation and PayPay Securities Corporation, under certain limited circumstances. With respect to PayPay Bank Corporation, authorization by the FSA is required to become a bank’s major shareholder so if our authorization is revoked, we will need to take measures so that we will no longer be the holder of a number of voting rights in the bank which is equal to or greater than the major shareholder threshold, within the period designated by the FSA. With respect to PayPay Securities Corporation, if it violates applicable rules and regulations, the regulatory authorities that oversee PayPay Securities Corporation’s activities may exercise their broad powers to issue an order canceling PayPay Securities Corporation’s registration or authorization or suspending or requiring changes in the manner of PayPay Securities Corporation’s business, which may result in the removal of certain directors or corporate auditors of PayPay Securities Corporation from their positions. In addition, the Japanese government in the future may adopt new regulations that adversely affect our online banking or online securities business by imposing additional costs, exposing us to increased liability or additional supervision or monitoring. See “Regulations.”

We have established a system of legal compliance including employee education and the establishment of a compliance system. There have been no events that cause revocation of our registration described above. However, if our registration were to be revoked, our overall business activities would be hindered, and our financial condition and results of operations could be materially affected. In addition, in the event that our business methods do not conform to laws and regulations, including, but not limited to, the Payment Services Act, the Installment Sales Act, the Act on Prevention of Transfer of Criminal Proceeds of Japan (Act No. 22 of 2007, as amended), or the Act on Prevention of Transfer of Criminal Proceeds, the Money Lending Business Act of Japan (Act No. 32 of 1983, as amended), or the Money Lending Business Act, the Banking Act and the FIEA, there is a possibility that we may be subject to administrative punishment or criminal punishment by the

 

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competent authorities. The laws and regulations related to financial services are complex, and our compliance with such laws and regulations may be subject to regular inspection by competent authorities, which may result in orders for improvement in the case of any non-compliance as well as regular reporting on the status of such improvement efforts. In particular, PayPay Bank Corporation was subject to an inspection by the FSA in 2021, which identified certain areas of improvement in PayPay Bank Corporation’s anti-money laundering and countering the finance of terrorism, or AML/CFT, compliance system. PayPay Bank Corporation reported the implementation of improvement measures to the FSA and the FSA confirmed PayPay Bank Corporation’s AML/CFT compliance system conformed with applicable guidelines in June 2024. However, due to the complex and evolving nature of AML/CFT compliance, there is a possibility we may face compliance issues in the future, which may result, among other things, in administrative inquiries or penalties.

We are required to spend significant costs, time and effort to comply with relevant laws and regulations. In addition, the introduction of new services or other offerings in our existing markets and the expansion of our business to other countries may subject us to additional laws and regulations. Furthermore, in Japan, financial authorities have significant discretion in financial administration. Therefore, we may sometimes be required to comply with management indicators that are not clearly defined in laws and regulations. There may also be new and increased regulation of our industry going forward. Other existing and future regulations and laws could impede the growth of our industry, internet and online services. Many of these laws and regulations are still evolving and could be interpreted or applied in ways that could limit our business, particularly in the new and rapidly evolving industry in which we operate. Unfavorable regulations and laws could diminish demand and increase our cost of doing business.

Any failure or alleged failure to comply, or failure by any of our third-party service providers or merchants to comply, with the applicable laws, regulations or requirements could subject us, or our subsidiaries, as applicable, to inspection, audit and enforcement actions by the relevant authority; suspension and revocation of the relevant license or approval; civil penalties including payment of damages; and criminal penalties including payment of fines. Also, we may in the future be subject to laws and regulations, that we currently believe do not apply to us, as a result of any amendment thereto or any changes in the interpretation of relevant regulatory authorities, which may increase our costs for compliance or otherwise materially and adversely affect our business or results of operations.

In addition, it is possible that a regulatory inquiry might force us to change our policies or practices, including those that may impact the user convenience or overall user experience of our services, or subject us to regulatory orders or consent decrees. If we were to violate such orders or decrees, we might be subject to fines or other penalties.

These actions or any failure to prevail in a possible civil or criminal litigation, may materially and adversely affect our business, results of operations, financial condition, cash flows and reputation. In addition, responding to any action or litigation may result in a diversion of our management’s attention and resources and an increase in professional fees and compliance costs.

We could be subject to regulatory scrutiny, enforcement actions or legal claims if there is unintentional loss, disclosure or misappropriation of our users’ personal information or other breaches of our security.

We make extensive use of online services and centralized data processing, including through the use of third-party service providers, so the secure maintenance and transmission of confidential information is a critical element of our operations. We also collaborate with affiliated companies that use our brand for the provision of financial services to users from whom personal and confidential information is collected. There can be no assurance that user information has not been and will not be lost or disclosed or taken without consent or that our information technology and other systems, or those of our third-party service providers or strategic business partners, will not be compromised. If we lose users’ personal information or if a third party is able to penetrate our or our business partners’ or service providers’ network security or otherwise misappropriate our users’

 

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personal information, we could be subject to claims, we could be in violation of the Act on the Protection of Personal Information of Japan (Act No. 57 of 2003, as amended), or the Act on the Protection of Personal Information, and the Act on the Use of Numbers to Identify a Specific Individual in Administrative Procedures of Japan (Act No. 27 of 2013, as amended). Inadvertent loss, disclosure or misappropriation of user information by our own employees would subject us to similar risks. The Japanese media, regulators and consumers have intensified their scrutiny of incidents involving the loss, disclosure or misappropriation of personal information in recent years. Significant violations could result in a business improvement order or suspension of specific operations by regulators, among other consequences, which may materially and adversely affect our business and results of operations.

We rely on third parties for certain aspects of our business, which creates additional risk, and the failure of third parties to comply with legal or regulatory requirements or to provide various products and services that are important to our operations could have a material and adverse effect on our business, results of operations, cash flows, financial condition, and prospects.

We depend on third-party service providers for certain services, such as technology and other services to support our operations, including cloud-based data storage, data centers and other IT solutions, card networks, payment processing and the processing of users’ and merchants’ personal data. Our success depends on our ability to manage various service providers to provide reliable and satisfactory services to users on our platform. Our operations and business could be materially and adversely affected if our outsourcing service providers face any operational or system interruptions. To the extent we are unable to effectively manage these partners to provide satisfactory services to our users to address their needs on commercially acceptable terms, or at all, or if we fail to retain existing or attract new quality partners to our platform, our ability to retain, attract or engage our users may be severely limited, which may have a material and adverse effect on our business, financial condition, cash flows and results of operations. In many cases, we utilize services of affiliated companies as described under “—We collaborate with SoftBank Group companies in the provision of our services. Any failure by such companies to continue to support our services, or a material change in our relationship with such companies, could adversely impact our services and could impact our overall business, financial condition, cash flows and results of operations.”

Most of our agreements with third-party service providers are terminable by the service provider at a short or no notice, and if our current third-party service providers were to terminate their agreements with us or otherwise stop providing services to us on acceptable terms, we may be unable to procure service from alternative service providers in a timely and efficient manner and on acceptable terms or at all. Furthermore, some of our service agreements are fixed-term contracts or have short duration ranging from one year to three years and are not subject to automatic renewal. If any service provider fails to provide the services we require, fails to meet contractual requirements (including compliance with applicable laws and regulations), fails to maintain adequate data privacy controls, personal information protection and electronic security systems, or suffers a cyber-attack or other security breach, we could be subject to regulatory enforcement actions, claims from third parties, including our users, and suffer economic and reputational harm that could have a material adverse effect on our business. Further, we may incur significant costs to resolve any such disruptions in service, which could materially and adversely affect our business.

We may be materially and adversely affected by the evolving laws and regulation governing our business and the introduction of any new laws and regulation which may become applicable to our business.

The laws and regulations governing our businesses are evolving and may be amended, supplemented or changed at any time. As a result, we may be required to seek for and follow additional procedures, modify or adjust certain activities, restructure our ownership structure, obtain new and additional licenses and incur additional expenses to comply with such laws and regulations, which could adversely affect our future development and business. New laws and regulations may be enacted from time to time to require additional licenses and approvals other than those we currently have. In order to comply with evolving laws and regulations,

 

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we may need to devote significant resources and efforts, including restructuring affected businesses, changing our business practices and adjusting our activities, which may materially and adversely affect our business, growth prospects and reputation. We will be affected by such changes particularly with respect to PayPay Bank Corporation and PayPay Securities Corporation due to the highly regulated nature of the industry they operate in. We cannot assure you that the relevant regulatory authorities will not introduce further new laws and regulations in the future which may require us to restructure our business, obtain new licenses, comply with additional requirements and incur additional ongoing compliance costs which may materially and adversely affect our future development, business and results of operations.

Any failure by us or our merchants and financial institution partners who work with us to comply with applicable anti-money laundering, counter-terrorist financing and economic sanction laws and regulations could lead to penalties and may damage our reputation.

We and our partners who work with us are required to comply with certain anti-money laundering requirements in Japan, including those related to “anti-social forces” (a reference to organized crime in Japan), and economic sanctions regimes. These requirements include the establishment of a client identification program, the monitoring and reporting of suspicious transactions, the preservation of client information and transaction records, and the provision of assistance in investigations and proceedings in relation to money laundering matters. We and our financial institution partners are also subject to various counter-terrorist financing and economic sanction laws and regulations that prohibit, among other things, any involvement in transferring the proceeds of criminal activities and any activities involving restricted countries, organizations, entities and persons that have been identified as unlawful actors or that are subject to U.S. sanctions imposed by the U.S. Department of the Treasury Office of Foreign Asset Control, or OFAC, or other international economic sanctions that prohibit us and our partners from engaging in trade or financial transactions with certain countries, businesses, organizations and individuals. These laws and regulations require us and our partners to establish sound internal control policies and procedures with respect to anti-money laundering, counter-terrorist financing and economic sanction monitoring and reporting obligations.

The policies and procedures we and our partners have adopted may not be effectively implemented in protecting our services from being exploited for money laundering, terrorist financing and other illegal purposes. If we fail to comply with anti-money laundering, anti-terrorist and economic sanction laws and regulations, we could be subject to fines, enforcement actions, regulatory sanctions, additional compliance requirements, increased regulatory scrutiny of our business, or other penalties levied by regulators, and damages to our reputation, all of which may materially and adversely affect our business operations, and results of operations. In particular, if we were publicly named as a sanctioned entity by relevant regulatory authorities or become subject to investigation, our business may be significantly interrupted and our reputation might be severely damaged. Similarly, if our partners fail to comply with applicable laws and regulations, it could disrupt our services and could result in potential liability for us and damage our reputation. We and our partners have been and will continue to be required to make changes to our and their respective compliance programs in response to any new or revised laws and regulations on anti-money laundering, counter-terrorist financing and economic sanctions, which could make compliance more costly and operationally difficult to manage.

External Risks Related to Economic Conditions and Other Factors

Unfavorable economic conditions in Japan could have a material adverse effect on our business, financial condition and results of operations.

Our revenue from the provision of payment settlement services and financial services is and will continue to be heavily influenced by the behavior of retail customers in Japan as well as market risks, including foreign exchange risk and interest risk. Accordingly, our business and future prospects are affected by general economic conditions in Japan and trends in Japanese household consumer spending. A downturn in the Japanese economy, whether due to intensifying international trade frictions, including tariffs, geopolitical risks, such as political tensions in Asia,

 

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including between mainland China and Taiwan and between North Korea and South Korea and the developing conflict between India and Pakistan, and geopolitical risks and military conflicts in the Middle East, including the conflicts between Israel and Hamas and between Israel and Iran, as well as escalating military tensions in Europe as a result of Russia’s invasion of Ukraine, a fluctuating yen, rising interest rates, inflation, volatility in financial markets, global economic instability or other factors, or a significant deterioration in consumer confidence or other unfavorable market conditions could have a material adverse effect on our business, financial condition and results of operations.

The outlook of the Japanese economy remains uncertain. In particular, since 2013, the Bank of Japan, or the BOJ, had implemented quantitative and qualitative monetary easing measures to overcome deflation until March 2024, when it stated that its policy framework of quantitative and qualitative monetary easing with yield curve control and its negative interest rate policy had fulfilled their roles. As the consumer price index increased and inflation has occurred in Japan in recent years, based on its view that the functioning of Japanese bond markets had deteriorated due to increased volatility in overseas financial and capital markets, the BOJ decided to modify the conduct of yield curve control in December 2022 to expand the range of 10-year Japanese government bond yield fluctuations from the target level of between around plus and minus 0.25 percentage points to around plus and minus 0.5 percentage points. In March 2024, the BOJ stated that its theretofore effective policy framework of quantitative and qualitative monetary easing with yield curve control and its negative interest rate policy had fulfilled their roles and set the uncollateralized overnight call rate to around 0 to 0.1%. Subsequently, the BOJ further raised this rate to 0.25% on July 31, 2024, to 0.5% on January 24, 2025 and to 0.75% on December 19, 2025. Despite the Japanese yen’s interest rate rising after the BOJ’s modification of the yield curve control and short-term interest rates rising in Japan after the BOJ’s raise, interest rates in Japan are still low relative to interest rates of other currencies, which may lead to continued or increased downward pressure on the Japanese yen and which, in turn, may adversely affect consumer borrowing or spending activities. Moreover, the recent increases or further increases in Japanese yen interest rates may also have negative effects on consumers, such as through increased interest rates on home or other loans, or other negative effects on economic activity in Japan, in turn materially and adversely affecting the businesses of PayPay Bank Corporation and PayPay Card Corporation. Although the BOJ stated in its “Review of Monetary Policy from a Broad Perspective,” released in December 2024, that the overall effect of these measures on the Japanese economy have been positive, future side effects from a prolonged large-scale continuation of unconventional monetary policy measures remain possible. Over the long term, demographic trends leading to population decreases could serve to depress economic growth or lead to economic contraction in Japan.

In addition, NISA a tax-deferred savings scheme targeted to significantly increase investment by Japanese individuals, was updated in January 2024 to increase the tax benefits available to Japanese taxpayers investing in both long-term mutual funds and stocks. Consumer investment has expanded significantly as a result of this update and is expected to continue to expand. This update to NISA is expected to have a positive impact on the business of PayPay Securities Corporation. However, if this tax-deferred savings scheme is further updated in the future such that consumer spending decreases as a result, this may similarly have a material and adverse impact on the financial results of PayPay Securities Corporation.

Natural disasters, fires, epidemics, pandemics, acts of war, civil unrest and other events could materially and adversely affect our business.

Natural disasters (such as typhoons, flooding and earthquakes), epidemics, pandemics, acts of war, terrorist attacks and other events, many of which are beyond our control, may lead to economic instability, including in Japan or globally, which may in turn materially and adversely affect our business, financial condition, cash flows and results of operations.

Our operations may be materially and adversely affected by fires, natural disasters and/or severe weather, which can result in damage to our technological infrastructure and generally reduce our productivity and may require us to evacuate personnel and suspend operations. In particular, such occurrences in the Tokyo area where our main data centers are located, which are supported by multiple AWS data centers, or in the area where our backup data center is located, could have a material adverse impact on our operations. Any terrorist attacks or civil unrest as well as other adverse social, economic and political events in Japan could have a negative effect on us.

 

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Risks Related to Shares of our Common Stock, the ADSs and this Offering

An active trading market for the ADSs may not develop and the trading price for the ADSs may fluctuate significantly.

We intend to apply to list the ADSs on the Nasdaq Global Select Market. However, there is no assurance that such listing can be sustained after this offering. We have not applied for a listing of our common shares on any market. Prior to the completion of this offering, there has been no public market for the ADSs or our common shares, and we cannot assure you that a liquid public market for the ADSs will develop. If an active public market for the ADSs does not develop following the completion of this offering, the market price and liquidity of the ADSs may be materially and adversely affected. The initial public offering price for the ADSs is determined by negotiation between the underwriters, the selling shareholder and us based upon several factors, and we can provide no assurance that the trading price of the ADSs after this offering will not decline below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their ADSs.

The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors.

The trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control or unrelated to our operating or financial performance. Factors that could cause fluctuations in the market prices and trading volume of the ADSs include the following:

 

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price and volume fluctuations in the global stock markets from time to time;

 

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general economic conditions and slow or negative growth of our markets;

 

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new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

 

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changes in tax laws and regulations as well as accounting standards, policies, guidelines, interpretations or principles;

 

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actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;

 

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rumors and market speculation involving us, our affiliated companies or other companies in our industry;

 

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failure of securities analysts and credit rating agencies to maintain coverage of us, changes in financial estimates by securities analysts and credit rating agencies who follow our company, or our failure to meet these estimates or the expectations of investors;

 

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announcements by us or our competitors of new products and services;

 

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announced or completed transactions affecting our businesses or technologies or those of our competitors;

 

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actual or anticipated changes in our results of operations or fluctuations in our results of operations;

 

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sales of shares of our common stock by us or our current shareholders;

 

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litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;

 

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developments or disputes concerning our intellectual property or other proprietary rights; and

 

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any significant change in our management.

 

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In addition, the Cornerstone Investors have, severally and not jointly, indicated an interest in purchasing up to an aggregate of $220 million of the ADSs offered in this offering at the initial public offering price and on the same terms and conditions as the other purchasers in this offering. Because these indications of interest are not binding agreements or commitments to purchase, the Cornerstone Investors may determine to purchase more, fewer, or no ADSs in this offering, or the underwriters may determine to sell more, less or no ADSs to the Cornerstone Investors. If any of the Cornerstone Investors are allocated a portion or all of, or more than, the ADSs in which they have indicated an interest in purchasing in this offering, their election to purchase any such ADSs could reduce the available public float of our ADSs.

Any of the above or other factors, in addition to other risk factors described herein, may result in large and sudden changes in the volume and price at which the ADSs will trade.

Fluctuations in exchange rates may affect the U.S. dollar value of the ADSs and dividends payable to holders of the ADSs.

The conversion of Japanese yen into foreign currencies, including the U.S. dollar, is based on market exchange rates. The Japanese yen has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of the Japanese yen against the U.S. dollar and other currencies is affected by changes in global political and economic conditions, among other things. We cannot assure you that the Japanese yen will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or U.S. government policy may impact the exchange rate between the Japanese yen and the U.S. dollar in the future.

Any significant depreciation of the Japanese yen may materially and adversely affect the value of, and any dividends payable on, the ADSs in U.S. dollars. If we decide to convert our Japanese yen into U.S. dollars for the purpose of making payments for dividends on our shares of common stock or ADSs, appreciation of the U.S. dollar against the Japanese yen would have a negative effect on the U.S. dollar amount available to us. In addition, appreciation or depreciation in the value of the Japanese yen relative to the U.S. dollar would affect our financial results translated from Japanese yen into U.S. dollar terms regardless of any underlying change in our business or results of operations. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

We will have broad discretion over the use of the net proceeds of the offering.

We will have broad discretion in the application of the net proceeds we receive in this offering for the purposes described under “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from the offering and the potential returns therefrom, it is possible that a substantial portion of the net proceeds will be invested in a way that does not yield a favorable, or any, return for us. Moreover, we may decide to change the application of the net proceeds from this offering in the future. If we do not use the net proceeds that we receive in the offering effectively, our business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected, and the market price for ADSs representing share of our common stock could decline.

We may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could subject U.S. investors in the ADSs or common shares to adverse tax consequences, which may be significant.

In general, we will be a passive foreign investment company (a “PFIC”) for any taxable year in which:

 

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at least 75% of our gross income is passive income, or

 

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at least 50% of the value (generally determined based on a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income.

For this purpose, passive income generally includes dividends, interest, royalties and rents (other than certain interest derived in the active conduct of banking business). In addition, cash and other assets readily convertible into cash are generally considered passive assets. If we own at least 25% (by value) of the stock of another corporation, for purposes of determining whether we are a PFIC, we will be treated as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income. We do not expect to be a PFIC for our current taxable year or in the foreseeable future. However, our PFIC status is a factual determination that is made annually, and thus may be subject to change due to changes in our income or asset composition or in the value of our assets. Because the value of our goodwill may be determined based on the expected market value of the ADSs from time to time, a decrease in the price of the ADSs may also result in our becoming a PFIC for any taxable year.

If we are a PFIC for any taxable year during which you hold the ADSs or common shares, our PFIC status could result in adverse United States federal income tax consequences to you if you are a United States investor. For example, if we are or become a PFIC, you may be subject to increased tax liabilities under United States federal income tax laws and regulations, and will be subject to reporting requirements. See “Taxation—Certain United States Federal Income Tax Considerations to United States Holders—Passive Foreign Investment Company.”

Substantial future sales of our shares of common stock or ADSs, or the perception that these transactions could occur, could depress the market prices of the ADSs.

Sales of the ADSs in the public market after this offering, including pursuant to registration rights provided to SoftBank Corp., LY Corporation, B Holdings Corporation and SVF II Piranha (DE) LLC (see “Related Party Transactions—Registration Rights Agreement”), or the perception that these sales could occur, could cause the market price of the ADSs to decline. All ADSs sold in this offering will be freely transferable without restriction or additional registration under the Securities Act. The remaining common shares issued and outstanding after this offering will be available for sale, upon the expiration of the 180-day lock-up period beginning from the date of this prospectus, subject to volume and other restrictions as applicable provided in Rules 144 and 701 under the Securities Act. Any or all of these shares may be released prior to the expiration of the lock-up period at the discretion of the representatives of the underwriters of this offering. To the extent shares are released before the expiration of the lock-up period and sold into the market, the market price of the ADSs could decline.

As of January 31, 2026, there were 12,436,600 shares of our common stock issuable upon exercise of outstanding stock options, and holders of our stock options may choose to exercise their options and sell all or a portion of their shares. Our shareholders approved a plan to grant stock options to our directors, corporate officers and employees through trust-type stock options in August 2022, under which stock options to purchase 11,636,000 shares of our common stock were initially issued to and held by a trustee. For the year ended March 31, 2023, stock options to purchase 4,589,200 common shares were distributed to directors, corporate officers and employees. As of April 30, 2025, the remaining trust-type stock options to purchase 7,046,800 common shares were forfeited and extinguished, and by May 30, 2025, the trust-type stock options to purchase 580,000 common shares that were registered were forfeited and extinguished due to retirement. In addition, in April 2025, our shareholders approved a plan to grant stock options to our directors, corporate officers and employees through tax qualified-type stock options and one-yen-exercisable at retirement-type stock options. Under this plan, on May 31, 2025, we granted stock options to purchase 8,729,400 common shares. See “Management—Compensation of Directors and Executive Officers,” “Management—Stock Options” and Note 36 to our annual consolidated financial statements. Furthermore, we may require additional capital to support our operations and the growth of our business, and we cannot be certain that financing will be available on reasonable terms when required, or at all. Moreover, our board of directors will be able to issue and sell additional shares of our common stock within the unissued portion of our authorized share capital, generally without any shareholder vote. Any such sales could cause the prices of the ADSs to decline.

 

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If securities or industry analysts were to adversely change their recommendations regarding an investment in us, the prices of the ADSs or their trading volume could decline.

The trading market for the ADSs will be influenced by the research and other reports that securities or industry analysts may publish about us, our business, our market, our shareholders or our competitors. If any of the analysts who may cover us adversely change their recommendation regarding an investment in us, or provide more favorable relative recommendations about our competitors, the price of the ADSs would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of the ADSs or their trading volume to decline.

We may not pay dividends for the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain future earnings to finance the operation and expansion of our business, and as a result, we may not declare or pay any dividends in the foreseeable future. You may only receive a return on your investment if the market price of the ADSs increases.

As a Japanese joint stock corporation, we are permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to public U.S. companies, as well as from certain disclosure requirements under the Exchange Act. This may afford less protection to holders of the ADSs than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.

As a company listed on Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, as a Japanese joint stock corporation, we are exempted from certain Nasdaq corporate governance requirements by virtue of being a foreign private issuer and are permitted to follow the corporate governance practices of our home country. For a brief description of the significant differences between our corporate governance practices and the corporate governance practices required to be followed by U.S. companies listed on Nasdaq, see “Management—Corporate Governance.” The standards applicable to us are considerably different from the standards applied to public U.S. companies. For instance, we are not required to:

 

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have a majority of our board of directors be independent;

 

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have a compensation committee or a nominating or corporate governance committee consisting entirely of independent directors;

 

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obtain shareholder approval of equity compensation plans, equity offerings that do not qualify as public offerings for cash, and offerings of equity to related parties; or

 

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have regularly scheduled executive sessions with only independent directors.

We intend to rely on these exemptions for so long as we maintain our status as a foreign private issuer. For example, although we have established a compensation committee and a nominating committee, those committees do not consist entirely of independent directors. As a result, you may not be provided with the benefits of certain corporate governance standards applicable to public U.S. companies.

Upon the completion of this offering, we expect we will be a “controlled company” as defined under the rules of Nasdaq, because the entities ultimately controlled by SoftBank Group Corp. will be able to exercise 91.78% of the aggregate voting power of our total issued and outstanding shares; the percentage is assuming the underwriters do not exercise their option to purchase additional ADSs. As a controlled company, we are eligible to, and, in the event we no longer qualify as a foreign private issuer, we intend to, elect not to comply with certain of the Nasdaq corporate governance standards, including the requirement that a majority of directors on our board of directors are independent directors and the requirement that our compensation committee and our nominating and corporate

 

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governance committee consist entirely of independent directors. If the underwriters exercise their option to purchase additional ADSs, and we are not a controlled company, we will not be eligible to elect not to comply with such Nasdaq corporate governance standards even when we no longer qualify as a foreign private issuer.

As a foreign private issuer, we are not subject to all of the disclosure requirements applicable to companies organized within the United States. For example, we are exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, our directors and officers are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies. Accordingly, there may be less publicly available information concerning our company than there is for U.S. public companies.

We will incur increased costs as a result of being a public company.

Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. These additional costs may negatively affect our financial results. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate governance practices of public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. We expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to appoint a certain number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures, both of which we have already begun to address. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

Holders of ADSs have fewer rights than shareholders under Japanese law, their voting rights are limited by the terms of the deposit agreement, and they may not be able to exercise their rights to vote the underlying shares of common stock.

The rights of shareholders under Japanese law to take actions, including voting their shares, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records, exercising appraisal rights, requesting to call shareholders meetings and submitting proposals at shareholders meetings, are available only to shareholders of record. Holders of ADSs do not have the same rights as our registered shareholders. The depositary, through its custodian, is the record holder of the shares of our common stock underlying the ADSs. Holders of ADSs will not have any direct right to attend general meetings of our

 

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shareholders or to cast any votes at such meetings. ADS holders will not be able to bring a derivative action, examine our accounting books and records, or exercise appraisal rights through the depositary.

Holders of ADSs will only be able to exercise the voting rights with respect to the underlying shares of common stock represented by the ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement, holders of ADSs may only vote by giving voting instructions to the depositary. If we request the depositary to solicit voting instructions, upon receipt of voting instructions from holders of ADSs in the manner set forth in the deposit agreement, the depositary will make efforts to vote the shares underlying the ADSs in accordance with the instructions of ADS holders. Holders of ADSs will not be able to directly exercise their right to vote with respect to the underlying shares unless they cancel their ADSs, withdraw the shares of common stock and become the registered holder of such shares of common stock prior to the record date for the general meeting. Under our post-offering articles of incorporation that will become effective immediately prior to the completion of this offering, the minimum notice period required for convening a general meeting is 14 days. When a general meeting is convened, holders of ADSs may not receive sufficient advance notice to cancel their ADSs, withdraw the shares underlying their ADSs to allow them to vote with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under our post-offering articles of incorporation, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent holders of ADSs from withdrawing the underlying shares of common stock represented by their ADSs and from becoming the registered holder of such shares prior to the record date, so that they would not be able to attend the general meeting or to vote directly. If we instruct the depositary to solicit instructions from holders of ADSs, the depositary will notify them of the upcoming vote and will arrange to deliver our voting materials to ADS holders. We cannot assure holders of ADSs that they will receive the voting materials in time to ensure that they can instruct the depositary to vote the underlying shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out their voting instructions. This means that holders of ADSs may not be able to exercise their right to vote and they may have no legal remedy if the shares underlying their ADSs are not voted as they requested. We have agreed to give the depositary notice of a general meeting at least 30 days in advance.

Holders of ADSs may not receive distributions on shares of our common stock or any value for them if it is illegal or impractical to make them available to such holders.

The depositary has agreed, subject to the terms of the deposit agreement, to pay holders of ADSs the cash dividends or other distributions it or the custodian for the ADSs receives on shares of common stock or other deposited securities after deducting its fees and expenses and any taxes or other governmental charges. Holders of ADSs will receive these distributions in proportion to the number of shares of our common stock that such ADSs represent. However, the depositary is not responsible for making such payments or distributions if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act, but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable efforts made by the depositary. The depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, shares of common stock, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, shares of common stock, rights or anything else to holders of ADSs. This means that holders of ADSs may not receive distributions we make on our shares of common stock or any value for them if it is illegal or impractical for us to make them available to such holders. These restrictions may cause a material decline in the value of the ADSs.

 

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Rights of shareholders under Japanese law may be different from rights of shareholders in other jurisdictions.

Our articles of incorporation and the Companies Act of Japan, or the Companies Act, govern our corporate affairs. Legal principles relating to matters such as the validity of corporate procedures, directors’ and executive officers’ fiduciary duties and obligations and shareholders’ rights under Japanese law may be different from, less extensive as or less clearly defined than, those that would apply to a company incorporated in any other jurisdiction. If you surrender your ADSs to the depositary to withdraw the common shares underlying your ADSs, you would be subject to shareholders’ rights under Japanese law, which may not be as extensive as shareholders’ rights under the law of other countries. For example, under the Companies Act, only holders of 3% or more of our total voting rights or our outstanding shares are entitled to examine our accounting books and records. Furthermore, there is a degree of uncertainty as to what duties the directors of a Japanese joint stock corporation may have in response to an unsolicited takeover bid, and such uncertainty may be more pronounced than that in other jurisdictions.

Investors holding less than one “unit” of shares of our common stock will have limited rights as shareholders.

Our post-offering articles of incorporation provide that 100 shares of common stock constitute one “unit.” Under the Companies Act and our articles of incorporation, shareholders are entitled to one voting right for each unit of shares, and shares constituting less than a full unit carry no voting rights and certain other shareholder rights are limited. As a result, if you surrender your ADSs to the depositary to withdraw the common shares underlying your ADSs and you hold shares constituting less than one unit, you will not have the right to vote with respect to those shares, and your ability to influence the outcome of matters submitted to shareholders (including the election of directors and other significant corporate actions) will be materially limited. In addition, there is no exchange-based market for odd-lot shares, and holders of shares constituting less than one unit may have limited liquidity. Under the Companies Act, holders of odd-lot shares have the right to require the company to purchase such shares, and we will comply with such request. However, our articles of incorporation do not provide holders of odd-lot shares with the right to acquire additional shares from the company in order to constitute a full unit. As a result, holders of shares constituting less than one unit may have limited methods available to dispose of such shares and may incur additional time, cost or uncertainty. For a more complete description of the unit share system and its effect on the rights of our shareholders, see “Description of Share Capital—Unit Share System.”

Further, although amendments to the articles of incorporation generally require approval by a special resolution of a general meeting of shareholders, pursuant to the Companies Act, our board of directors may reduce the number of shares constituting one unit or cease to use the unit share system by amendments to the articles of incorporation without shareholders’ approval. Any such action could change the allocation of voting rights and other shareholder rights among holders of our common stock, including common stock underlying ADS, and could affect your ability to exercise voting rights (including through the depositary) and the relative influence of different shareholders. In addition, changes to the unit share system could require adjustments to the ADS-to-share ratio or other technical changes under the deposit agreement, which could create uncertainty for investors and may result in additional administrative steps, costs or fees.

Holders of ADSs may be subject to limitations on transfer of their ADSs and on the ability to deposit or withdraw common shares.

ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs or to accept surrenders of ADSs for the purpose of withdrawing common shares generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. Moreover, even if the deposit agreement permits a withdrawal of common shares, your ability to effect such withdrawal may depend on the agreement with or operational practices of your broker, custodian or other intermediary, and in some cases you may not be able to withdraw common shares and hold them directly as a result.

 

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Holders of ADSs may experience dilution of their holdings due to inability to participate in rights offerings.

We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless we indicate that we wish such rights to be made available to holders of ADSs and the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs or are registered under the provisions of the Securities Act. The depositary will try to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.

The depositary for the ADSs may give us a discretionary proxy to vote our shares of common stock underlying the ADSs to the extent holders of ADSs do not timely provide voting instructions to the depositary in accordance with the deposit agreement, which could adversely affect the interests of ADS holders.

Under the deposit agreement for the ADSs, if we ask the depositary to solicit your instructions at least 30 days before the meeting date but the depositary does not receive voting instructions as to a question to be voted on from you by the specified date and we confirm to the depositary that

 

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we wish to receive a discretionary proxy to vote uninstructed common shares;

 

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as of the instruction cutoff date we reasonably do not know of any substantial shareholder opposition to that question; and

 

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that question is not materially adverse to the interests of our shareholders,

then the depositary will consider you to have authorized and directed it to give a discretionary proxy to a person designated by us to vote the number of deposited common shares represented by your ADSs as to that question.

The effect of this discretionary proxy is that if holders do not provide voting instructions to the depositary in the manner required by the deposit agreement, we may acquire the right to vote the common shares underlying their ADSs. This may make it more difficult for ADS holders to influence the management of our company. Direct holders of our common shares are not subject to this discretionary proxy.

ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

The deposit agreement governing the ADSs representing our shares of common stock provides that, to the fullest extent permitted by applicable law, holders and beneficial owners of ADSs irrevocably waive the right to a jury trial of any claim that they may have against us or the depositary arising from or relating to our shares of common stock, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. The waiver continues to apply to claims that arise during the period when a holder holds the ADSs, even if the ADS holder subsequently withdraws the underlying shares of common stock. Purchasers of ADSs in secondary transactions will be subject to the jury trial waiver provision to the same extent as purchasers of the ADSs offered in this offering. However, holders of ADSs will not be deemed, by agreeing to the terms of the deposit agreement, to have waived our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder. In fact, holders of ADSs cannot waive our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder.

If you or any other owners or holders of the ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under U.S. federal securities laws, you or such other owners or holders may not be entitled to a jury trial with respect to such claims,

 

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which may have the effect of limiting and discouraging lawsuits against us or the depositary, and may lead to increased costs to bring a claim. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have, including outcomes that could be less favorable to the plaintiff(s) in any such action.

If we or the depositary opposed a demand for jury trial relying on the above-mentioned jury trial waiver, it is up to the court to determine whether such waiver is enforceable considering the facts and circumstances of that case in accordance with the applicable state and federal law.

If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court or by the United States Supreme Court. Nonetheless, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York. In determining whether to enforce a jury trial waiver provision, New York courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim, none of which we believe are applicable in the case of the deposit agreement or the ADSs. If holders or beneficial owners of ADSs bring a claim against us or the depositary relating to the matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, such holder or beneficial owner may not have the right to a jury trial regarding such claims, which may limit and discourage lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary according to the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may have different outcomes compared to that of a jury trial, including results that could be less favorable to the plaintiff(s) in any such action.

Moreover, as the jury trial waiver relates to claims arising out of or relating to the ADSs or the deposit agreement, we believe that, as a matter of construction of the clause, the waiver would likely continue to apply to ADS holders who withdraw the shares of common stock from the ADS facility with respect to claims arising before the cancelation of the ADSs and the withdrawal of the shares of common stock, and the waiver would most likely not apply to ADS holders who subsequently withdraw the shares of common stock represented by ADSs from the ADS facility with respect to claims arising after the withdrawal. However, to our knowledge, there has been no case law on the applicability of the jury trial waiver to ADS holders who withdraw the shares of common stock represented by the ADSs from the ADS facility.

We may amend the deposit agreement without consent from holders of ADSs, and, if such holders disagree with our amendments, their choices will be limited to selling the ADSs or withdrawing the underlying shares of our common stock.

We may agree with the depositary to amend the deposit agreement without consent from holders of ADSs. If an amendment increases fees to be charged to ADS holders or prejudices a material right of ADS holders, it will not become effective until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, ADS holders are considered, by continuing to hold their ADSs, to have agreed to the amendment and to be bound by the amended deposit agreement. If holders of ADSs do not agree with an amendment to the deposit agreement, their choices will be limited to selling the ADSs or withdrawing the underlying shares of our common stock. No assurance can be given that a sale of ADSs could be made at a price satisfactory to the holder in such circumstances.

 

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We are incorporated in Japan, and it may be more difficult to enforce judgments obtained in courts outside Japan.

We are incorporated in Japan as a joint stock corporation with limited liability. Most of our directors are non-U.S. residents, and a substantial portion of our assets and the personal assets of our directors and corporate officers are located outside the United States. As a result, when compared to a U.S. company, it may be more difficult for investors to effect service of process in the United States upon us or to enforce against us, our directors or corporate officers, judgments obtained in U.S. courts predicated upon civil liability provisions of the federal or state securities laws of the United States. or similar judgments obtained in other courts outside Japan. There is doubt as to the enforceability in Japanese courts, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the federal and state securities laws of the United States.

Prior notification under the Foreign Exchange and Foreign Trade Act of Japan may be required in the case of acquisition by foreign investors of our shares.

Because we are engaged in certain businesses designated by the Foreign Exchange and Foreign Trade Act of Japan (Act No. 228 of 1949, as amended), or the Foreign Exchange and Foreign Trade Act, and its related cabinet orders and ministerial ordinances, or collectively, the Foreign Exchange Regulations, such as the development of our PayPay app through which we collect certain types of personal information of one million or more people, if a foreign investor, as defined under the Foreign Exchange and Foreign Trade Act, intends to consummate an acquisition of shares of our common stock that constitutes an “inward direct investment,” or IDI, under the Foreign Exchange Regulations, the foreign investor, in general, must file prior notification of such IDI with the Minister of Finance and any other competent minister, or the Ministers. IDI includes an acquisition by a foreign investor of one or more shares of our common stock. While certain exemptions from the prior notification requirements are provided for under the Foreign Exchange Regulations, foreign investors seeking to make any acquisition of shares of our common stock would not be eligible for such exemptions. If such prior notification is filed, the proposed acquisition may not be consummated until the prescribed screening period expires. In some cases, the Ministers may extend the screening period, and may recommend or order a modification or abandonment of such acquisition. In addition, if certain conditions including those prescribed in light of national security of Japan under the Foreign Exchange Regulations are met, the Ministers may order the disposal of the shares acquired or take other measures. Consequently, any foreign investor seeking to acquire shares of our common stock that constitutes an IDI may not consummate such acquisition on the expected timeframe, in accordance with an intended plan, or at all.

Additionally, if a foreign investor consents, at a general meeting of shareholders, to certain proposals having a material influence on our management such as the (i) election of such foreign investor or any of its related persons (as defined in the Foreign Exchange Regulations) as our directors or (ii) transfer or discontinuation of our business, such consent, subject to certain exemptions, also constitutes an “inward direct investment” requiring prior notification. If such prior notification is filed, such consent may not be given until the prescribed screening period expires. As a result, such foreign investors may have difficulties giving such consent in accordance with an intended plan, or at all.

Regarding the acquisition of ADSs, the Minister of Finance has expressed its view that, provided that it should be judged in accordance with the actual situation on a case-by-case basis, in general, in the case where a Japanese corporation that is not listed on any Japanese stock exchange, such as us, lists depositary receipts issued by a foreign depository bank backed by the shares of such Japanese corporation on any foreign stock exchange, it is considered that, while such a foreign depositary bank needs to submit a prior notification of IDI upon acquiring the shares, non-residents or foreign corporations that acquire such depositary receipts do not need to submit any prior notification of IDI because the foreign depositary bank that will acquire the shares of such Japanese corporation is required to submit a prior notification. However, there is no guarantee that the Minister of Finance will maintain this view in the future. If the Minister of Finance changes its view and requires non-residents or foreign corporations seeking to acquire the ADSs to submit a prior notification of IDI, foreign

 

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investors may not consummate such acquisition on the expected timeframe, in accordance with an intended plan, or at all. Also, foreign investors that intend to surrender the ADSs and thereby acquire the underlying shares of our common stock will be required to submit a prior notification to the Ministers.

The discussion above is not exhaustive of all possible foreign exchange controls considerations that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall foreign exchange controls consequences of the acquisition, ownership and disposition of the ADSs, shares of our common stock or voting rights by consulting their own advisors. For a more detailed discussion on the requirements and procedures regarding the prior notifications under the Foreign Exchange Regulations, see “Japanese Foreign Exchange Regulations.”

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The initial public offering price of $    per ADS is substantially higher than the pro forma net tangible book value per share of our outstanding capital stock upon the completion of this offering. Therefore, if you purchase ADSs representing shares of our common stock in this offering, you will incur immediate dilution of $    in the net tangible book value per ADS from the price you paid. In addition, investors purchasing ADSs representing shares of our common stock from us in this offering will have contributed   % of the total consideration paid to us by all stockholders who purchased shares of our common stock, in exchange for acquiring approximately   % of the outstanding shares of our common stock as of      , 2026, after giving effect to this offering. The exercise of outstanding options to purchase shares of our common stock and the issuance of future equity-based awards may result in further dilution.

We may lose our foreign private issuer status in the future, which would then require us to comply with U.S. domestic reporting requirements and could impose additional regulatory burdens and costs on us.

We currently qualify as a foreign private issuer under U.S. securities laws, which allows us to follow certain reduced reporting and governance requirements. See “—As a Japanese joint stock corporation, we are permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to public U.S. companies, as well as from certain disclosure requirements under the Exchange Act. This may afford less protection to holders of the ADSs than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.” These and other accommodations available to us as a foreign private issuer help reduce our compliance burdens. However, U.S. securities regulations require us to reassess our foreign private issuer status annually, and we will lose foreign private issuer status if more than 50% of our voting shares are held by U.S. residents and we fail to meet additional requirements regarding the nationality of our officers or directors, the location of our assets, or the primary place of administration of our business.

If we cease to qualify as a foreign private issuer, we will become subject to the full reporting and regulatory regime applicable to U.S. domestic issuers. This change would require us, among other things, to file periodic reports with the SEC on the domestic forms (Form 10-K for annual reports and Form 10-Q for quarterly reports) with more detailed disclosures and on accelerated timelines, instead of the streamlined forms we are allowed to use as a foreign private issuer. We would also have to comply with U.S. federal proxy rules and regulations, including the requirement to distribute proxy statements for shareholder meetings and to comply with U.S. executive compensation disclosure standards, from which we are currently exempt. Furthermore, our directors, officers and principal shareholders would become subject to the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act, which would require them to file reports disclosing their ownership and transactions in our stock and could expose them to liability for short-swing profits. We may also no longer be able to rely on home-country governance practices.

We would likely also need to transition our financial reporting to comply with U.S. accounting principles and standards. As a foreign private issuer, we are permitted to report our financial statements in

 

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accordance with IFRS or other home-country accounting standards, but if we lose foreign private issuer-status we would be required to prepare our financial statements in accordance with U.S. GAAP for all historical and future periods. Adopting U.S. GAAP could be costly and time-consuming, potentially requiring us to adjust our accounting processes, systems, and personnel to address the differences between IFRS and U.S. GAAP.

In general, complying with the U.S. domestic issuer requirements, including the more stringent reporting, disclosure and governance rules, is expected to significantly increase our legal, accounting and administrative costs. We may need to hire additional finance and legal personnel, upgrade our systems, and engage outside advisors to meet these new obligations. Management’s attention may also be diverted from other business matters to focus on compliance with the additional regulatory requirements. These changes could materially and adversely affect our business, financial condition and results of operations, by increasing our expenses and regulatory risks and by imposing constraints on how we manage our corporate affairs.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This prospectus contains forward-looking statements that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates and projections about us and our industry. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. The forward-looking statements included in this prospectus relate to, among others:

 

•

our ability to successfully execute our business and growth strategy;

 

•

our future financial performance, including our expectations regarding our revenue, cost of revenue and operating expenses and our ability to achieve and maintain future profitability;

 

•

industry landscape of, and trends in, Japan’s market for electronic payment services and digital financial services;

 

•

our ability to compete successfully against future and current competitors;

 

•

our expectations regarding demand for, and market acceptance of, our services;

 

•

our ability to retain and grow our relationships with users and merchants;

 

•

our ability to obtain and maintain the necessary licenses to operate our business;

 

•

our ability to partner with card networks, payment services providers and other participants in the payment ecosystem;

 

•

our ability to maintain and improve our technological infrastructure and protect it from cyber-attacks while simultaneously continuing to innovate and develop new technologies and services;

 

•

our ability to manage risk associated with our business;

 

•

our ability to comply with existing, amended or new laws, regulations and policies applicable to our business;

 

•

general economic and business conditions and uncertainties affecting the markets in which we operate, and economic volatility that could adversely impact our business; and

 

•

our anticipated use of proceeds from this offering.

This prospectus also contains market data relating to the electronic payment services and digital financial services market in Japan, including our general expectations, market position, market size, and market opportunities of the markets in which we participate, that are based on industry publications and reports, in addition to brand awareness surveys that we commissioned as well as patent data we purchased. This information involves a number of assumptions, estimates and limitations. These industry publications, surveys and forecasts generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Nothing in such data should be construed as

 

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advice. We have not independently verified the accuracy or completeness of the data contained in these industry publications and reports. The electronic payment services and digital financial services market in Japan may not grow at the rates projected by market data, or at all. The failure of this market to grow at the projected rates may have a material adverse effect on our business and the market price of the ADSs. If any one or more of the assumptions underlying the market data turns out to be incorrect, actual results may differ from the projections based on these assumptions. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. You should not place undue reliance on these forward-looking statements.

Certain users and merchants providing testimonials in this prospectus have been compensated for their time and reimbursed for their expenses in providing such testimonials.

The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we have referred to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately US$555 million, or approximately US$703 million if the underwriters exercise their over-allotment option in full, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us and based upon an assumed initial public offering price of US$18.50 per ADS (the mid-point of the estimated initial public offering price range shown on the front cover of this prospectus). A US$1.00 increase (decrease) in the assumed initial public offering price of US$1.00 per ADS would increase (decrease) the net proceeds to us from this offering by US$30 million, after deducting the estimated underwriting discounts and commissions and the estimated aggregate offering expenses payable by us and assuming no change to the number of ADSs offered by us as set forth on the cover page of this prospectus.

The principal purposes of this offering are to create a public market for our ADSs and enable access to the public equity markets for us and our shareholders. We intend to use the net proceeds we receive from this offering for general corporate purposes, including working capital, sales and marketing activities, product development, general and administrative matters, and capital expenditures. Additionally, we may use a portion of the net proceeds from this offering to acquire or invest in businesses, services or technologies, although we do not currently have any agreements or commitments to enter into any material acquisitions or investments. We cannot further specify with certainty the particular uses for the net proceeds from this offering. Accordingly, we will have broad discretion in using these proceeds. Pending the use of proceeds from this offering as described above, we may hold them as cash or invest them in cash equivalents or securities.

We will not receive any proceeds from the sale of shares by the selling shareholder in this offering.

 

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DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business and we do not expect to declare or pay any dividends in the foreseeable future. In addition, our articles of incorporation, which will be amended upon the listing of the ADSs, will authorize our board of directors, rather than our shareholders, to determine matters relating to the appropriation of surplus, including the declaration of dividends. Any future determination to declare cash dividends will be subject to such amendment and, following the effectiveness of such amendment, will be made by resolution of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, any contractual restrictions, general business conditions and other factors that our board of directors may deem relevant.

If we pay any dividends on our common shares, we will pay those dividends which are payable in respect of the common shares underlying the ADSs to the depositary, as the registered holder of such common shares, and the depositary then will pay such amounts to the ADS holders in proportion to the common shares underlying the ADSs held by such ADS holders, less the fees and expenses payable under the deposit agreement in respect of, and any Japanese tax applicable to, such dividends. See “Taxation—Japanese Taxation” and “Description of American Depositary Shares.” The depositary will generally convert the Japanese yen it receives into U.S. dollars and distribute the U.S. dollar amounts to holders of ADSs. See “Description of American Depositary Shares.”

We currently intend to retain any future earnings and may not pay any dividends for the foreseeable future. See “Risk Factors—Risks Related to Shares of our Common Stock, the ADSs and this Offering—We may not pay dividends for the foreseeable future.”

 

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CAPITALIZATION AND INDEBTEDNESS

The following table sets forth our capitalization and indebtedness as of December 31, 2025 presented on an actual basis and an as adjusted basis to give effect to the issuance and sale of the common shares in the form of ADSs offered hereby at an assumed initial public offering price of US$18.50 per ADS, the mid-point of the estimated public offering price range shown on the front cover of this prospectus, after deducting underwriting discounts, commissions and estimated offering expenses payable by us assuming the underwriters exercise their over-allotment option in full.

The as adjusted information below is illustrative only and our capitalization and indebtedness following the closing of this offering is subject to adjustment based on the initial public offering price of the ADSs and other terms of this offering determined at pricing. You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

 

		As of December 31, 2025
		Actual				As Adjusted(2)
		(in millions of yen)
Liabilities:
Borrowings (current)		¥	378,084			¥	378,084
Borrowings (non-current)		¥	190,225			¥	190,225
Shareholders’ equity:
Shareholders’ equity:
Share capital:
Issued capital(1)			152,405				207,727
Authorized—1,600,000,000 shares; Issued—637,571,200 shares (676,873,535 shares as adjusted for the offering (assuming the over-allotment option is exercised in full))
Share premium			37,260				92,195
Retained earnings			96,357				96,357
Accumulated other comprehensive loss			(1,852	)			(1,852)
Equity attributable to owners of the parent company			284,170				394,428
Non-controlling interests			36,059				36,059
Total shareholders’ equity			320,229				430,487
Total capitalization(3)		¥	510,454			¥	620,712

Notes:

(1)	All of our issued shares of capital stock are fully-paid and non-assessable. On November 15, 2025, we split our common stock at a ratio of 1:200. The numbers of authorized and issued shares reflect the split.

(2)	The translations from U.S. dollars to yen in the above information were made at a rate of ¥156.80 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2025.

(3)	Total capitalization is calculated as borrowings (non-current) plus total shareholders’ equity.

There has been no material change to our capitalization and indebtedness since December 31, 2025.

A US$1.00 increase (decrease) in the assumed initial public offering price of US$18.50 per ADS (the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus) would increase (decrease) our as adjusted amount of each of issued capital, share premium, equity attributable to shareholders of the Company, total shareholders’ equity and total capitalization by approximately ¥7 per ADS, assuming no change to the number of ADS offered by us as set forth on the front cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The adjusted information discussed above is illustrative only and will adjust based on the actual initial public offering price and other terms of this offering determined at pricing.

 

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DILUTION

If you invest in the ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per common share is substantially in excess of the book value per common share attributable to the existing shareholders for our presently issued common shares.

Our net tangible book value as of December 31, 2025 was approximately US$848 million, or US$1.33 per common share as of that date, and US$1.33 per ADS. Net tangible book value represents the amount of our total consolidated assets, less the amount of our intangible assets, deferred tax assets, goodwill and total consolidated liabilities. Dilution is determined by subtracting net tangible book value per common share from our consolidated total assets, after giving effect to the issuance and sale by us of shares represented by ADSs in this offering at an assumed initial public offering price of US$18.50 per ADS (the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus) after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us.

Without taking into account any other changes in net tangible book value after December 31, 2025, other than to give effect to the issuance and sale by us of 54,987,214 common shares in the form of ADSs in this offering at an assumed initial public offering price of US$18.50 per ADS (the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus) after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2025 would have been US$1,403 million, or US$2.10 per issued common share and US$2.10 per ADS. This represents an immediate increase in net tangible book value of US$0.77 per common share and US$0.77 per ADS to the existing shareholders and an immediate dilution in net tangible book value of US$16.40 per common share and US$16.40 per ADS to investors purchasing ADSs in this offering.

The following table illustrates such dilution:

 

		Per Common Share		Per ADS
Actual net tangible book value as of December 31, 2025		US$1.33		US$1.33
Pro forma as adjusted net tangible book value after giving effect to this offering		US$2.10		US$2.10
Assumed initial public offering price		US$18.50		US$18.50
Dilution in net tangible book value to new investors in the offering		US$16.40		US$16.40

The amount of dilution in net tangible book value to new investors in this offering set forth above is calculated by deducting the pro forma net tangible book value after giving effect to this offering.

The following table summarizes, on a pro forma as adjusted basis as of December 31, 2025, the differences between existing shareholders and the new investors with respect to the number of common shares (in the form of ADSs or shares) purchased from us, the total consideration paid and the average price per common share and per ADS paid before deducting the underwriting discounts and commissions and estimated offering expenses. The total number of common shares does not include common shares underlying the ADSs issuable upon the exercise of the option to purchase additional ADSs granted to the underwriters.

 

		Common Shares Total								Total Consideration								Average Price per Common Share Equivalent				Average Price per ADS Equivalent
		Number				Percent				Amount				Percent
										(in millions)
Existing shareholders			613,638,240				91.78%			US$	3,135				84.50%			US$	5.11			US$	5.11
New investors			54,987,214				8.22%			US$	575				15.50%			US$	18.50			US$	18.50
Total			668,625,454				100.00%			US$	3,710				100.00%

 

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A US$1.00 increase (decrease) in the assumed public offering price of US$18.50 per ADS (the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus) would increase (decrease) our pro forma as adjusted net tangible book value after giving effect to the offering by US$30 million, the pro forma as adjusted net tangible book value per common share and per ADS after giving effect to this offering by US$0.04 per common share and US$0.04 per ADS and the dilution in pro forma as adjusted net tangible book value per common share and per ADS to new investors in this offering by US$0.96 per common share and US$0.96 per ADS, assuming no change to the number of ADS offered by us as set forth on the front cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of the ADSs and other terms of this offering determined at pricing. The translations from yen to U.S. dollars and from U.S. dollars to yen in the above information were made at a rate of ¥156.80 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2025.

The discussion and tables above do not take into consideration common shares underlying the ADSs issuable upon the exercise of the option to purchase additional ADSs granted to the underwriters. In addition, the discussion and tables above do not take into consideration the outstanding options granted under our share incentive plan. As of the date of this prospectus, there are also 12,436,600 common shares available for future issuance upon the exercise of future grants under our equity incentive plan. If any of these options are exercised, there will be further dilution to new investors.

 

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ENFORCEMENT OF CIVIL LIABILITIES

We are a joint stock corporation incorporated with limited liability under the laws of Japan. All but one of our directors and other officers are residents of countries other than the United States. A substantial portion of our and their assets are located outside of the United States. As a result, it may not be possible for holders or beneficial owners of ADSs or shares of our common stock to effect service of process within the United States or elsewhere outside of Japan upon us or these persons, or to enforce against us or these persons judgments obtained in U.S. courts or elsewhere, whether or not predicated upon the civil liability provisions of the U.S. federal securities or other laws of the United States or any state thereof. Our legal counsel in Japan, Mori Hamada & Matsumoto, has advised us that in original actions or in actions for enforcement of judgments of U.S. federal or state courts brought before Japanese courts, there is general doubt as to the enforceability of liabilities based solely on U.S. federal and state securities laws.

We have appointed Cogency Global Inc. as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any state in the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.

 

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OUR HISTORY AND CORPORATE STRUCTURE

We were established in Japan on June 15, 2018 under the corporate name of Pay Corporation, as a joint venture between SoftBank Corp. and Yahoo Japan Corporation (currently LY Corporation), with the aim of developing and offering electronic payment services. In July 2018 we changed our corporate name to PayPay Corporation. Yahoo Japan Corporation later changed its corporate name to Z Holdings Corporation in October 2019 when it transformed to a holding company structure and transferred its business operation to a newly established company named Yahoo Japan Corporation and subsequently merged with its wholly-owned subsidiaries including Yahoo Japan Corporation and LINE Corporation, the operator of the LINE messaging app, in October 2023, changing its corporate name to LY Corporation. We are authorized to conduct our lines of business under Article 2 of our articles of incorporation.

The following is a summary of our key business development milestones since our establishment in 2018:

 

•

In October 2018, we began to offer our main electronic payment services under the brand “PayPay” with the technology-related support of One97 Communications Limited, the operator of the Paytm app in India.

 

•

In September 2019, Yahoo Japan Corporation’s electronic payment business, Yahoo! Money, was transferred to us and combined with PayPay, and we registered our business under the Payment Services Act of Japan.

 

•

In February 2020, we registered as a settlement business operator under the Ministry of Internal Affairs and Communications of Japan’s “MyNaPoint” campaign implemented to incentivize the use of Japanese individual number cards (known in Japan as “My Number Cards”).

 

•

In October 2022, we acquired all the shares of PayPay Card Corporation from Yahoo Japan Corporation (currently LY Corporation), making it our wholly-owned subsidiary. As part of the transaction, PayPay Card Corporation succeeded Yahoo Japan Corporation’s credit card merchant acquiring business.

 

•

In April 2023, we completed the acquisition of 35.0% of the shares of PayPay Securities Corporation through a third-party allotment of new shares, making it a joint venture among us, SoftBank Corp., Mizuho Securities Co., Ltd and Z Holdings Corporation (currently LY Corporation). Upon the completion of the transaction, SoftBank Corp., Mizuho Securities Co., Ltd. and Z Holdings Corporation (currently LY Corporation) held 30.6%, 34.0% and 0.4% of the shares, respectively.

 

•

In July 2024, we established PayPay SC Corporation as a joint venture with SB C&S Corporation and SB Payment Service Corporation. As of the date of this prospectus, we, SB C&S Corporation and SB Payment Service Corporation each hold 34%, 33% and 33%, respectively, of the shares of PayPay SC Corporation.

 

•

In August 2024, we were designated by the Ministry of Health, Labour and Welfare as a funds transfer service provider for the purpose of digital wage payments, which allows employers to transfer wages directly to their employees’ PayPay accounts, the first company to be so designated.

 

•

In November 2024, we completed the acquisition of Credit Engine Group, Inc. (currently Credit Engine, Inc.), an online loan management service provider, making it our wholly-owned subsidiary.

 

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•

In April 2025, we acquired additional shares in PayPay Securities Corporation from SoftBank Corp. and LY Corporation, as well as from a third-party allocation of shares conducted by PayPay Securities Corporation, making it our consolidated subsidiary. Upon the completion of the transaction, we held 75.2% of the shares of PayPay Securities Corporation, while Mizuho Securities Co., Ltd. held 24.8%.

 

•

In April 2025, we completed the acquisition of 47.1% of the common shares and 100% of the non-voting Class A preferred shares of PayPay Bank Corporation, Japan’s first internet bank, from Z Financial Corporation (currently LY Corporation) and Mitsui Sumitomo Insurance Co., Ltd. Sumitomo Mitsui Banking Corporation, Fujitsu Ltd., Taiju Life Insurance Company Limited and Sumitomo Life Insurance Company held 46.6%, 5.3%, 0.5% and 0.5% of the common shares, respectively, upon completion of the transaction. Upon the conversion of the non-voting Class A preferred shares of PayPay Bank Corporation into common shares, effective April 28, 2025, we held 75.5% of the common shares, making PayPay Bank Corporation our consolidated subsidiary. Sumitomo Mitsui Banking Corporation, Fujitsu Ltd., Taiju Life Insurance Company Limited and Sumitomo Life Insurance Company held 21.5%, 2.4%, 0.2% and 0.2%, respectively, of the common shares, respectively, upon the conversion of the non-voting Class A preferred shares of PayPay Bank Corporation into common shares.

On July 30, 2021, we completed an issuance of our shares (except for the conversion of Class A preferred shares into common shares described below), after which SoftBank Corp. held 960,000 shares (275,000 common shares and 685,000 Class A preferred shares), Yahoo Japan Corporation held 960,000 shares (275,000 common shares and 685,000 Class A preferred shares) and SoftBank Group Corp., the parent company of SoftBank Corp. and Z Holdings Corporation (currently LY Corporation), held 830,000 of our shares (550,000 common shares and 280,000 Class A preferred shares).

On December 21, 2021, SoftBank Group Corp. transferred all of its 830,000 shares to SVF II Piranha (DE) LLC, an investment fund ultimately controlled by SoftBank Group Corp. On August 31, 2022, Yahoo Japan Corporation transferred all of its 960,000 shares to Z Intermediate Holdings Corporation, Z Holdings Corporation’s (currently LY Corporation) wholly-owned subsidiary, out of which Z Intermediate Holdings Corporation transferred 163,196 common shares to Z Holdings Corporation (currently LY Corporation) on the same date. On October 1, 2022, all of the remaining 796,804 shares held by Z Intermediate Holdings Corporation were transferred to a new holding company, B Holdings Corporation, in which SoftBank Corp. held 50% of the shares and Z Holdings Corporation (currently LY Corporation) indirectly held 50% of the shares. On the same date, SoftBank Corp. transferred 796,804 of our common shares to B Holdings Corporation. By that date, all the Class A preferred shares we had issued were converted on a one-to-one basis into common shares.

On April 4, 2025, SVF II Piranha (DE) LLC exercised stock options it purchased from One97 Communications Singapore Private Limited, a subsidiary of One97 Communications Limited in December 2024, originally granted by us to One97 Communications Singapore Private Limited in September 2020, and received 159,012 common shares.

On April 10, 2025, we conducted a third-party allotment of new shares in which we issued 94,802 shares of common stock to SVF II Piranha (DE) LLC, 92,021 shares of common stock to SoftBank Corp. and 92,021 shares of common stock to LY Corporation. Following this issuance, and as of the date of this prospectus, B Holdings Corporation, SVF II Piranha (DE) LLC, SoftBank Corp. and LY Corporation hold 49.99%, 34.00%, 8.01% and 8.01% of our shares, respectively.

On November 15, 2025, we effected a stock split of one share into 200 shares. The historical issuances of preferred shares and common shares described in this section have not been retroactively adjusted to reflect the Stock Split.

 

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The following diagram illustrates our corporate structure as of the date of this prospectus. Certain entities that are immaterial to our results of operations, business and financial condition are omitted.

Corporate Structure

 

Note:

As of end of December 2025

Companies Using the PayPay Brand

In October 2022, Z Holdings Corporation (currently LY Corporation) transferred to us the intellectual property rights relating to the “PayPay” brand, and in exchange, we granted Z Holdings Corporation (currently LY Corporation) a perpetual, non-exclusive, non-transferable license to use the transferred intellectual property rights relating to the “PayPay” brand as well as the right to sublicense those rights to certain of its subsidiaries, including to PayPay Insurance Service Corporation, without any subsequent payment obligations owed to us. As of the date of this prospectus, PayPay Insurance Service Corporation is the only company that is not part of our group and uses “PayPay” in its company name.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. See “Special Note Regarding Forward-Looking Statements and Industry Data.”

Overview

We offer a digital finance platform with services that range from easy-to-use payments services to a full-suite of financial services, designed to simplify and enrich the everyday lives of consumers and businesses in Japan. Payments services contribute to broad-based user engagement through transaction frequency, while financial services deepen and accelerate user engagement through cross-selling and long-term product relationships. Together, they function as mutually reinforcing pillars of our ecosystem and form the foundation of our user engagement strategy.

Payment business. Our payment business is anchored by PayPay, Japan’s leading code-based mobile payment platform, and PayPay Card, our integrated credit card service. Since its launch in 2018, PayPay has become one of the most widely used digital wallets in Japan, with approximately 72 million PayPay registered users as of December 31, 2025, and approximately 40 million monthly transacting users, or MTUs, during December 2025. PayPay allows users to make fast, secure payments by simply scanning a code with their smartphone, while offering merchants a low-cost, easy-to-adopt digital payment solution. We believe our rapid growth has been supported by key drivers, including the launch of multiple large-scale promotional campaigns offering an aggregate of ¥10 billion in incentives, government policies designed to actively promote and encourage the use of cashless payments, as well as heightened consumer adoption during the COVID-19 pandemic as a means of avoiding physical cash handling. Our users can charge their PayPay Balance via several methods and make payments from that pre-loaded balance or utilize PayPay Credit to leverage credit extended to them by PayPay, if approved for PayPay Card credit. PayPay Card Corporation, through its more traditional credit card offerings, also offers revolving credit, cash advances, and installment plans for eligible card holders. PayPay Card had 16.0 million active cards issued as of December 31, 2025. Together, we recorded Payment Segment GMV of ¥15.39 trillion based on transactions processed through PayPay Balance, PayPay Credit and PayPay Card for the year ended March 31, 2025, reinforcing our dominant position in Japan’s code-based payments market. These services support a broad range of daily transactions—both offline and online—and form the foundation of our efforts to further deepen user engagement and expand monetization across our ecosystem.

Financial service business. Our financial service business, anchored by PayPay Bank Corporation and PayPay Securities Corporation, complements our payment platform by offering seamless, app-based banking and investing services. PayPay Bank services are integrated into the PayPay ecosystem and, as of December 31, 2025, had 9.7 million accounts with a total of ¥2,281.9 billion in deposits and ¥1,098.3 billion in loan balances, including card loans, business loans and mortgages. PayPay Securities Corporation, with its standalone app in addition to also being embedded in the PayPay app, reached 1.54 million brokerage accounts as of December 31, 2025, and serves a broad base of primarily first-time investors through user-friendly features, such as micro-investing via “PayPay Invest” (as described in more detail below) which allows users to begin investing with as little as ¥100. The feature is often used as a sub-account for casual securities investment, and has become a gateway for users to experience investing in a more simple and accessible format. Our strategy in financial services is to further deepen integration with PayPay—recently exemplified by PayPay acquiring majority stakes in both PayPay Bank Corporation and PayPay Securities Corporation in April 2025—to create a unified digital

 

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finance platform where users can effortlessly manage spending, saving, borrowing and investing all within a single mobile experience.

As we have expanded the use cases and frequency of payment transactions, our payment business has not only scaled with user growth, but also contributed meaningfully to overall profitability. In parallel, we have expanded our revenue mix by deepening financial engagement with existing users, leveraging cross-selling between our payment and financial service businesses to increase average revenue per user and improve platform monetization. This deliberate expansion of revenue streams alongside our product ecosystem has enabled us to simultaneously grow revenue and expand margins, which we believe is unique and differentiating across the broader global fintech landscape.

As we expand our service offerings and grow our business, it is important to continue maintaining constructive and transparent relationships with the regulatory authorities that supervise our business. The scope and pace of our license acquisitions underscore the depth of our regulatory engagement and serve as further validation of our role in advancing national policy objectives, particularly the Japanese government’s goal of accelerating adoption of digital and cashless payments across the broader Japanese population. To date, we have expanded our business steadily and strategically through the acquisition of a comprehensive set of regulatory licenses, reflecting both our long-term commitment to compliance and the government’s support for Japan’s transition to a more digital and fintech-enabled financial ecosystem. We have obtained 13 licenses across payment and financial business domains, including licenses for banking, securities brokerage, credit card operations and funds transfer, enabling us to offer a broad range of regulated financial services directly through our platform.

Our Financial Model

We operate a technology-enabled digital finance platform with two primary business areas—payments settlement and financial services—each supported by varying yet synergistic monetization drivers. Our financial model is underpinned by a combination of GMV-driven revenue, interest income, and a highly scalable, technology-oriented and low-cost operating structure.

Our Revenue Underpinned by “Payment” Business

 

 

 

1.	Represents proportion of total revenue of each segment. Includes inter-segment eliminations. The same applies hereafter.

 

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Payments-Driven Revenue Model

Our core business model is primarily payments-driven, with monetization centered on transaction flows between users and merchants. Our payment services include payment and related services offered through our PayPay app and payment credit services such as revolving and installment payments options and cash advances. Revenue generated from the payments services is characterized by both transaction-based revenue from merchants and users, and interest income generated from our credit products. We recorded revenue from external customers in the Payment segment of ¥176.6 billion and ¥163.3 billion, or 86.7% and 88.1% of consolidated revenue from external customers, in the year ended March 31, 2025 and the nine-month period ended December 31, 2025, respectively. Additionally, we recorded interest income in the Payment segment and the Financial service segment of ¥68.6 billion and ¥19.8 billion, respectively, in the year ended March 31, 2025, and ¥61.2 billion and ¥22.3 billion, respectively, in the nine-month period ended December 31, 2025.⁷ In the year ended March 31, 2025, we recorded Payment Segment GMV of ¥15.39 trillion, reflecting our scale and high transaction frequency across a large user base.

 

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Code-based Payment Settlement Services. We offer code-based cashless payments to merchants and consumers across Japan. Revenue is primarily derived from transaction and service income, which includes merchant discount fees and other payment-related service charges. Our ability to scale this service profitably is driven by our two-sided network model, which facilitates growth in GMV without a proportional increase in marginal costs, strong user engagement, continuous expansion of merchant coverage and higher-value use cases such as utility bill payments, and tax settlements. In particular, we have seen momentum in online-based GMV growth, supported by increased transaction frequency and larger average ticket sizes in digital commerce settings.

 

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Credit Card Payment Services and Credit Card Merchant Acquisition. We also generate revenue through our credit card issuance and acquiring business operated by PayPay Card Corporation. Revenue consists of interchange fees from merchants, annual and other user fees, as well as interest income from revolving balances, cash advances, and installment payments. We actively promote higher-margin credit usage through campaigns that encourage card registration within the PayPay app, offering users additional PayPay Points or payment flexibility tied to usage conditions. This integration has enabled us to lower customer acquisition costs, while driving increased GMV and improved monetization through revolving and installment plans. Credit risk management is supported by our proprietary data-driven credit model that utilizes data from the large volume of payment transactions on our platform, exceeding 7.8 billion transactions per year. We have seen continued growth in the Number of Active PayPay Card Issued, particularly among younger users, indicating the strong monetization potential of our credit offerings.

 

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Subscription Revenue and Value-Added Services. We also generate revenue from promotions and marketing support provided to PayPay merchants, which are companies that our group provides the PayPay Settlement Services platform to as a method of payment in their stores. This portion of our business is currently quite limited and not a material source of revenue.

Our most basic payment method is PayPay Balance with a merchant-presented code, in which users can easily make a payment either by scanning merchant-presented QR codes or by merchants scanning user-presented codes on their PayPay App. As illustrated in the payment flow diagram below, our revenue model typically involves the following steps: (1) a user tops up their PayPay app balance, (2) the user makes a purchase using the app at a participating merchant, and (3) we reimburse the merchant for the transaction amount, net of applicable merchant discount fees. Unlike traditional credit card networks, we operate our own merchant

7	These amounts represent the total revenue of the Payment segment, including both transaction and service income and interest income, and serve as the denominator in our segment NIM calculation.

 

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network, enabling us to set fee levels independently and avoid third-party network charges. In addition, because our model involves prepaid top-ups, we receive cash inflows at the outset of the transaction rather than after it has taken place, which supports a structurally cash-generative business model.

Payment Flow (Simplified illustration¹)—Top-up

 

 

1.	Simplified illustration of transaction when users make a payment via PayPay Balance by scanning merchants’ printed QR code. The chart does not describe payment flow, fees, or other matters.

Under this model, we derive revenue primarily from merchant discount fees, which are typically calculated as a percentage of the transaction value. These fees are paid to us by merchants in exchange for providing them with access to our scaled and active user base, which includes approximately 72 million registered PayPay app users as of December 31, 2025, 55% of which were monthly transacting users. Our seamless digital payment infrastructure and value-added tools help increase customer engagement, retention, and transaction volume, which support this model from a user standpoint. Our scale and integration of payment infrastructure and merchant tools enable efficient merchant onboarding and high-frequency payment activity, further enhancing the attractiveness of our platform to merchants. In transactions conducted via our own merchant network, we incur no intermediary, acquirer, brand, or network processing fees, which are costs typically borne under traditional credit card settlement structures. This enables us to retain a greater share of unit economics and offer more competitive pricing.

Expansion into Financial Services

While our business has historically been anchored in payments, we are actively expanding into other financial services domains. Our financial services include internet banking services, including loans such as mortgages and remittances through PayPay Bank Corporation, security brokerage services through PayPay Securities Corporation, PayPay Point investment services through PPSC Investment Service Corporation and loan management services through Credit Engine, Inc. The revenue derived from these services are primarily interest income and transaction and service income. We recorded revenue from external customers in Financial service of ¥27.0 billion and ¥22.1 billion, or 13.3% and 11.9% of consolidated revenue from external customers, in the year ended March 31, 2025 and the nine-month period ended December 31, 2025, respectively. Additionally, we recorded interest income in connection with Financial service of ¥19.8 billion and ¥22.3 billion

in the year ended March 31, 2025 and the nine-month period ended December 31, 2025, respectively. These

 

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offerings create new monetization channels and allow us to deepen our engagement with both users and merchants, providing a robust foundation for long-term revenue growth.

 

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Internet Banking Services. Revenue from the internet banking services is primarily derived from interest income, calculated under the effective interest rate method. In the year ended March 31, 2025, PayPay Bank Corporation achieved a NIM of 0.88%, with interest income of ¥19,759 million and interest expenses of ¥2,248 million, reflecting disciplined asset liability management and growth in loan-to-deposit ratios. As of December 31, 2025, PayPay Bank Corporation had total deposit balances of approximately ¥2,281.9 billion and total loan balances of ¥1,098.3 billion, highlighting ongoing user engagement and balance growth. Our banking operations also benefit from operational scalability, allowing us to offer high-interest deposit products while preserving margin.

 

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Securities Brokerage Business. Revenue is earned through brokerage commissions, asset management fees, and interest income from margin accounts. We enable users to invest small balances of accumulated PayPay Points or cash through streamlined account opening and product education features. PayPay Securities Corporation manages a growing base of asset-under-management (AUM), supported by the national shift from savings to investment and the expanded “new NISA” program, a Japanese government tax-free stock investment program, which is similar to the UK’s Individual Savings Account (ISA) program and has further encouraged long-term investment activity among individuals.

Cost Structure

Our cost structure reflects the dual nature of our platform—high user engagement across payments and financial services, supported by a lean, scalable operating model. Operating expenses primarily consist of settlement related cost, provision for loss allowance and interest expenses (the sum of which we define as “Total Transaction Cost”), point expenses, employee benefit expenses, and professional and outsourcing services expenses, as well as other operating expenses including depreciation and amortization, which reflect continued investment in platform development and infrastructure. We believe that Total Transaction Cost provides meaningful insight into the variable costs of facilitating transactions, which helps evaluate our cost efficiency relative to transaction activity. We have achieved operating leverage through cost controls in marketing and fixed overhead. For example, the reduction in advertising and promotion expenses reflects a strategic shift toward lower-cost in-app engagement and more targeted user acquisition through our ecosystem. Our cost base supports continued GMV and revenue growth while preserving margin scalability across our different services.

Our Financial Performance, Key Metrics and Financial Highlights

For the years ended March 31, 2023, 2024 and 2025, we generated total revenue of ¥201,194 million, ¥254,611 million, and ¥299,078 million, respectively. This growth was primarily driven by expansion in both our Payment segment and Financial service segment. The Payment segment contributed revenue of ¥165,934 million, ¥211,307 million, and ¥248,254 million for the respective years, supported by increasing code and credit card payment volume, and growth in associated interest income. The Financial service segment contributed ¥37,547 million, ¥46,208 million, and ¥53,640 million, respectively, reflecting strong momentum in deposit and loan growth at PayPay Bank Corporation and increasing securities trading activity at PayPay Securities Corporation.

Our profitability has improved significantly over the past three years. We recorded an operating loss of ¥20,548 million in the year ended March 31, 2023, which improved to an operating profit of ¥11 million in the year ended March 31, 2024, and further increased to an operating profit of ¥35,510 million in the year ended March 31, 2025. Net income attributable to shareholders of the parent company improved from a loss of ¥25,856 million in the year ended March 31, 2023 and ¥3,350 million in the year ended March 31, 2024 to a profit of ¥36,170 million in the year ended March 31, 2025. Adjusted EBITDA improved from a loss of ¥3,356 million in the year ended March 31, 2023 to a profit of ¥21,078 million in the year ended March 31, 2024

 

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and further improved to a profit of ¥58,650 million in the year ended March 31, 2025. These improvements reflect operating leverage achieved through revenue scale, disciplined cost management, and increased contribution from higher-margin financial services.

For the nine-month period ended December 31, 2025, we continued to observe positive trends in user growth, transaction volume, and revenue; total revenue, operating profit and profit for the period were ¥278,478 million, ¥61,008 million and ¥103,337 million, respectively, reflecting continued progress toward deepening monetization and sustaining profitable growth. Adjusted EBITDA for the nine-month period ended December 31, 2025 was ¥82,538 million.

In addition to our financial results, we use operating metrics, which our management reviews to evaluate our current and past business, measure our performance, identify trends affecting our business, and make strategic decisions. The following table presents some of our key non-IFRS financial measures, together with the most directly comparable IFRS financial measures, and operating metrics for the years ended March 31, 2023, 2024 and 2025 and the nine-month periods ended December 31, 2024 and 2025:

 

		For the year ended March 31,												For the nine-month period ended December 31,
		2023				2024				2025				2024				2025
		(in millions of yen, unless otherwise indicated)
Operating profit (loss)		¥	(20,548	)		¥	11			¥	35,510			¥	28,184			¥	61,008
Operating profit (loss) margin			(10)%				0%				12%				13%				22%
Profit (loss) for the year (period)		¥	(24,946	)		¥	(830	)		¥	39,157			¥	28,957			¥	103,337
Profit (loss) for the year (period) margin			(12)%				0%				13%				13%				37%
Non-IFRS Financial Measure:
Adjusted EBITDA(1)		¥	(3,356	)		¥	21,078			¥	58,650			¥	44,647			¥	82,538
Adjusted EBITDA Margin(2)			(2)%				8%				20%				20%				30%
		(in trillions of yen, unless otherwise indicated)
Operating Metrics:
Consolidated
Total GMV(3)		¥	10.47			¥	12.73			¥	15.68			¥	11.56			¥	14.29
Payment segment
Payment Segment GMV(4)		¥	10.20			¥	12.46			¥	15.39			¥	11.34			¥	14.05
Take Rate(5)			1.63%				1.70%				1.61%				1.62%				1.63%
Cost Rate(6)			1.83%				1.73%				1.42%				1.40%				1.27%
PayPay MTU (millions of users)(7)			30.3				33.2				37.2				36.2				40.0
PayPay Number of Transactions (millions of transactions)(8)			5,137.4				6,367.7				7,806.6				5,810.7				6,884.7
Financial service segment
PayPay Bank Balance of Deposits (billions of yen)(9)						¥	1,685.2			¥	1,841.0			¥	1,912.7			¥	2,281.9
PayPay Bank Balance of Loans (billions of yen)(10)							723.8				926.9				858.6				1,098.3

Notes:

(1)

Adjusted EBITDA is defined as profit (loss) for the year (period) plus income tax expense (benefit), share of profit (loss) of investments accounted for using the equity method, depreciation and amortization, loss on disposal of property and equipment and intangible assets, amortization of contract cost, listing-related expenses, M&A-related expenses and net interest expense (income) from corporate borrowings and treasury assets. Share of profit (loss) of investments accounted for using the equity method includes share of loss of a joint venture accounted for using the equity method.

(2)	Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenue.

(3)

Total GMV, or gross merchandise value, is defined as the total of PayPay Balance GMV, PayPay Credit GMV, PayPay Card GMV and PayPay Bank Visa Debit Card GMV, excluding the GMV of cancelled transactions. See “—Our Financial Performance, Key Metrics and Financial Highlights—Gross Merchandise Value (GMV)” for a discussion of GMV.

 

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(4)	Payment Segment GMV is defined as the total of PayPay Balance GMV, PayPay Credit GMV and PayPay Card GMV, excluding the GMV of cancelled transactions.

(5)	Take Rate is defined as Payment segment’s total revenue divided by Payment Segment GMV (which includes PayPay Balance, PayPay Credit, and PayPay Card GMV).

(6)	Cost Rate is defined as Payment segment’s operating expenses divided by Payment Segment GMV (which includes PayPay Balance, PayPay Credit, and PayPay Card GMV).

(7)

PayPay MTU is defined as the number of unique users who completed at least one payment per month that contributes to PayPay Balance or PayPay Credit GMV, but excluding P2P (peer-to-peer) money transfers and cancelled transactions. PayPay MTU over a quarterly or annual period represents the figure from the last month in the relevant period.

(8)	PayPay Number of Transactions is defined as the total number of completed transactions that contribute to PayPay Balance GMV or PayPay Credit GMV, but excluding P2P (peer-to-peer) money transfers and cancelled transactions.

(9)	PayPay Bank Balance of Deposits is defined as the sum of demand deposit and time deposit.

(10)	PayPay Bank Balance of Loans is defined as the sum of mortgage loans, overdraft and other.

Gross Merchandise Value (GMV)

One of the key business metrics for our payment settlement services is GMV, which is the yen value of total payments made (excluding cancelled transactions) and processed with our payment settlement services and financial services. Because we collect fees calculated based on the volume of payments made through our payment settlement services, including credit payment services, and our financial services, GMV is highly correlated to our revenue and we believe that it is an important business metric for investors to understand and assess our business, results of operations and growth. GMV provides useful information to investors as it represents the amount of users’ spend that is being directed through our payment settlement services and financial services. GMV enables us and investors to understand, evaluate and compare the total amount of user spending that is being directed through our payment settlement services over a period of time.

The following chart shows the main sources of GMV:

GMV Structure

 

See “—Other Operating Metrics” for additional information on GMV.

 

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Factors Driving Our Performance

User Base Growth and Engagement and Merchant Base Growth

Our financial performance is closely tied to the continued expansion and engagement of our user base. Growth in the number of registered users and MTUs, as well as increased frequency and value of transactions per user, have been key drivers of GMV, particularly in our Payment segment. Higher user engagement also increases the potential for cross-sell into financial services such as banking, investment, and credit, contributing to long-term monetization and improved unit economics.

As of December 31, 2025, we had approximately 72 million PayPay registered users, up from 67 million as of December 31, 2024 and 61 million as of December 2023. The number of MTUs increased to approximately 40 million as of December 2025, from 36 million as of December 2024 and 32 million as of December 31, 2023. The growth reflects strong brand recognition, network effects from our large merchant base, and successful marketing campaigns tailored to specific product rollouts, as well as high user engagement levels across our platform, which support frequent and repeated usage. As a result of our user activity levels, we recorded a DTU/MTU (Daily Transacting Users / Monthly Transacting Users) ratio of 34.5% as of December 2025.

We also observed sustained increases in monthly engagement per user, with the average number of transactions per MTU growing from 18.4 in the three-month period ended December 31, 2023 to 20.3 in the three-month period ended December 31, 2024 and 21.5 in the three-month period ended December 31, 2025. In parallel, Monthly GMV per User grew from ¥34,509 in the three-month period ended December 31, 2023 to ¥38,745 in the three-month period ended December 31, 2024, and further to ¥42,363 in the three-month period ended December 31, 2025, indicating a steady rise in per-user spending and platform utility.

Monthly GMV per User—Growing Steadily Overtime

 

 

1.	Calculated by dividing the total Quarterly transactions for PayPay Balance, PayPay Credit, and PayPay Card by the total Quarterly PayPay App MTU (Monthly Transacting Users).

2.	Calculated by dividing the total Quarterly GMV for PayPay Balance, PayPay Credit, and PayPay Card by the total Quarterly PayPay App MTU (Monthly Transacting Users).

3.	The results of PayPay Card Corporation, which became a subsidiary in October 2022, have been retroactively consolidated from the beginning of FY2021, in accordance with the “interest pooling method” in business combination accounting.

 

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Furthermore, user cohorts have exhibited strong retention and deepening usage trends over time. Across all registration cohorts from the year ended March 31, 2019 through December 31, 2025, we observed that users with longer tenures demonstrate higher active user rates and Monthly GMV per User, indicating the strength of our engagement model and the increasing relevance of PayPay’s platform in daily financial activity. These patterns reinforce the long-term monetization potential of our user base.

As we continue to scale our user base and expand product offerings, we expect sustained growth in Monthly Transactions per User and Monthly GMV per User to remain a fundamental driver of top-line expansion.

The continued growth of our merchant base is also a key driver of our performance. This expansion not only broadens the reach of our ecosystem, but also enhances the utility of our platform for users by increasing the number of available payment locations, which in turn drives higher transaction frequency and payment volumes for merchants. Growth in merchant adoption is supported by our targeted onboarding campaigns, same-day settlement features, and value-added merchant tools such as coupon distribution and data analytics. As more merchants accept PayPay, the value proposition for users strengthens, contributing to a positive network effect and reinforcing user retention and engagement. Because PayPay directly manages both sides of the payment network, including users and participating merchants, our platform operates as a “two-sided” system, which enhances efficiency and supports superior economics relative to open-loop models, giving us a structural competitive advantage. This virtuous cycle between merchant adoption and user activity is central to our monetization strategy, supporting both GMV growth and margin expansion.

GMV and Payment Mix

GMV is a key indicator of the scale and usage intensity of our platform, particularly within our Payment segment. Growth in GMV results from both increased adoption (expansion in MTUs) and deepening engagement (more frequent usage and higher transaction values per user).

Our Payment Segment GMV grew from ¥10.20 trillion in the year ended March 31, 2023 to ¥12.46 trillion in the year ended March 31, 2024 and further to ¥15.39 trillion in the year ended March 31, 2025, representing a CAGR of 23% over the two-year period. This growth reflects both the increase in registered users and MTUs, as well as improvements in average transaction frequency and size. On a per-user basis, Monthly GMV per User rose from ¥32,410 in the three-month period ended June 30, 2023 to ¥42,363 in the three-month period ended December 31, 2025, indicating sustained upward momentum in user-level monetization.

While PayPay Balance transactions continue to account for the majority of payment volumes, the contribution of credit card GMV, including PayPay Credit, credit card functionality embedded in code usage, and PayPay Card, has substantially expanded following the consolidation of PayPay Card Corporation, resulting in increased penetration of revolving payment and cash advances options. Code-based payments tend to drive high user frequency, while physical credit payments support larger average ticket sizes and recurring interest income. We believe the combination of these two payment methods enables us to maximize user utility and revenue capture across spending categories and demographics. Initiatives to promote PayPay Credit have accelerated consolidated GMV growth and facilitated increased use of revolving and cash advances features. Additionally, marketing initiatives such as PayPay Point campaigns and PayPay Card–PayPay app integration have supported higher per-user GMV and product attach.

As we continue to enhance our product mix and user targeting, we expect the blended GMV growth to remain a key driver of our revenue, particularly in transaction and interest income lines.

Cross-Product Penetration and Financial Services Adoption

Our broad and comprehensive product suite is increasingly positively impacting our performance given the depth of engagement across our platform. As users adopt financial services in addition to core payments, we

 

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are able to generate higher revenue per user, improve retention, and unlock new monetization channels. Cross-product penetration—especially into banking, investment, and credit—has become a key driver of growth and profitability as we evolve from a payment app into a full-service digital finance platform.

We track this dynamic through user engagement and service adoption trends. Over recent years, we have experienced significant growth in payments GMV per user, increased adoption of credit and investment features, and have developed an expanded suite of financial service offerings. These trends reflect deeper monetization driven by enhanced user activity and higher utilization of value-added offerings such as point investment, securities brokerage, and credit features.

Following the consolidation of PayPay Bank Corporation and PayPay Securities Corporation in April 2025, we have seen accelerating adoption of financial services within our existing user base. As of December 31, 2025:

 

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PayPay Bank Corporation had 9.7 million accounts, supported by app-based customer acquisition campaigns and competitive deposit offerings (e.g., 2.0% yields for U.S. dollar and Japanese yen ordinary deposits under the “Dollar & Yen 2% Deposit” campaign; the interest rate on Japanese yen ordinary deposits will step up from 0.2% to 0.5%, as of February 1, 2026, based on the balance under the “Step-Up Yen Deposit” campaign).

 

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PayPay Securities Corporation continued to expand its footprint via seamless onboarding, growing cumulative investment accounts and benefiting from strong engagement with the “new NISA” program.

Importantly, users who engage with multiple services—e.g., payments + deposits, or payments + investments—tend to exhibit significantly higher GMV per user, improved monetization, and lower churn. Internal cohort analysis indicates that GMV increases alongside the number of services used per user, reinforcing our platform strategy.

By simplifying the account opening process through eKYC, we facilitate smoother cross-selling into financial service offerings. Our eKYC allows PayPay users to open banking or securities accounts with as few as two to three steps—compared to seven to eight steps for users not onboarded via our ID system. As of December 31, 2025, 38.9 million users had registered for eKYC, underscoring our ability to migrate payment users efficiently into financial services.

We believe that continued cross-sell and product bundling will be a key lever in expanding our per-user monetization and platform lifetime value. Over time, we expect financial services to contribute to a growing share of both revenue and margin, complementing our payment business and reinforcing our position as Japan’s leading digital finance platform.

NIM and Credit Portfolio Performance

Our financial results are influenced by the performance of our interest-earning assets, particularly in the areas of credit card receivables and banking loans. The profitability of these activities depends on our ability to maintain a healthy NIM, grow our credit portfolio, and manage credit losses through disciplined risk management supported by data-driven credit model.

In the year ended March 31, 2025, our consolidated interest income totaled ¥88,442 million, representing a 19.7% increase year-over-year from ¥73,884 million in the prior fiscal year. This growth was driven by expansion in credit card receivables of PayPay Card Corporation, as well as rising loan balances at PayPay Bank Corporation. Interest income attributable to the Payment segment increased to ¥68,623 million, while interest income from the Financial service segment rose to ¥19,819 million, reflecting growth in mortgage and consumer loan products.

 

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We achieved a consolidated NIM across both segments of 2.61% in the year ended March 31, 2025, up from 2.58% in the year ended March 31, 2024, benefiting from favorable product mix and continued optimization of our funding base. On the banking side, we are able to offer attractive yields to users while preserving spread. On the credit side, we have maintained high-yielding receivables, including revolving credit and cash advances, while limiting delinquencies through advanced risk scoring and behavioral modeling.

Our proprietary data-driven credit model, built on behavioral and transaction data from over 7.8 billion transactions per year, enables us to assess borrower risk with further precision. To date, this system has supported revolving and cash advance balances in the Payment segment. While the size of our credit portfolio is still expanding, we maintain a disciplined risk management framework to balance growth with asset quality. PayPay maintains a healthy credit portfolio with robust risk controls. The non-performing loan (NPL) ratios are 0.4% for banking and 5% for the credit card business. In banking, almost all of the loans excluding mortgage loans are backed by external guarantors, effectively minimizing the level of non-performing assets. For credit cards, although the NPL ratio stands at 5%, nearly the entire amount has already been provisioned. We utilize a rigorous, data-driven model to monitor credit quality and proactively mitigate the risk of NPL growth. We also adjust credit terms dynamically based on real-time user behavior, credit utilization, and macroeconomic signals. In addition to consumer risk assessment, our model also enables us to offer credit-related services and insights to merchants, such as installment support and cash advance solutions.

Credit Portfolio

 

 

1.	Almost all of the loans are being guaranteed and thereby categorized as Performing.

2.	Total amount of credit watch and at risk or default. Credit watch is defined as an account designated for elevated attention, and at a risk or default is defined as an account where there is an increased likelihood that default may exist based on qualitative and quantitative factors.

We believe that continued NIM stability, paired with the scalable growth of our interest-earning assets, will be a key contributor to margin expansion. As our lending portfolio deepens and the ratio of loan balances to total deposits improves, we expect the Financial service segment to deliver increasing profit contribution, complementing our transaction-driven Payment segment. Currently, almost all of our loans (excluding mortgage loans) are guaranteed by third-party financial institutions, and the interest income reported reflects the net amount after deducting the cost of such guarantees. While this approach effectively mitigates credit risk, it also compresses reported interest margin. Looking ahead, we intend to gradually reduce reliance on external guarantees and assume more credit risk internally for PayPay Bank Corporation, supported by enhancements to its own credit management framework. This reduction is enabled by our proprietary data-driven credit model,

 

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built on behavioral and transaction data, which strengthens our ability to evaluate and price credit risk. This shift is expected to increase recognized interest income and further expand NIM over time.

Cost Structure and Operating Efficiency

Our ability to operate at scale while maintaining a lean cost structure has been a key contributor to our profitability and margin expansion. We actively manage our cost base across variable costs (including settlement related cost, provision for loss allowance and interest expenses, the sum of which we define as “Total Transaction Cost”) and other costs (e.g., point expenses, personnel, infrastructure and advertising), with an ongoing focus on cost-to-revenue efficiency. These initiatives have allowed us to expand GMV and improve monetization without proportionate increases in spending, enhancing overall operating leverage. For example, PayPay Points expenses as a percentage of Payment Segment GMV declined significantly—from 20.6% in the second half of the year ended March 31, 2019 to 0.8% in the year ended March 31, 2025—reflecting tighter targeting and more efficient PayPay Point-based promotions. Similarly, our Fund Source Cost Rate⁸, which indicates the cost of sourcing funds from external partners, improved from 1.1% in the second half of the year ended March 31, 2019 to 0.3% in the year ended March 31, 2025. These improvements underscore our ability to grow GMV while enhancing cost efficiency and monetization.

We apply rigorous internal return metrics such as Life Time Value to Customer Acquisition Cost (LTV/CAC) when allocating resources to user acquisition and promotional activities. LTV represents the present value of the anticipated revenue less Total Transaction Cost, directly or indirectly generated from a user’s PayPay usage by efficiently invested CAC. CAC refers to the costs incurred for user acquisition and nurturing, such as point rewards and advertising expenses. This approach drives initiatives aimed at improving LTV, such as strategically targeting more engaged users such as users verified via eKYC process to increase the conversion rate. Conversely, to reduce CAC, initiatives including shortening campaign durations, narrowing target users, introducing a “scratch-off” lottery as rewards (costs incurred only for users who actively scratch off the lottery to receive points), refining geographical targeting, and selecting specific advertising channels (such as shifting from TV commercials to connected TV, or CTV, which allows for programmatic, data-driven advertising that reaches users via internet-connected televisions, improvising precision and cost-efficiency).

Based on the internal return metrics, we have disciplined control over marketing expenditures, leveraging campaigns tailored to specific user behaviors and transaction types. Major initiatives—such as the “Super PayPay Festival,” conducted three times annually—are designed to drive both user acquisition and product usage expansion. Campaign mechanics are continuously refined to reflect our product strategies, and may include reward acceleration tied to monthly activity thresholds, top-up behavior, or code/credit usage. Additionally, we have transitioned a significant portion of our customer acquisition efforts to ecosystem-based channels, including in-app cross-sell and bank-linked campaigns, which deliver cost reductions compared to standalone marketing. See “Business—Our Growth Strategies—Drive User Growth and Engagement through Targeted, Phase-Aligned Marketing” for more details for marketing initiatives.

In addition, we actively deploy targeted, regional campaigns in collaboration with municipal governments and local partners. These externally supported initiatives—such as PayPay Point-based subsidies linked to code-based public programs (whereby government or partner funding covers a portion of the rewards issued to users) or “furusato nozei” gift certificates—allow us to enhance local economic participation while also subsidizing the cost of PayPay Points. Our platform is also used to process gift certificate transactions, contributing to incremental fee income. By adjusting eligibility thresholds and optimizing regional targeting, we maintain high effectiveness while minimizing costs.

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Calculated by dividing fund source cost by the GMV of PayPay (non-consolidated). Fund source cost includes items expensed during the period, such as bank fees related to PayPay Balance; issuing fees for PayPay Card and other credit cards; acquiring fees for PayPay Card; and other connection costs (e.g., gateway fees, bad debt losses from carrier payments), less revenue from carrier billing. These figures are unaudited.

 

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