{"url_path":"/sec/payp/10-k/2026/item-4","section_key":"item-4","section_title":"Item 4 Information on the Company","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-06-30","source_url":"https://www.sec.gov/Archives/edgar/data/2080845/0001193125-26-289382-index.html","accession_number":"0001193125-26-289382","cik":"0002080845","ticker":"PAYP","issuer_name":"PayPay Corp","edgar_url":"https://www.sec.gov/Archives/edgar/data/2080845/0001193125-26-289382-index.html","primary_entity_key":"0002080845","primary_entity_name":"PayPay Corp"},"word_count":24753,"has_tables":true,"body_markdown":"Item 4. Information on the Company\n\nA History and development of the company\n\nPayPay Corporation is our legal and commercial name. We were incorporated in Japan on June 15, 2018 under the corporate name Pay Corporation and changed our corporate name to PayPay Corporation in July 2018. We are a joint stock corporation, or kabushiki kaisha, incorporated under the laws of Japan, including the Companies Act of Japan. Our corporate existence is indefinite unless dissolved in accordance with our articles of incorporation or applicable Japanese law.\n\nOur principal executive offices are located at Yotsuya Tower, 1-6-1 Yotsuya, Shinjuku-ku, Tokyo 160-0004, Japan, and our telephone number is +81-3-6885-8181. Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.\n\nThe SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Our main website is www.paypay.ne.jp, and the information contained on, or that can be accessed through, our website is not a part of, or incorporated by reference into, this Annual Report.\n\nImportant Events in the Development of Our Business\n\nThe following is a summary of the important events in the development of our business from April 1, 2025 through the latest practicable date:\n\n•\nIn April 2025, we acquired additional shares in PayPay Securities Corporation from SoftBank Corp. and LY Corporation and subscribed for new shares issued by PayPay Securities Corporation through a third-party allotment, making PayPay Securities Corporation our consolidated subsidiary. Upon completion of the transactions, we held 75.2% of the shares of PayPay Securities Corporation, while Mizuho Securities Co., Ltd. held 24.8%.\n\n•\nIn April 2025, we completed the acquisition of common shares and non-voting Class A preferred shares of PayPay Bank Corporation from Z Financial Corporation(currently LY Corporation), and common shares of PayPay Bank Corporation from Mitsui Sumitomo Insurance Co., Ltd. Upon the conversion of the non-voting Class A preferred shares of PayPay Bank Corporation into common shares, effective April 28,\n\n40\n\n[Table of Contents](#toc_page)\n\n \n\n2025, we held 75.5% of the common shares of PayPay Bank Corporation, making PayPay Bank Corporation our consolidated subsidiary. In September 2025, we acquired 40% of the shares of Binance Japan Inc., a cryptocurrency exchange operator, making it an equity-method affiliate.\n\n•\nIn November 2025, we effected a stock split of one share into 200 shares. The stock split did not affect our total equity or the proportional interests of our shareholders.\n\n•\nIn March 2026, we closed our initial public offering of ADSs representing our common shares. Our ADSs began trading on the Nasdaq Global Select Market under the symbol “PAYP” on March 12, 2026, U.S. time. On March 27, 2026, U.S. time, the underwriters fully exercised their option to purchase additional ADSs. This offering included a public offering without listing in Japan of the ADSs (the “POWL”).\n\n•\nIn June 2026, we entered into a share purchase agreement with T&D Holdings, Inc. to acquire shares representing 70.2% of the voting rights of T&D Financial Life Insurance Company, with the aim of adding life insurance to our financial services offerings. The acquisition is expected to close in October 2027.\n\nPrincipal Capital Expenditures and Divestitures\n\nSince April 1, 2023, our principal capital expenditures have consisted primarily of software development and other investments to support our payment and financial services platform. In our consolidated statements of cash flows, these capital expenditures are recorded as purchases of property and equipment and purchases of intangible assets (largely attributable to customer-facing tangible and intangible assets such as capitalized system development costs and physical credit cards). For the fiscal years ended March 31, 2024, 2025, and 2026, Purchases of property and equipment were ¥4,584 million, ¥4,822 million, and ¥6,369 million, respectively, while Purchases of intangible assets were ¥17,911 million, ¥17,264 million, and ¥17,823 million, respectively.\n\nDuring the same period, our principal investments in interests in other companies were as follows: in April 2023, we invested ¥6,597 million in PayPay Securities Corporation through a third-party allotment; in November 2024, we acquired Credit Engine Group, Inc. (currently Credit Engine, Inc.), with cash outflows of ¥5,759 million; in April 2025, we acquired additional interests in, and made related investments in, PayPay Securities Corporation and PayPay Bank Corporation for aggregate consideration of ¥130,185 million; and in September 2025, we acquired a 40.0% interest in Binance Japan Inc., with cash outflows for the acquisition of investments accounted for using the equity method of ¥11,655 million.\n\nWe have not made any principal divestitures during this period. From April 1, 2026 through the date of this Annual Report, we have not made any principal capital expenditures or divestitures, other than ordinary-course capital expenditures.\n\nPrincipal Capital Expenditures and Divestitures Currently in Progress\n\nAs of the date of this Annual Report, our principal capital expenditures currently in progress include the following:\n\nWe are evaluating a potential rollout of a digital wallet in the United States through a new company to be established under our leadership. This investment would be located outside Japan, in the United States, and is expected to be financed through a combination of our internal funds and external contributions from Visa, although the scope, timing and amount of any capital expenditures have not yet been finalized.\n\nWe have also entered into a share purchase agreement to acquire shares representing 70.2% of the voting rights of T&D Financial Life Insurance Company from T&D Holdings, Inc. The proposed acquisition is a domestic investment in Japan and is expected to be financed with cash on hand. The estimated total acquisition cost, including the currently expected acquisition price for the shares and acquisition-related expenses, is ¥134,338 million, although the final acquisition price may differ. The acquisition is expected to close on October 1, 2027, subject to customary closing conditions, including required regulatory approvals and other conditions precedent.\n\nB Business overview\n\nPayPay is a leading FinTech company in Japan that operates a digital finance platform centered on payments, offering a range of payment and financial services to users and merchants. Our platform is built on a two-sided network connecting tens of millions of users and millions of merchants, and provides code-based payment, credit card, banking, investments, and other related services which are accessible primarily through smartphones.\n\nOur payment services are integrated into the daily lives of our users, supporting a broad range of transaction scenarios and contributing to user engagement. We also provide merchants with promotional tools such as PayPay Coupons, PayPay Stamp Cards and PayPay Funding solutions designed to enhance retail productivity. As of March\n\n41\n\n[Table of Contents](#toc_page)\n\n \n\n31, 2026, we had approximately 73 million PayPay registered users, accounting for 78% of smartphone users in Japan (1).\n\nOur financial services are still relatively new, and were established through the acquisitions of PayPay Bank Corporation and PayPay Securities Corporation in April 2025. As of March 31, 2026, the number of accounts at PayPay Bank Corporation and PayPay Securities Corporation were 9.98 million and 1.73 million, respectively. Our offerings include savings and borrowings services through PayPay Bank Corporation and investment services through PayPay Securities Corporation.\n\nOur business consists of two domains:\n\nPayment business: Our payment business is anchored by PayPay, a code-based mobile payment platform, and PayPay Card, our integrated credit card service. PayPay had 73 million PayPay registered users as of March 31, 2026, and 41 million MTUs during March 2026. 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. 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. PayPay Card Corporation, through its more traditional credit card offerings, also offers revolving credit, cash advances, and installment plans for eligible card holders. Notably, PayPay Card Corporation added 2.9 million net additions in CY2025 (January-December), representing the highest net account additions among major credit card issuers in Japan during the period (2). This drove our total active card base to 16.89 million as of March 31, 2026, primarily powered by an increase in the card approval rate, made possible through the enhancement of a proprietary credit model. Together, we recorded Payment segment GMV of ¥19.03 trillion based on transactions processed through PayPay Balance, PayPay Credit and PayPay Card for the year ended March 31, 2026.\n\nFinancial 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. As of March 31, 2026, the number of PayPay Bank Deposit Accounts reached approximately 10 million, and the Balance of Deposits grew 23% year-over-year to ¥2.3 trillion. Building on this solid funding base, the Balance of Loans including card loans, business loans and mortgages reached ¥1.2 trillion, up 34% year-over-year primarily driven by growth in mortgage loans. In April 2026, PayPay Bank Corporation launched a data lending service exclusively for PayPay’s merchants. This is an invite-only lending which provides financing of up to ¥10 million, and the terms are presented in advance based on the daily payment transaction data of PayPay merchants. This allows merchants to finance as early as the day of application via smartphone. PayPay Securities Corporation serves a broad base of primarily first-time investors through user-friendly features, such as micro-investing via “PayPay Invest” 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 simpler and more accessible format. In March 2026, PayPay Corporation facilitated the domestic retail offering of PayPay’s IPO shares (PayPay ADS) through PayPay Securities, boosting PayPay Securities brokerage accounts to 1.73 million as of March 31, 2026, representing a year-over-year increase of 0.36 million accounts. We seek to further integrate our financial services offerings with the PayPay platform and provide users with access to payment, banking, lending and investment services within a single mobile experience.\n\nWe have expanded our revenue base through growth in payment transaction volumes and increased adoption of financial services by existing users. Cross-selling between our payment and financial service businesses has contributed to revenue diversification across the platform.\n\n \n\n(1)\nCalculated by using 78.9% from the Ministry of Internal Affairs and Communications’ “2025 Survey on Communication Usage Trends (announced May 29, 2026),” Materials 2 “Mobile Device Ownership (Individual)” and “Smartphone Ownership (Individual),” applied to the Japanese population aged five and over as of April 1, 2026, from the Ministry of Internal Affairs and Communications and Statistics Bureau’s “Population Estimates (estimates as of April 2026 (Reiwa 8)).”\n\n(2)\nNet additions are calculated based on the year-on-year increase in the number of active cards or contracts as of December 31, 2025. Figures are derived from publicly available financial results and disclosure materials of three peer companies for the period ended December 31, 2025.\n\nMarket Opportunity\n\nJapan has historically been a cash-centric economy, with cash accounted for approximately ¥173 trillion, or 70.2%, of domestic household final consumption payments in 2018 calculated based on statistics released by the Ministry of Economy, Trade and Industry (the “METI”) on March 31, 2026. Although cashless payment adoption has increased in recent years, the Japanese market continues to present significant opportunities for digital payment and financial services providers. According to a survey by the METI, the cashless payment ratio in 2025 reached 58.0% compared to approximately 29.8% in 2018. The Japanese government has also introduced various policy initiatives\n\n42\n\n[Table of Contents](#toc_page)\n\n \n\nintended to promote cashless payments and digital financial services and in January 2026, it reiterated its long-term policy objective of increasing Japan’s cashless payment ratio to 80%, including an interim target of 65% by year 2030.\n\nOur shares in the code-based payments are as follows:\n\n•\nWe accounted for 65% of code-based payment gross merchandise value in Japan in CY2025 (1)\n\n•\nOur code-based payment accounted for 20% of the total of the approximately 43.5 billion cashless transactions completed in Japan in 2025 (2)\n\n•\nWe had approximately 523 million transfers, accounting for 98% of code-based P2P money transfers in CY 2025 (3)\n\nOpportunities for digitalization also extend beyond payments into banking and investment-related services. According to the Bank of Japan’s report entitled “Flow of Funds”, Japan’s household financial assets totaled ¥2,351 trillion as of the end of December 2025.\n\nAccording to the Japanese Bankers Association and public disclosures by Japan Post Bank, total deposits held by Japanese banks amounted to approximately ¥1,202 trillion as of March 31, 2026. Of this amount, deposits held by Japan’s internet-only banks totaled approximately ¥44 trillion as of March 31, 2026, according to company disclosures.\n\nAccording to the Japan Financial Services Association and the Bank of Japan, unsecured consumer loans, including credit card loans, card loans and personal loans, totaled approximately ¥10.2 trillion as of March 31, 2026.\n\nJapan is also shifting “from savings to investment.” This is being reinforced by the government’s expansion of the NISA program, a Japanese government tax-free stock investment program for individuals, which has contributed to record growth in individual investment account openings. According to the Japan Securities Dealers Association, assets under management across Japanese securities firms totaled approximately ¥431 trillion as of March 31, 2025.\n\nThese developments reflect the continued expansion of digital payment, banking and investment services in Japan and provide opportunities for companies offering integrated digital financial services platforms.\n\n \n\n(1)\nCalculated based on the PayPay App GMV divided by the GMV for code-based payments from the Payments Japan Association’s “Code-based Payment Usage Trends Survey” (Released March 30, 2026).\n\n(2)\nCalculated by summing the number of credit card contracts from \"Monthly Survey: Credit Card Activity Survey,\" a document released by the Japan Credit Association; debit card and electronic money transaction counts from \"Payment Trends January 2026,\" a document released by the Bank of Japan; and code-based payment transaction counts from \"Code-based Payment Usage Trends Survey,\" a document released by the Payments Japan Association on March 30, 2026. PayPay's share is calculated from its transactions within the PayPay App for CY2025.\n\n(3)\nThe total number of transactions made using PayPay Balance's \"Send and Receive“(= P2P money transfers) feature in CY2025. PayPay Balance includes PayPay Money, PayPay Money (Salary), and PayPay Money Lite.\n\nOur Competitive Advantages\n\nIntegrated Digital Finance Platform Supported by a Proprietary Two-Sided Network\n\nWe operate an integrated digital finance platform serving users and merchants through a two-sided network connecting tens of millions of users and millions of merchants. Our platform includes payment, banking, credit card and investment services that are accessible primarily through smartphones.\n\nOur payment service forms the foundation of our platform and supports user and merchant engagement through network effects. As our user base and payment usage increase, additional merchants are incentivized to adopt PayPay, which expands the number of payment acceptance locations available to users. Growth in users and merchants has contributed to the expansion of both sides of our network.\n\nIn addition, because of our two-sided network, we are able to process payments with reduced reliance on traditional third-party payment processors, external acquirers or brand / network providers. This structure allows us to retain a share of payment economics and minimize settlement outflows.\n\nOur strong network effects have also driven the expansion of our financial services offerings. Greater engagement with our payment service creates opportunities to promote our internet banking and securities brokerage services, while generating cross-service synergies—users who adopt multiple services across our ecosystem exhibit higher average payment volume per user and stronger long-term engagement.\n\nAs our ecosystem has expanded, we have developed an integrated digital finance platform designed to support a broad range of financial activities for users and merchants. For example, users can receive their salary through PayPay Bank Corporation, make everyday purchases using PayPay code-based payments and invest through PayPay\n\n43\n\n[Table of Contents](#toc_page)\n\n \n\nSecurities Corporation. Merchants may also use our platform for payment collection and banking-related services such as payroll and financing.\n\n \n\n44\n\n[Table of Contents](#toc_page)\n\n \n\nTwo-Sided Network\n\nSimple Transaction Structure which Translates into Strategic Pricing\n\n \n\n \n\n \n\n1.\nPayPay registered users as of end of December 2025.\n\n2.\nSolid arrows represent direct payments (i.e. payments not sent via a PSP), which are limited to PayPay app payments via MPM (Merchant-Presented Mode) and payments made with PayPay Balance.\n\n3.\nThe standard rate for small and medium-sized PayPay merchants.\n\n4.\nExcerpt from the model case of “Small and Medium-sized Merchants with Average-priced transactions (Off-us Transactions),” from the “Study Group on Promoting a Better Environment for the Further Adoption of Cashless Payments by Small and Medium-Sized Businesses,” 3rd Meeting Materials, published by the Ministry of Economy, Trade and Industry (August 27, 2021).\n\nBroad User and Merchant Offering\n\nOur platform provides payment and financial services to both users and merchants.\n\nFor users, our platform delivers a seamless financial experience built around smartphone-based payments. Since the launch of our service, we have expanded the payment use cases and services available through our platform, including code-based payments, credit card payments, online payments, bill payments and P2P money transfers, banking and investment through a single mobile application.\n\nFor merchants, we provide compelling services centered on low-friction adoption and high-impact tools for business growth. Onboarding is fast and cost-efficient, with no upfront installation fees and competitively priced payment service charges level. We also offer digital marketing tools—such as in-app coupons, promotions, and loyalty programs—designed to encourage user spending. Additional solutions like PayPay for Business (our merchant-facing platform that provides onboarding, sales tracking and marketing campaign tools) streamlined settlement and reporting features, and data analytics tools further enable merchants to improve operational efficiency.\n\nPenetration of eKYC within our User Base\n\nThe number of eKYC (electronic Know-Your-Customer)-verified users surpassed 40 million as of the end of March 2026, representing more than half of PayPay’s 73 million registered users. eKYC is an important component of prevention of fraudulent activities and reinforcing Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) measures. Furthermore, eKYC acts as a critical enabler for seamless cross-use across our expanding financial ecosystem. By leveraging verified identity information, the friction typically associated with onboarding for new services—such as bank account opening or securities brokerage—is reduced, offering users a streamlined and frictionless experience.\n\nOur eKYC infrastructure also supports cross-use across our financial services ecosystem by simplifying onboarding for banking, securities brokerage and other financial services. We have implemented a unified eKYC that allows users who have already completed identity verification in PayPay to bypass part of the identity verification process when accessing services provided by PayPay Bank Corporation and PayPay Securities Corporation. For example, users can open a PayPay Bank account in just two steps, compared to the standard of seven steps through traditional channels. These frictionless entry points eliminate redundancies such as repetitive document uploads and identity verification processes, providing us with an advantage to cross sell our services on the platform.\n\n45\n\n[Table of Contents](#toc_page)\n\n \n\nOur unified identity verification infrastructure reduces the need for repeated document submission and verification procedures across services and supports cross-service adoption within our ecosystem.\n\nUser Experience and Platform Design\n\nOur payment, banking and investment services are available through mobile applications and integrated user interfaces. We continuously refine our UI/UX to deliver an intuitive, responsive and seamless app experience, utilizing data from our large user base and applying our technology. Improving our UI/UX enables us to deepen user engagement, and the large user base we have cultivated through our PayPay app can be guided to adopt additional services throughout our broader ecosystem.\n\nUsers can access a range of services within the PayPay application and key utilities such as P2P money transfers, real-time balance tracking, and payment notifications enhance the day-to-day usability of our ecosystem, while our app-based integration of financial products allows users to access deposits, loans, and investment services without leaving the PayPay environment.\n\nOur platform also supports multiple financial and non-financial mini apps within the PayPay environment, enabling users to access multiple services within a single digital environment, while still allowing users who wish to use dedicated apps with advanced features for PayPay Bank services and PayPay Securities services.\n\n \n\n \n\nTechnology Infrastructure Supporting Continuous Innovation and Growth\n\nOur payment business is supported by a vertically integrated and horizontally scalable technology platform that supports high performance, low-cost operations at scale. Our infrastructure utilizes a cloud-native and microservice-based architecture that enables us to handle vast transaction volumes with speed and reliability, while delivering a flexible foundation for rapid product development, personalization and risk management, and horizontal scalability that enables feature expansion supporting continued business growth.\n\nOur technology stack consists of four core layers: the PayPay app interface, a core platform powered by microservice architecture and a proprietary platform driven by data, a cloud-native infrastructure layer, and an integration platform that connects to a broad network of financial and ecosystem partners. This structure provides the foundation for real-time transaction processing, precision risk assessment, and scalable expansion across both user and merchant use cases.\n\nWe also maintain in-house engineering and technology development capabilities. As of March 31, 2026, approximately 48% of the combined employees of PayPay Corporation and PayPay India Private Limited were engaged in product and technology development activities, representing employees across 48 countries.\n\nWe are accelerating product development through the adoption of generative AI, particularly in coding workflows. We are actively expanding AI-assisted tooling across additional functions to further enhance speed, efficiency, and innovation in our product development. For example, we are leveraging proprietary AI to accumulate and refine product development data over time, enabling further differentiation in tooling optimization and code quality.\n\n46\n\n[Table of Contents](#toc_page)\n\n \n\nThis technology infrastructure supports transaction processing, product development and platform expansion across our ecosystem.\n\nEffective Security and Fraud Prevention\n\nWe have established a reputation for cybersecurity and fraud prevention, supported by a layered defense architecture, proprietary risk controls, and continuous investment in system integrity. Our platform is designed to meet the highest standards of security while maintaining the seamless user experience expected in modern digital finance. In addition to detecting transaction-level fraud, our system incorporates advanced anti-money laundering protocols and behavioral risk modeling to prevent misuse by bad actors, including impersonation and unauthorized use.\n\nOur Products and Services\n\nWe provide payment and financial services to users and merchants through our PayPay ecosystem. Our offerings include code-based payments, credit and debit payments, revolving, installment payment and cash advances, internet banking, security brokerage, PayPay Point investment-related services and loan management services. In addition, we offer other value-added services for users and enterprises such as insurance services and marketing services that merchants have the option to subscribe to.\n\nPayment Business\n\nPayPay Settlement Services\n\nOur payment settlement service offered through our PayPay code-based payment app is core to our financial platform. The app is free to download, and users can access our code-based payment feature with a simple registration process. Users can make payments at participating merchant stores by launching the PayPay app, showing their app-generated code and having the merchant scan it or by scanning the merchant’s PayPay code.\n\nMerchants can introduce our payment settlement services with a thorough screening process and will receive a welcome package tailored to their use-cases after approval. We offer customer service support for our merchants 24 hours a day and 365 days a year. Merchants can adopt PayPay’s payment settlement service without upfront hardware costs by using Merchant-Presented Mode, a printed payment format where a user uses their smartphone to read a QR-code presented by the merchant.\n\nPayPay Balance\n\nPayPay Balance is a pre-loaded balance that users can make payments through the PayPay application. Users can fund their account from their smartphone in several ways - by linking their bank account or their PayPay Card account, through Seven Bank or Lawson Bank ATMs, P2P money transfer, or through SoftBank Corp.’s cellphone billing. In addition, users can charge their balance with sales proceeds received through Yahoo! JAPAN Auction and Yahoo! JAPAN Flea Market. Furthermore, users can also transfer withdrawals from investment-related services such as PayPay Invest, a mini-app within our PayPay app, LINE BITMAX, a cryptocurrency asset trading service operated by LINE Xenesis Corporation , and Binance Japan, a joint venture between of Binance and PayPay, to PayPay Balance.. We do not handle crypto assets or provide crypto-related services, and our role is limited solely to yen transfer connectivity.\n\nPayPay Balance can also be used for digital wage payments through PayPay Payroll, donations to certain non-profit organizations and other permitted use cases.\n\nPayPay Credit\n\nPayPay Credit allows users of our PayPay app who have been approved for PayPay Card to make code-based payments on the app, leveraging credit extended by PayPay. All payments using PayPay Credit are accumulated each month, where users’ bank accounts registered to their PayPay Card are debited in the following month as a lump sum if the user chooses to do so. Users also have the option to cover the prior month’s payments made with revolving credit that we extend to the user.\n\n47\n\n[Table of Contents](#toc_page)\n\n \n\nPayments Using Linked Services\n\nIn addition to PayPay Balance and PayPay Credit, users can also utilize our PayPay code-based payments with our merchants by linking their credit cards to the PayPay app. Users can create a credit card-linked payment option by adding credit cards issued by PayPay Card Corporation or other credit card companies to the PayPay app. We limit transactions using linked credit cards issued by other credit card companies to a maximum total of ¥20,000 in a single 24-hour period and ¥50,000 in a single 30-day period. Transactions using linked credit cards issued by other credit card companies do not accrue PayPay Points.\n\nPayments Using PayPay Bank App (PayPay Debit)\n\nUsing our Debit Payment Settlement Services, our PayPay Bank accountholders are able to make payments with merchants that accept PayPay code-based payments directly from their PayPay Bank yen-denominated deposit accounts using an app operated by PayPay Bank Corporation.\n\nUtility Bill and Tax Payments\n\nWe have partnered with major Japanese public and private electricity, gas and water companies, as well as cellphone carriers and insurance companies, to further expand our reach of companies where users can use PayPay as a payment option. Users can pay for utilities by scanning the payment barcodes or QR codes on bills issued by utility companies we have partnered with and use their PayPay Balance or PayPay Credit to make payments. We have also introduced compatibility with online bills, where users can receive notifications that a bill is due and pay the bill entirely within the app. In addition, we have partnered with government agencies in various prefectures across Japan to enable users to make resident tax, property tax, automobile tax, or national insurance tax payments using PayPay in participating prefectures.\n\nFurthermore, in connection with the tax donation program in Japan called Furusato Nozei, where taxpayers have the option to redirect a certain portion of their yearly residence tax to local municipalities and in turn receive rewards from donee municipalities, some municipalities issue rewards in the form of PayPay Gift Vouchers when donations are performed through our partner Satofull Co., Ltd., a wholly-owned subsidiary of SoftBank Corp. These vouchers can be used across a variety of local stores designated by the issuing municipalities. See “—Sales and Marketing.”\n\nOverseas Payment Mode\n\nOur eKYC verified users can use the PayPay app overseas. In September 2025, we launched overseas payment mode in South Korea, enabling PayPay users to pay at stores affiliated with Alipay+ and ZeroPay (a payment service introduced by the Seoul Metropolitan Government) and to make P2P payments while in South Korea. In April 2026, we launched the same service in Taiwan, allowing users to utilize key PayPay functions such as balance top-ups and payment at stores affiliated with HIVEX®.\n\nCredit Payment Settlement Services\n\nPayPay Card Corporation issues PayPay Card and PayPay Card Gold under the JCB, Visa and Mastercard brands. These cards provide credit card payment functionality, contactless payment capability, instant transaction history through the PayPay app, and PayPay Point rewards. Our current main offering consists of the following two types of PayPay Cards:\n\n•\nPayPay Card. Our basic-level PayPay Card has no annual fee. Cardholders earn PayPay Points equivalent to 1% of total amounts charged on the card, and up to an additional 0.5% of the total amounts charged if users make 30 or more purchases of at least ¥200 each and spend at least ¥100,000 in total over a particular month. This additional reward is one of the benefits of a customer retention program called PayPay STEP. Additional cards can be issued to family members upon the request of cardholders, and individual cardholders can request more than one card to be issued for them. SoftBank Points, which are issued by SoftBank Corp. and convertible into PayPay Points, of up to 1.5% of the total amounts charged can also be earned when cardholders use this card to pay their cellphone bills with SoftBank Corp.\n\n•\nPayPay Card Gold. Our PayPay Card Gold has an annual fee of ¥11,000 (including consumption tax). Cardholders can maximize their point earnings, with PayPay Points from 1.5% of total amounts charged up to 2.0% of total amounts charged on the card if users make 30 or more than 30 purchases of at least ¥200 each and spend at least ¥100,000 in total over a particular month. This additional 0.5% reward is one of the benefits of PayPay STEP. In addition to overseas and domestic travel insurance benefits and access to domestic airport lounges, PayPay Card Gold cardholders can earn SoftBank Points of up to 10% of total amounts charged to pay cellphone bills with SoftBank Corp. as well as time-limited PayPay Points (a special type of PayPay Points that expire after a set period of time) of an additional up to 2% of total amounts charged for purchases made via Yahoo! JAPAN Shopping or at LOHACO. Additional cards can be issued to family members upon the request of cardholders.\n\n48\n\n[Table of Contents](#toc_page)\n\n \n\nRevolving and Installment Payment Options\n\nPayPay Card Corporation also offers revolving payment options, installment payment options and cash advances to eligible cardholders. Under our revolving payment option, we have two options, Marugoto Flat Revo and Koredake Skip Revo. After a cardholder makes purchases, the cardholder selects to automatically convert all of their credit card purchases (Marugoto Flat Revo) or selectively convert specific purchases (Koredake Skip Revo) into a revolving payment with a commission rate of 18% per annum. Our revolving payment option is available for purchases made using PayPay Credit as well. Although our installment payment option is only available for payments made using PayPay Card with merchants that have accepted installment payments as a payment option, our Pay in Installments Later (Ato Kara Bunkatsu) service allows cardholders to convert payments they had elected to pay in full at the time of purchase to an installment payment from the PayPay Card app or the mini-app.\n\nCash Advances\n\nWe also offer cash advances to cardholders, who can apply for cash advances on the PayPay app or via an internet browser, whereby we allow approved cardholders to withdraw cash from ATMs or transfer loaned funds to their bank accounts. The interest rate is currently 18.0% per annum and 15.0% per annum for additional advances when the total outstanding amount of cash advances extended to a cardholder totals ¥1 million or more.\n\nAcquiring Services\n\nOn the merchant side, we also operate a credit card merchant acquiring business, through which we offer processing services for merchants to accept credit card payments. The majority of our merchants that utilize this service were grandfathered in through referrals from our payment settlement services, LY Corporation (previously Yahoo Japan Corporation) and SB Payment Service Corporation.\n\nFinancial Service Business\n\nInternet Banking Services\n\nPayPay Bank Corporation provides internet banking services to individual and corporate customers. Its principal products and services include deposit accounts, domestic and foreign exchange transactions, debit card services, mortgage loans, consumer loans, business loans and securities intermediary services. Customers can open accounts digitally and access transfers, deposits, bill payments, balance inquiries and other banking services online. PayPay Bank accounts are integrated with the PayPay application, enabling transfers between PayPay Balance and PayPay Bank accounts. We also provide integration between PayPay Bank accounts and PayPay app, enabling instant transfers between PayPay Balance and PayPay Bank accounts without fees.\n\nAccountholders receive a PayPay Bank Visa Debit Card, which can be used Visa-affiliated merchants and ATMs in Japan and overseas. We also provide ATM access and cardless cash withdrawal functionality through partnerships with major ATM networks. Customers can withdraw funds using their PayPay Bank Visa Debit Card or conduct cardless cash withdrawals using the Smartphone ATM feature. When accountholders are abroad, they can also withdraw cash at Visa or PLUS network ATMs worldwide.\n\nDeposit Accounts and Remittances\n\nWe offer a full range of deposit account services spanning yen-denominated products including ordinary deposits and time deposits and foreign currency products including ordinary deposits and time deposits denominated in nine different currencies. As an internet bank, PayPay Bank Corporation does not have the high fixed costs associated with maintaining a network of physical branches, which enables us to offer competitively-priced deposit interest rates. We also refer our accountholders to PayForex, a service offered by Queen Bee Capital Co., Ltd., which offers our accountholders the ability to send and receive remittances to and from over 200 countries with no transaction fees.\n\nLending Services\n\nPayPay Bank Corporation offers lending products to individual and corporate customers, including mortgage loans, consumer loans, and business loans.\n\nMortgage loans, durations from 1 to 50 years, amount from anywhere between ¥5 million and ¥200 million to home buyers through the PayPay Bank app or our website, enabling borrowers to submit the necessary paperwork from their smartphones. As of May 2026, variable rate starts from 0.980% yearly. Our mortgage offering includes the followings:\n\n•\n“Pair loan” product which enables two borrowers to co-sign for a mortgage, with the loan forgiven in the event that one of the two passes away before the end of the term.\n\n49\n\n[Table of Contents](#toc_page)\n\n \n\n•\nWe offer SoftBank users a 0.910% loan benefit for loan refinancing. Additionally if the SoftBank users pay for smartphone, internet and electricity provided by SoftBank Corporation, they will receive a benefit of 0.850% variable rate\n\nConsumer loans are available to customers that have an ordinary savings account and can be borrowed through PayPay Bank app or by participating ATMs 24 hours a day, 365 days a year. Interest rates vary depending on the borrowing amount, ranging from 1.59% to 18.0% per annum..\n\nIn addition, we offer business loans for corporations and sole proprietors. These include business loan of up to ¥10 million, with competitive interest rates ranging from 1.8% to 13.8% per annum as well as loans guaranteed by credit guarantee corporations of up to ¥80 million with interest rates ranging from 1.4% to 3.4% per annum. In April 2026, PayPay Bank Corporation launched a data lending service exclusively for PayPay’s merchants. This invite-only financing service provides loans of up to ¥10 million, with lending terms determined based on merchants’ daily payment transaction data. This allows merchants to finance as early as the application date via smartphone.\n\nForeign Exchange Transaction Services\n\nWe also offer a standalone app for foreign exchange transactions to accountholders, allowing trades for 24 currency pairs. The app also contains features to help our users such as stop loss features and rate alerts. The app offers two types of accounts, the general type and the beginner type. The general type allows accountholders to conduct leveraged trades, while the beginner type does not permit leveraged trading. There are no transaction fees charged for foreign exchange transactions beyond the spread charged.\n\nDigital Securities Services\n\nWe offer a wide range of digital securities intermediary services through PayPay Securities Corporation, a financial services provider focused on digital securities brokerage services. We provide a platform for users to buy and sell mutual funds, stocks and ETFs where trades can be made using PayPay Invest, a mini app integrated into our main PayPay app, built for first-time investors. We also operate a standalone app that offers additional and more advanced investment options for our more experienced users allowing for larger amounts to be invested. In addition, we also offer a platform for trading contracts for difference, or CFDs.\n\nApp-Based Investment Services\n\nWe offer simplified investment services on PayPay app as mini apps. Through PPSC Investment Services Co., Ltd., a wholly owned subsidiary of PayPay Securities Corporation, we offer a PayPay Point investment service that allows users to utilize over ten different simulated asset management courses to manage their PayPay Points. Users can utilize this service starting from just one PayPay Point. Users can monitor, invest and withdraw their managed PayPay Points through the PayPay Point management screen in the PayPay app.\n\nWe also offer PayPay Securities (formerly PayPay Invest) a mini app that serves as an entry point into financial markets. PayPay users who have completed eKYC can open an account using PayPay Invest in as little as three minutes. Users can open both regular investment accounts as well as NISAs using the mini app, starting with a minimum of ¥100 using PayPay Money. Users can use PayPay Money to make investments, as well as PayPay Points and available funds in a PayPay Bank account. Users can also charge the invested amount to their PayPay Card or withdraw funds from PayPay Invest as PayPay Money and transfer them into their PayPay Balance without a transaction fee. Users can also invest in U.S. and Japanese stocks and ETFs, as well as in investment trusts, using PayPay Securities. We allow users to trade U.S. stocks and ETFs on a continuous basis, while Japanese stocks and ETFs can be traded during the Tokyo Stock Exchange’s operating hours, with the option for flexible trading by scheduling recurring daily, weekly and monthly investments. Securities purchased using PayPay Invest are purchased at an “offered price” by users, which is calculated by adding a spread of 0.5% to the “unit price” provided to us by our information provider\n\nPayPay Securities App\n\nThe PayPay Securities app is available to any investor, offering a broader set of investment products and trading functionality compared to PayPay Invest. Users of the PayPay Securities app can invest in U.S. stocks and ETFs, Japanese stocks and ETFs as well as mutual funds, just like PayPay Invest, in addition to Japanese REITs with a minimum investment amount of ¥1,000. Accounts can be funded with PayPay Money as well as through bank transfers from designated financial institutions. The app provides enhanced features such as reservation orders for Japanese equities outside of the Tokyo Stock Exchange operating hours, as well as the “Oitamama Kaitsuke” feature, which enables users to purchase securities using their deposits with designated financial institutions, including with PayPay Bank Corporation, without having to transfer any funds or pay transfer fees.\n\nAutomated Investing Services\n\n50\n\n[Table of Contents](#toc_page)\n\n \n\nWe offer certain automated investing solutions in order to make investment as convenient and easy as possible for new investors. We offer two automated investment services tailored to different needs:\n\n•\nPayPay Invest Easy. PayPay Invest Easy is a simplified investment service integrated as a mini app within the PayPay app, which allows investors to invest on a recurring basis in one of two index funds using PayPay Money, PayPay Points or their credit card, starting at ¥500 per day. This service is also compatible with NISA, offering tax benefits to users.\n\n•\nRobot Accumulation Plan. Robot Accumulation Plan is a standalone app, which facilitates automatic, recurring investments in U.S. equities, starting at ¥1,000. This service is not compatible with NISA.\n\nCFD Trading Services\n\nThrough PayPay Securities Corporation, we offer CFD trading services, a type of financial agreement which enables traders to trade on the direction of securities in the very short term. Our services enable customers to engage in leveraged trading using two different standalone apps, the 10x CFD app and the Japanese Equity CFD app. The 10x CFD app allows trading in stock index futures, such as the Nikkei 225 and the E-mini S&P 500, with leverage up to ten times the deposited margin. The Japanese Equity CFD app allows customers to trade in selected Tokyo Stock Exchange-listed equities during regular exchange hours with leverage up to five times the deposited margin amount. Both of these apps offer real-time pricing, margin monitoring and loss-cut functionality while participation in our CFD trading services requires a deposit margin of over ¥10,000.\n\nLoan Management Services Through Credit Engine\n\nIn November 2024, we acquired Credit Engine Group, Inc. (currently Credit Engine, Inc.), making it our wholly-owned subsidiary. Credit Engine Group, Inc. provides online loan management systems that aid in the digitalization of lending and debt collection operations as well as SaaS lending products for small and medium-sized businesses and automated calls and messaging for debt collection.\n\nOther Value-Added Services\n\nTo Users\n\nWe refer our users to PayPay Insurance Service Corporation, a PayPay-branded insurance agency. Our PayPay app provides users with access to a mini app operated by PayPay Insurance Service Corporation, through which users can apply for an array of insurance policies offered by PayPay Insurance Service Corporation.\n\nPayPay Insurance Service Corporation is a wholly-owned subsidiary of LY Corporation. PayPay Insurance Service Corporation was formerly known as Wise Insurance and adopted the “PayPay” brand in February 2021. PayPay Insurance Service Corporation is not a subsidiary or affiliate of ours and we have no profit-sharing arrangement with them.\n\nTo Merchants\n\nOur platform for merchants offers a user-friendly dashboard from which merchants can easily manage all of their PayPay transactions.\n\nWe offer our PayPay My Store service on our platform for merchants without a subscription fee. Through PayPay My Store, our merchants are able to create and publish a webpage with their business information within our PayPay app. On their personalized webpage, merchants can add information such as their store address and hours of operation as well as pictures of their shops and the products they sell. Event and promotional campaign information can also be posted, functioning as a marketing tool. Merchant webpages have the ability to be followed by users, who can give ratings and reviews enabling merchants to monitor and analyze users’ shopping behavior.\n\nWe also offer the PayPay My Store Lite Plan to our merchants that wish to expand their marketing to our users and/or wish to enjoy a discount on settlement fees. Merchants can sign-up to this service for a fee of just ¥1,980 and pay a monthly per store subscription fee of the same ¥1,980 for the PayPay My Store Lite Plan. Merchants that subscribe to our PayPay My Store Lite Plan receive a discounted settlement fee rate of 1.60%, compared to our standard rate of 1.98%. We also offer other sales and promotional services with additional fees to our merchants that enroll in our PayPay My Store Lite Plan, including the following:\n\n•\nPayPay Coupon. Our PayPay Coupon is an add-on service we offer on commission through which merchants can issue and distribute coupons for their stores to our PayPay app users. This is a convenient tool for merchants to conduct targeted marketing to either acquire new customers or increase repeat customers.\n\n51\n\n[Table of Contents](#toc_page)\n\n \n\n•\nPayPay Coupon (Item-Specific). PayPay Coupon (Item-Specific) is a sales promotion service we offer to manufacturers to issue coupons within the PayPay app on a per-product basis that can be used with certain PayPay merchants that carry POS terminals. This tool assists manufacturers in targeting promotions and gathering market data across national and local drugstore, convenience store and supermarket chains, among other retailers.\n\n•\nPayPay Stamp Card. PayPay Stamp Card is another add-on service we offer on commission through which merchants can issue store loyalty cards as a sales promotion tool to grant rewards to users whose payments satisfy pre-determined criteria.\n\n•\nPayPay Funding. PayPay Funding is an invite-only merchant financing service that allows selected PayPay merchants to receive future sales proceeds in advance when they require operating capital. We utilize machine learning to estimate merchants’ future sales and provide advances of up to ¥1 million, which is then deducted from the merchant’s subsequent sales proceeds earned via PayPay transactions over a period determined by us. We charge a usage fee of between 3.0% and 18.0% per annum, averaging 15%, for the use of this service. Using our data-driven credit model, we can conduct instantaneous, fully-online risk assessments based on merchants’ sales history, transaction patterns, and growth trends, without the need for the cumbersome screening and documentation typically required by traditional banks.\n\nPayCAS (PayPay Multi-Payment Unit)\n\nIn 2022, we began leasing PayCAS, a unified cashless payment terminal with POS integration functionalities, to select merchants by collaborating with SB C&S Corp., a wholly owned subsidiary of SoftBank Corp. and the supplier of PayCAS, and SB Payment Service Corp, another subsidiary of SoftBank Corp. We made PayCAS available to all merchants starting April 2023.\n\nPayPay Points\n\nPayPay Points are our loyalty and rewards points which can be used not only as a traditional loyalty program but also as a form of cash equivalent across a wide range of services within our ecosystem.\n\nThe principal uses of PayPay Points include:\n\n•\nPayments at merchants and online services: Users may use PayPay Points for payments at participating merchants nationwide, as well as through online services that support PayPay Points, with one point redeemable for one Japanese yen.\n\n•\nPayment of utilities and taxes: Through our PayPay billing platform, users may apply PayPay Points toward payments for electricity, gas, water and other public utility charges, as well as certain tax obligations.\n\n•\nFinancial services: Users may apply PayPay Points directly when purchasing investment trusts through PayPay Securities Corporation. In addition, through the “Point Management” service offered by PayPay SC Investment Service Corporation, users may manage and invest their PayPay Points.\n\n•\nOther services: PayPay Points may also be used within our PayPay app for a variety of other services, including remittances and related offerings.\n\nWe offer our users two primary ways to earn PayPay Points: our standard rewards and bonus rewards through the PayPay STEP program.\n\nStandard Rewards\n\n•\nUsers earn a 0.5% base reward rate on payments made with their PayPay Balance, and a 1.0% base reward rate on payments made with PayPay Credit or PayPay Card (physical card).\n\n•\nUsers earn a 0.2% base reward rate on payments made with their PayPay Debit or PayPay Bank Visa Debit Card.\n\nFor all standard rewards, PayPay Points accrue for every ¥200 transacted. No PayPay Points are awarded for some types of transactions, including when payments are made with credit cards issued by other credit card companies linked to the PayPay app. As regular PayPay Points do not expire, the company does not record any breakage associated with these points.\n\nPayPay STEP (Bonus Rewards)\n\nThe PayPay STEP program allows users to boost their reward rate with two types of bonuses as part of our user retention program:\n\n52\n\n[Table of Contents](#toc_page)\n\n \n\n•\nAchievement Bonus: Users earn an extra 0.5% to their reward rate by meeting the following two conditions in the previous month:\n\n•\nMake 30 or more payments of at least ¥200 each.\n\n•\nSpend a total of ¥100,000 or more.\n\n•\nPayPay Debit, PayPay Bank Visa Debit Card and payments made with credit cards issued by other credit card companies linked to the PayPay app are excluded from the PayPay STEP program.\n\nEffective June 2, 2026, we implemented certain changes to our PayPay Points rewards program. These changes are intended to strengthen our eKYC foundation, enhance user engagement, and facilitate smoother referrals of users of our payments services to our financial services. These changes include the following:\n\n•\nUsers who have not completed eKYC registration with us will no longer be eligible to earn PayPay Points under the PayPay STEP program\n\n•\nWhen payments are made using PayPay Points, only the portion of the payment made without using PayPay Points will accrue PayPay Points for every ¥200 transacted (but the entire payment amount will continue to count towards the Achievement Bonus criteria of our PayPay STEP program)\n\nWe also provide merchant marketing and loyalty solutions, including Extra PayPay Points Stores and customized PayPay Points programs, which enable merchants to design targeted promotional campaigns and reward programs to support customer acquisition, retention and sales growth.\n\nAlliances with our Partners\n\nWe have entered into partnerships with third-party companies, including Seven-Eleven Japan Co., Ltd., Monteroza Co., Ltd. and MINISTOP Co., Ltd. to integrate their various services with our PayPay app. For example, our users who download the Seven-Eleven app and complete the registration process are able to link their PayPay accounts to the Seven-Eleven app. When users make payments using PayPay in the Seven-Eleven app, users can earn points for both their PayPay and Seven-Eleven accounts, augmenting the financial benefit from making payments with PayPay. Our users that download the Monte app and make payments using PayPay in the Monte app earn PayPay Points as well.\n\nIn addition, when LINE Corporation (currently LY Corporation), the operator of the LINE messaging app, which had approximately 98 million monthly active users in Japan in the month of March 2025, became an indirect subsidiary of SoftBank Group Corp. in March 2021, we implemented interoperability between the code-based on-premise payment systems of LINE Pay and PayPay by enabling the use of LINE Pay at PayPay merchants that use the merchant-generated code-based payment method starting August 17, 2021. In October 2024, we added a shortcut function in the LINE app enabling LINE users that are registered users of ours to easily initiate the sending and receiving of P2P money transfers with other PayPay users without leaving the LINE app. Although LINE Pay ended service on April 30, 2025, PayPay continues to remain embedded in the LINE app providing a convenient function for LINE users.\n\nTo match this integration with overseas partners to benefit inbound travelers, on September 16, 2025, we launched PayPay’s Overseas Payment Mode, which enables our eKYC verified users to use the PayPay app overseas. The service started in South Korea from late September 2025, enabling PayPay users to pay at stores in South Korea affiliated with Alipay+ and ZeroPay (a payment service introduced by the Seoul Metropolitan Government) and to make P2P payments while in South Korea. We plan to expand our outbound partnership to more countries and regions going forward. On May 15, 2025, SoftBank Corp. announced its entry into a comprehensive business alliance with Sumitomo Mitsui Card Co., Ltd., intended to integrate the diverse functionalities of Olive, the SMBC Group’s comprehensive personal financial service, with SoftBank’s range of digital technology-based services. As part of this alliance, we announced the launch of initiatives in collaboration with Sumitomo Mitsui Card Co., Ltd. Specifically, we announced:\n\n•\nthat, regardless of any changes in the PayPay app’s approach to payment with credit cards issued by other companies, credit cards issued by Sumitomo Mitsui Card Co., Ltd. would continue to be available without any usage fees;\n\n•\nthat the Olive app would be updated to enable PayPay users to check their PayPay Balance and perform top-up and withdrawal transactions between their Sumitomo Mitsui Banking Corporation (SMBC) account and PayPay Balance via the Olive app, and that PayPay Balance would be added as a payment method under Olive’s Flexible Pay mode. Payments using PayPay Balance would be available at Visa-affiliated merchants worldwide through Olive; and\n\n53\n\n[Table of Contents](#toc_page)\n\n \n\n•\nthat users would be able to mutually exchange points between PayPay Points and V Points, a point service operated by CCC MK Holdings Co., Ltd., which will enable users to earn and use points with both PayPay and Visa-affiliated merchants.\n\nOn September 16, 2025, we acquired a 40.0% stake in Binance Japan, an affiliate of Binance, which operates one of the world’s largest cryptocurrency exchanges. As the first phase of our strategic partnership with Binance Japan, we have integrated our platforms, enabling our PayPay users to purchase cryptocurrency using their PayPay Money balance and seamlessly convert crypto assets back into PayPay Money within the app. We aim to create a seamless integration of digital payments and cryptocurrency by connecting a leading global crypto exchange with our extensive user and merchant network.\n\nIn order to expand payment options for users and merchants in Japan and overseas, we have agreed upon the basic terms of a business alliance with Visa 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. PayPay intends to establish and control an entity to develop a digital wallet that supports both Near Field Communication (“NFC”) and QR code payments in the United States. Both PayPay and Visa will contribute capital in the form of investment, technology, and people to this new partnership, with Visa providing additional support through consulting services and embedded expertise delivered via Visa Managed Services or similar programs.\n\nWe also intend to collaborate with Visa to integrate new payment experiences into our existing ecosystem in Japan, including enhancing card services through Visa Flexible Credential, to enable multiple funding sources to be linked to a single card, expanding credit card acceptance at PayPay merchants, and strengthening cross-border payment capabilities for both domestic and international users. Details of the potential collaboration have not yet been decided.\n\nCollaborations with SoftBank Group Companies\n\nWe collaborate with SoftBank Group companies in branding and marketing as well as for a variety of other services and arrangements, including for joint promotional activities, outsourcing of services, financial services, loan agreements with LY Corporation and secondments and directors dispatched from SoftBank Group companies. Descriptions of the primary agreements under each category are below. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” for additional details.\n\nJoint Promotional Activities\n\n•\nBasic Agreement (Sales Promotion Measures, Advertising, Earn and Use of Incentives) between us and SoftBank Corp., dated September 16, 2021, stipulates the cooperation and cost-sharing agreement between us and SoftBank Corp., for the purpose of expanding the user base of PayPay payment settlement services as well as the subscriber base for telecommunication services of SoftBank Corp., through “Y!mobile” telecommunication service campaigns, Yahoo! Premium e-shopping mall, PayPay Point incentives and advertisement for such promotional measures. The term of this agreement was from the date of execution through March 31, 2022, but has been extended through several amendments, and following the latest of such amendments, the agreement is currently scheduled to expire on March 31, 2026. This agreement may be terminated by the parties to the agreement for breach of all or part of its respective obligations under the agreement as well as for certain conditions set forth in the agreement.\n\n•\nService Outsourcing Agreement for Issuance of PayPay Bonus (currently PayPay Points) between Yahoo Japan Corporation (currently LY Corporation) and us, dated August 21, 2019, stipulates the outsourcing of the issuance of PayPay Points based on the settlement amount of goods and services purchased by members on LY Corporation’s e-commerce platform. LY Corporation pays us an amount equal to one Japanese yen multiplied by the number of PayPay Points issued to Yahoo!JAPAN members for the services we provide. The term of this agreement was from the date of the agreement to March 31, 2020, but provides that unless either party gives written notice at least three months prior to the expiration of the agreement of its intention to terminate the agreement, the agreement automatically renews for one year from the expiration date and the same applies thereafter. This agreement may be terminated by the parties to the agreement for breach of all or part of its respective obligations under the agreement as well as for certain conditions set forth in the agreement.\n\n54\n\n[Table of Contents](#toc_page)\n\n \n\n•\nBasic Agreement for Provision of “Pay-Toku” Fee Plan between us and SoftBank Corp., dated September 5, 2023, stipulates the mutual cooperation pursuant to a specific fee rate plan for mobile communication services offered by SoftBank Corp. utilizing PayPay Points aiming at the expansion of the customer base for PayPay’s payment settlement services. The “Pay-Toku” Fee Plan sets forth the PayPay Point-related benefits SoftBank mobile service users can receive. SoftBank Corp. bears the cost equivalent to the amount obtained by multiplying the PayPay Points granted to SoftBank mobile service users by one Japanese yen. The term of this agreement is from the date of execution until such time when SoftBank Corp. ceases to provide Pay-Toku. This agreement may be terminated by the parties to the agreement for breach of all or part of its respective obligations under the agreement as well as for certain conditions set forth in the agreement.\n\n•\nService Outsourcing Agreement for Issuance of PayPay Money Lite and PayPay Points between SoftBank Corp. and us, dated July 31, 2019, stipulates the outsourcing of the issuance of PayPay Money Lite or PayPay Points to certain current and potential customers of services provided by SoftBank Corp. and certain current and potential customers of services provided with SoftBank Corp. SoftBank Corp. pays us an amount equal to one Japanese yen multiplied by the number of PayPay Money Lite or PayPay Points units issued to current and potential customers of services provided by or with SoftBank Corp. The term of this agreement was from August 1, 2019 to July 31, 2020, but provides that unless either party gives written notice at least six months prior to the expiration of the agreement of its intention to terminate the agreement, the agreement automatically renews for one year from the expiration date and the same applies thereafter. This agreement may be terminated by the parties to the agreement for breach of all or part of its respective obligations under the agreement as well as for certain conditions set forth in the agreement.\n\nOutsourcing of Services\n\n•\nBusiness Alliance Agreement for PayCAS between us, SB C&S Corp. and SB Payment Service Corporation, dated August 1, 2024, sets forth the agreement among the parties with respect to the role of each party in connection with the provision of services related to PayCAS. The revenue share among us, SB C&S Corp. and SB Payment Service Corporation is 34%, 33% and 33%, respectively. The term of this agreement was for one year from August 1, 2024, but provides that unless either party gives written notice to the contrary at least six months prior to the expiration of the agreement, the agreement automatically renews for one year upon expiration and the same applies thereafter. This agreement may be terminated by any of the parties to the agreement for another party’s failure to perform under the agreement as well as for certain conditions set forth in the agreement.\n\n•\nBusiness Outsourcing Agreement between us and PayPay SC Corporation, dated August 1, 2024, for the outsourcing of the following services: (1) signing up merchants for PayCAS and related merchant support, (2) signing of new PayPay merchants, (3) PayPay merchant support related to PayPay payment settlement services and (4) acquisition through sales promotion activities. The term of this agreement was from August 1, 2024 to March 31, 2025, but provides that unless either party gives written notice to the contrary at least six months prior to the expiration of the agreement, the agreement automatically renews for one year upon expiration and the same applies thereafter, except with respect to the service of signing up merchants for PayCAS and related merchant support, which ends upon the expiration of the Business Alliance Agreement for PayCAS between us, SB C&S Corp. and SB Payment Service Corporation. This agreement provides for early termination and may be terminated by the parties to the agreement for any breach of the agreement or default on all or part of its respective obligations under the agreement as well as for certain conditions set forth in the agreement.\n\n•\nGeneral Agency Agreement between us and SB Payment Service Corporation, dated December 13, 2019, under which SB Payment Service Corporation acts as our payment service provider and assists our online merchants using our payment settlement services. We pay SB Payment Service Corp. a fee, which is calculated based on a percentage applied to the value of transactions made through SB Payment Service Corp.’s systems. The term of this agreement was one year from December 13, 2019, but provides that unless either party gives written notice at least three months prior to the expiration of the agreement of its intention to terminate the agreement, the agreement automatically renews for one year upon expiration and the same applies thereafter. This agreement may be terminated by the parties to the agreement for breach of all or part of its respective obligations under the agreement as well as for certain conditions set forth in the agreement.\n\n55\n\n[Table of Contents](#toc_page)\n\n \n\n•\nSales Alliance and Partner Agreement between us and SB Payment Service Corporation, dated December 3, 2018, under which SB Payment Service Corporation provides us with various services, such as access to a payment gateway which connects merchants to our payment system, and supports our relations with the merchants by checking information provided by the merchants and by communicating with the merchants on our behalf. The term of this agreement was one year from December 3, 2018, but provides that if neither party notifies the other party in writing that it intends to terminate the agreement upon expiration at least three months prior to the expiration date, the agreement automatically renews for one year and the same applies thereafter. This agreement may be terminated by the parties to the agreement for breach of all or part of its respective obligations under the agreement as well as for certain conditions set forth in the agreement.\n\nFinancial Services\n\n•\nMemorandum on PayPay Merchant Terms for Mini-apps between us and PayPay Insurance Corporation, dated December 1, 2021, provides the terms of the agreement under which PayPay Insurance Corporation operates a mini-app, through which users can apply for an array of insurance policies offered by PayPay Insurance Service Corporation and make purchases using our PayPay payment settlement services. The mini-app usage fee is calculated as an agreed amount between 2.22% and 5% of the purchases made using the mini-app. The term of this agreement was one year from execution, but provides that if the parties do not notify the other party of its intention to not renew the agreement at least 30 days prior to expiration, the agreement automatically renews for one year and same applies thereafter. This agreement may be terminated by us without any notice or other procedures for certain conditions set forth in the agreement.\n\nLoan Agreements with LY Corporation\n\n•\nIn February 2018, PayPay Card Corporation (then YJ Card Corporation) entered into an agreement with LY Corporation (then Yahoo Japan Corporation), pursuant to which LY Corporation (then Yahoo Japan Corporation) agreed to provide loans of up to ¥70 billion to PayPay Card Corporation and PayPay Card Corporation agreed to grant a security interest at the request of LY Corporation (then Yahoo Japan Corporation) with respect to any contractual obligation between PayPay Card Corporation and LY Corporation (then Yahoo Japan Corporation). In April 2019, PayPay Card Corporation entered into a ¥10 billion loan agreement with LY Corporation (then Yahoo Japan Corporation) due in December 2027, with a fixed interest rate of 0.5%, for general business purposes, including working capital. As of March 31, 2026, the amount outstanding under this loan agreement was ¥10 billion. The term of the master agreement, which applies to all such individual loans, is from the execution date of February 15, 2018 to December 7, 2027. However, there is no remaining committed availability under this loan agreement. PayPay Card Corporation’s obligations to LY Corporation are subject to automatic acceleration for certain conditions set forth in the agreement.\n\n•\nIn December 2019, PayPay Card Corporation entered into an agreement with LY Corporation (then Z Holdings Corporation), pursuant to which LY Corporation (then Z Holdings Corporation) agreed to provide loans of up to ¥25 billion to PayPay Card Corporation and PayPay Card Corporation agreed to grant a security interest at the request of LY Corporation (then Z Holdings Corporation) with respect to any contractual obligation between PayPay Card Corporation and LY Corporation (then Z Holdings Corporation). In December 2019, LY Corporation (then Z Holdings Corporation) provided a ¥10 billion loan to PayPay Card Corporation due in December 2028, with a fixed interest rate of 0.6%, for general business purposes, including working capital. As of March 31, 2026, the amount outstanding of this loan was ¥10 billion. The term of the master agreement, which applies to all such individual loans, is from the execution date of December 18, 2019 to December 6, 2028. However, there is no remaining committed availability under this loan agreement. PayPay Card Corporation’s obligations to LY Corporation are subject to automatic acceleration for certain conditions set forth in the agreement.\n\n•\nIn February 2024, PayPay Card Corporation entered into a ¥15 billion term loan agreement with LY Corporation due in February 2026, with a fixed interest rate of 0.7%, for general business purposes, including working capital. This loan was repaid in full in February 2026, and as of March 31, 2026, no amount was outstanding under this loan agreement.\n\n56\n\n[Table of Contents](#toc_page)\n\n \n\n•\nIn December 2024, LY Corporation and PayPay Card Corporation executed a memorandum of understanding pursuant to which the permitted use of proceeds for the intercompany loans described above was broadened to include business investments (including the provision of working capital and loans to PayPay Corporation for its business investments). The other principal terms of the loan agreements remain the same. The memorandum of understanding provides that the parties may agree from time to time to renew or extend the maturity of the loans described above. In the event of such renewal, the date of maturity is extendable unless LY Corporation provides one month of notice that the repayment date will not be extended, with the final maturity being no later than March 29, 2030. Any such renewal bears interest at a rate equal to LY Corporation’s average funding cost as of the day after the repayment date prior to the extension plus a spread of 0.1.As of March 31, 2026, the aggregate outstanding principal amount of the loans described above was ¥20 billion, consisting of the April 2019 and December 2019 loans, and the February 2024 term loan had been repaid in full in February 2026.\n\nSecondments and Directors Dispatched from SoftBank Group Companies\n\n•\nBasic Contract of Secondment between SoftBank Group Corp. and us, dated March 23, 2022, under which employees of SoftBank Group Corp. are seconded to us. The term of this agreement was until March 31, 2023, but provides that it will be renewed for another year if neither party requests termination of the agreement no later than one month prior to expiration and the same applies thereafter. This agreement may be terminated by the parties for certain conditions related to anti-social forces (a reference to organized crime in Japan) as set forth in the agreement.\n\n•\nBasic Contract of Secondment between LY Corporation and us, dated October 1, 2023, under which employees of LY Corporation are seconded to us. The term of this agreement was from October 1, 2023 through March 31, 2024, but provides that if neither party requests to terminate the agreement or amend the terms of the agreement one month prior to expiration, the term is extended for a further six-month period and the same applies thereafter.\n\n•\nBasic Contract of Secondment between SoftBank Corp. and us, dated July 1, 2018, under which employees of SoftBank Corp. are seconded to us. The term of this agreement was until June 14, 2019, but provides that it will renew for another year if neither party requests to terminate the agreement no later than one month prior to expiration. This agreement may be terminated by the parties for certain conditions related to anti-social forces as set forth in the agreement.\n\nSales and Marketing\n\nOur sales and marketing activities are designed to support user acquisition, merchant acquisition and user engagement across our platform. Since the launch of PayPay, we have conducted promotional campaigns, loyalty programs and merchant initiatives in collaboration with SoftBank Group companies, merchants, municipalities and strategic partners. The recent marketing activities are as follows:\n\nSuper PayPay Festival\n\n•\nWe continue to launch a series of large-scale promotional campaigns, known as the “Super PayPay Festival.” A key feature of these campaigns is the strategic integration of gamification elements to transform the payment process from a purely transactional interaction into an engaging and enjoyable experience. For example, we have introduced an instant-win scratch-off lottery, which replaced a prior virtual darts game. This gamification is designed with two primary objectives: first, to randomly award additional benefits to users, and, second, to create opportunities for social interaction among family and friends, making the act of payment a shareable and enjoyable moment.\n\nUtilizing PayPay Points Supported by Third Parties\n\n•\nPayPay Points are also utilized in connection with promotional programs conducted by SoftBank Group companies including SoftBank Corp. and LY Corporation, merchants, municipalities and other partners. In many cases, these partners bear the associated promotional costs. For example, SoftBank Corp. grants PayPay Points to its long-term smartphone users and LY Corporation conducts promotional campaigns in which customers earn PayPay Points equivalent to a certain percentage of purchases made via PayPay on its e-commerce platforms. In these arrangement, participating companies generally provide us a cash amount, which we record under our assets, corresponding to the PayPay Points they grant to their customers, which are recorded as PayPay Users’ deposits under our liabilities. We also participate in government and municipality programs intended to promote adoption of cashless payment services in Japan. We have expended sales and marketing efforts so that merchants applying for subsidized government programs select us as a payment service company among other service providers, enabling us to leverage these government policies to further encourage use of our payment settlement services.\n\n57\n\n[Table of Contents](#toc_page)\n\n \n\nThese programs have contributed to our expansion of our user base, merchant acquisition and increase in users’ balance of PayPay Points to be used for future payments.\n\nWe have strategically executed several key marketing campaigns to drive user acquisition, engagement, and transaction volume. Our campaigns are designed not only to provide monetary incentives but also to make the payment experience itself more engaging and interactive.\n\nCompetition\n\nThe cashless payment industry in Japan remains fragmented, continuously changing, while consistently receiving government support to promote cashless payment and the digitalization of financial services. Many of the areas in which we compete evolve rapidly with innovative and disruptive technologies, shifting user preferences and needs, price sensitivity of merchants and consumers, and frequent introductions of new products and services. Competition may also intensify as new competitors emerge, businesses enter into business combination and partnerships, and established companies in other segments expand to become competitive with various aspects of our business.\n\nPayment Service\n\nThe main competitors for our code-based payment services include providers of traditional credit and debit cards, e-money services such as East Japan Railway Company’s Suica and other smartphone-based payment apps such as Rakuten Payment, Inc.’s Rakuten Pay and d Payment offered by NTT DOCOMO, INC. We also compete with contactless NFC credit card payment offered by credit card companies as well as smartphone contactless payments such as Apple Pay, Google Pay, QUICPay and iD. In light of the relatively high ratio of cash payments in Japan, the market for cashless settlement is still expected to expand significantly and competition in the industry is expected to remain intense.\n\nOur competitors for PayPay Card Corporation’s services consist primarily of large Japanese consumer finance companies, a number of major Japanese banks, Japanese subsidiaries of foreign financial institutions, Japanese internet companies that have entered into the consumer finance industry by acquiring existing consumer finance companies, bank-affiliated credit card companies, retailer-affiliated credit card companies, cellphone carriers and shopping credit companies that issue credit cards, such as Rakuten Card Co., Ltd., Sumitomo Mitsui Card Company, Limited, JCB Co., Ltd., Mitsubishi UFJ NICOS Co., Ltd., Credit Saison Co., Ltd., AEON Financial Service Co., Ltd. and NTT DOCOMO, INC.\n\nFinancial Services Service\n\nPayPay Bank Corporation faces competition in Japan’s banking market. We compete with various types of financial services companies, including Japan’s major banking groups, government-controlled and government-affiliated entities, regional banking institutions, non-bank financial institutions and other firms that are engaged in providing similar products and services. In particular, we compete with other internet banks, including Rakuten Bank, Ltd., SBI Sumishin Net Bank, Ltd., Sony Bank, Inc. and au Jibun Bank Corporation, as well as traditional banking institutions which have expanded their internet banking services. In addition, the development of new technologies in the “Fintech” and other sectors, along with the corresponding rise of new entrants from these sectors into the financial services industry may lead to the development of other competing business models and further intensify competition.\n\nOur main competitors for PayPay Securities Corporation are other online securities firms, such as Rakuten Securities, Inc., SBI Securities Co., Ltd., Matsui Securities Co., Ltd., Monex, Inc. and Mitsubishi UFJ eSmart Securities Co., Ltd. We also face competition from full-services securities firms in Japan, such as Nomura Securities Co., Ltd., Daiwa Securities Co. Ltd. and SMBC Nikko Securities Inc. Since the NISA program was updated in January 2024 to increase the tax benefits available to Japanese taxpayers investing in both long-term investment trusts and stocks, consumer investment has expanded significantly and is expected to continue to expand, resulting in an expected increase in both the size of the market for online securities firms as well as competition.\n\nInformation Technology\n\nWith our smartphone-based payment service at our core, we rely heavily on information technology and communication systems to operate our business. We utilize a proprietary technology platform on the back end within our company that enables us to operate our business effectively. Our app is backed up by a microservices architecture that makes our platform more reliable, scalable and flexible. We also utilize a data platform to make our back-end better able to handle large transaction volumes and scale to meet future growth. Our infrastructure is cloud native.\n\nIt is also critical that we create a secure environment to attract and retain users and merchants. We have robust systems in place to process the identity verification of our users, merchants and cardholders through eKYC procedures. We conduct identity verification through smartphones by either certifying a MyNumber social security card and\n\n58\n\n[Table of Contents](#toc_page)\n\n \n\nscanning the IC chip on it, scanning the IC chip on a driver license and taking a face photo or taking a photo of an identity verification document in addition to taking a face photo. Thanks to our “eKYC Passport,” users who are verified through our PayPay app are able to open accounts with other services and apps in our ecosystem through a streamlined process, which allows them to skip verification of name, date of birth, address, telephone number, e-mail address, identity verification documents and facial photos by using the information already processed.\n\nWe maintain information security measures as part of our operations. We have established our own security system which we continually work to strengthen. We maintain a dedicated Security Operation Center, or SOC, in charge of monitoring and analyzing threats to information systems, with a focus on incident detection. We also maintain a Computer Security Incident Response Team, or CSIRT, that focuses on responding when an incident occurs. We conduct red teaming on a regular basis to test our security and employ white hat hackers to conduct red teaming, penetration testing and vulnerability diagnosis so we can quickly evaluate information security amidst our frequent release cycle of new features. This helps protect our systems from breach and protect our users’ privacy.\n\nIn addition, Paytm Labs Inc. has granted us licenses to their software used for our PayPay My Store Service and fraud prevention and marketing solutions.\n\nLY Corporation has granted PayPay Card Corporation a license to use the software necessary to operate our credit card merchant acquiring business.\n\nIntellectual Property\n\nOur success depends in part on our ability to protect our intellectual property and proprietary technologies. To protect our proprietary rights, we rely on a combination of intellectual property rights in Japan and other jurisdictions, including patents, trademarks, copyrights, trade secret laws, license agreements, internal procedure, and contractual provisions. We also enter into confidentiality and invention assignment agreements with our employees and contractors, and sign confidentiality agreements with third parties. Our internal controls restrict access to proprietary technology.\n\nOur patent portfolio includes technologies relating to digital payments, credit services, fraud prevention, risk management and data analytics. We continue to develop and seek protection for technologies that support our payment and financial services ecosystem.\n\nPayPay Brand\n\nLY Corporation has transferred to us trademarks, design rights, domain names and copyrights of logos, which contain or relate to the name “PayPay” such as, but not limited to, the trademarks and logos of PayPay, PayPay Card, PayPay Bank, PayPay Insurance Service and PayPay Securities, as well as various domain names including paypay.ne.jp and paypay-card.co.jp. We have granted to LY Corporation a perpetual, non-exclusive, non-transferable license to use those transferred intellectual property rights as well as the right to sublicense them to certain of its subsidiaries, including PayPay Insurance Service Corporation.\n\nFacilities\n\nOur corporate headquarters is located in Tokyo, Japan, where we currently lease 17,234 square meters under a lease agreement that expires in January 2030. We do not own any real property. We believe that these facilities are suitable to meet our needs.\n\nEmployees\n\nFor information regarding our employees, see “Item 6. Directors, Senior Management and Employees\n—D. Employees.”\n\nLegal Proceedings\n\nWe are involved in litigation and other legal proceedings from time to time in connection with the ordinary course of our business. We are not currently involved in any litigation or other legal proceedings that, if determined adversely to us, may have, or have had in the recent past, significant effects on the company’s financial position or profitability, individually or in the aggregate.\n\nInformation required by subpart 1400 of Regulation S-K\n\nSee “Selected Statistical and Other Information” for information required by subpart 1400 of SEC Regulation S-K.\n\n59\n\n[Table of Contents](#toc_page)\n\n \n\nRegulations\n\nWe are subject to various laws and regulations in Japan, where we primarily conduct our business. These include requirements to obtain governmental approvals for conducting business, as well as laws and regulations such as the Payment Services Act, the Banking Act, the FIEA, the Labor Standards Act (Act No. 49 of 1947, as amended), or the Labor Standards Act, the Ordinance for Enforcement of the Labor Standards Act (Act No. 23 of 1947, as amended), or the Ordinance for Enforcement of the Labor Standards Act, the Money Lending Business Act, the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates, the Interest Rate Restriction Act, the Installment Sales Act, the Deposit Insurance Act (Act No. 34 of 1971, as amended), or the Deposit Insurance Act, the Act on Special Measures for Strengthening Financial Functions of Japan (Act No. 128 of 2004, as amended), or the Act on Special Measures for Strengthening Financial Functions of Japan, the Act on Emergency Measures for the Revitalization of the Financial Functions (Act No. 132 of 1998, as amended), or the Act on Emergency Measures for the Revitalization of the Financial Functions, the Act on Limitation on Shareholding by Banks and Other Financial Institutions of Japan (Act No. 131 of 2001, as amended), or the Act on Limitation on Shareholding by Banks and Other Financial Institutions of Japan, the Act on the Provision and the Improvement of the Environment of Financial Services (Act No. 101 of 2000, as amended), or the Act on the Provision and the Improvement of the Environment of Financial Services, the Act on the Promotion of Ensuring National Security Through Integrated Implementation of Economic Measures (Act No. 43 of 2022, as amended), or the Act on the Promotion of Ensuring National Security Through Integrated Implementation of Economic Measures, the Foreign Exchange and Foreign Trade Act, the Act on Prevention of Transfer of Criminal Proceeds, the Act on the Protection of Personal Information and the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade. Below are summaries of key Japanese regulations applicable to our business.\n\nPayPay Corporation\n\nPayment Services Act\n\nRegulations on Prepaid Payment Instruments\n\nIn Japan, the Payment Services Act regulates issuers of prepaid payment instruments, such as prepaid cards and e-money. Issuers of prepaid payment instruments must register with the Director of the relevant Local Finance Bureau if the prepaid payment instruments can be used to purchase goods or services that are offered not only by the issuer or its closely related parties, including its subsidiaries, but also by third parties. Since PayPay Corporation offers PayPay Money Lite, a non-refundable type of PayPay Balance, which qualifies as a prepaid payment instrument and can be used to purchase goods and services offered by third parties, PayPay Corporation has registered with the Director of the Kanto Local Finance Bureau and must comply with certain regulations under the Payment Services Act. Such regulations include: (i) an obligation to deposit an amount not less than 50% of the total unused balance arising from all issued prepaid payment instruments, which corresponds to the balance of PayPay Money Lite, as of the relevant reference date (March 31 and September 30 every year) (the “Unused Balance as of the Reference Date”); if the Unused Balance as of the Reference Date is more than JPY 10 million, then the deposit must be made within two months after the date immediately following the reference date, or issuers of prepaid payment instruments must enter into certain guarantee or trust agreements with a financial institution or a trust company to provide the security deposits when required under the Payment Services Act and such agreements must be notified to the Director of the relevant Local Finance Bureau; (ii) an obligation to refund the outstanding balance of prepaid payment instruments if certain events specified under the Payment Services Act, including discontinuation of all or part of the business of issuing prepaid payment instruments, occur; (iii) general restrictions on refunds except for the mandatory refund described in the foregoing item (ii); and (iv) an obligation to secure any private information obtained in connection with prepaid payment instruments. The Director of the Kanto Local Finance Bureau is authorized to issue a business improvement or suspension order, or cancel PayPay Corporation’s registration, if PayPay Corporation fails to comply with these regulations. PayPay Corporation may also be subject to criminal sanctions if it fails to fulfill certain obligations under the Payment Services Act.\n\nIn addition, the Payment Services Act regulates issuers of high-value, electronically transferable prepaid payment instrument. These instruments are designed to be transferred by electronic means, exceeding a certain amount either at one time or over the course of a month. Since PayPay Money Lite (High Amount) falls within the definition of a high-value, electronically transferable prepaid payment instrument, PayPay Corporation is required to (i) submit a business implementation plan that states certain matters, such as measures to protect users of PayPay Money Lite (High Amount), and ensure the sound and appropriate management of the business of issuing PayPay Money Lite (High Amount) to the Director of the Kanto Local Finance Bureau, and (ii) conduct the necessary identification procedures for users of PayPay Money Lite (High Amount) as required under the Act on Prevention of Transfer of Criminal Proceeds as described below.\n\n60\n\n[Table of Contents](#toc_page)\n\n \n\nRegulations on Funds Transfer Services\n\nThe Payment Services Act also regulates funds transfer service providers. A “funds transfer service” is the business of transferring funds carried out by persons other than banks and other deposit-taking institutions. Under the Payment Services Act, funds transfer services are, in general, classified into three types, one of which is a type II funds transfer service, which permits the transfer of JPY 1 million or less and requires registration with the Director of the relevant Local Finance Bureau. Since PayPay Corporation offers PayPay Money, a refundable type of PayPay Balance deposited by users, which falls within the definition of a type II funds transfer service, PayPay Corporation has registered with the Director of the Kanto Local Finance Bureau as a type II funds transfer service provider and must comply with certain regulations under the Payment Services Act. Under these regulations, type II funds transfer service providers are obligated to deposit a specific amount (the “Deposit”) (the calculation of which is described below), and the Deposit must be made within three business days after the end of a period designated as a week or shorter by the funds transfer service provider, or type II funds transfer service providers must enter into certain guarantee or trust agreements with a financial institution or a trust company to provide the Deposits when required under the Payment Services Act and such agreements must be notified to the Director of the relevant Local Finance Bureau. The amount of Deposit is the higher of (i) JPY 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 service.\n\nIn addition, type II funds transfer service providers are obligated to take necessary measures for the safe management of information related to funds transfer services, or provide explanations to prevent users from mistaking these services for exchange transactions conducted by banks.\n\nThe Director of the Kanto Local Finance Bureau is authorized to issue a business improvement or suspension order, or cancel PayPay Corporation’s registration, if PayPay Corporation fails to comply with these regulations. PayPay Corporation may be also subject to criminal sanctions if it fails to comply with certain obligations as a funds transfer service provider.\n\nBanking Act\n\nRegulations on Electronic Payment Services\n\nThe Banking Act regulates electronic payment services. “Electronic payment services” is the business of performing any of the following activities using an electronic data processing system as entrusted by a depositor that has opened an account for deposits with a bank: (i) receiving instructions to execute funds transfer transactions for transferring funds in the depositor’s account and providing such instructions to the bank; or (ii) acquiring information on the depositor’s account from the bank and providing it to the depositor. Electronic payment service providers must: (a) register with the Director of the relevant Local Finance Bureau; (b) enter into a contract with the bank for electronic payment services, stipulating, among other things, the allocation of liability with the bank for any losses or damages incurred by users arising from electronic payment services; (c) conduct electronic payment services pertaining to that bank in accordance with the contract; and (d) disclose certain information contained in the above contract from among the conditions of that contract using the internet or by any other means. PayPay Corporation, which acquires information on user accounts from PayPay Bank Corporation and provides it to those users, has registered with the Director of the Kanto Local Finance Bureau as an electronic payment service provider.\n\nThe Director of the Kanto Local Finance Bureau is authorized to issue a business improvement or suspension order, or cancel PayPay Corporation’s registration, if PayPay Corporation fails to comply with these regulations.\n\nRegulations on Bank Agency Services\n\nThe Banking Act regulates bank agency services. “Bank agency services” is the business of acting as an agent or intermediary for a bank to enter into a contract for: (i) the acceptance of deposits, installment savings, etc.; (ii) the lending of funds or the discounting of bills and notes; or (iii) funds transfer transactions. The bank agent must obtain a license from the Director of the relevant Local Finance Bureau. PayPay Corporation, which acts as an intermediary to enter into contracts for the acceptance of yen ordinary deposits, foreign currency ordinary deposits, the lending of yen funds, and funds transfer transactions with PayPay Bank Corporation as its principal bank, has obtained a license from the Director of the Kanto Local Finance Bureau. The Director is authorized to issue a business improvement or suspension order, or cancel PayPay Corporation’s license, if PayPay Corporation fails to comply with the regulations applicable to bank agents under the Banking Act.\n\n61\n\n[Table of Contents](#toc_page)\n\n \n\nThe FIEA\n\nRegulations on Financial Instruments Intermediary Services\n\nThe FIEA regulates financial instruments intermediary services. “Financial instruments intermediary services” are services that fall under any of the following acts, which are provided for and under entrustment from financial instruments business operators or registered financial institutions: (i) intermediation for the purchase or sale of securities; (ii) intermediation for the purchase or sale of securities or market derivatives transactions on domestic or foreign financial instruments exchange markets; (iii) the handling of public offerings or secondary distributions of securities, or the handling of a private placement of securities or solicitation for selling, etc. only for professional investors; or (iv) intermediation for the conclusion of investment advisory or discretionary investment contracts. Financial instruments intermediary service providers must register with the Director of the relevant Local Finance Bureau. PayPay Corporation provides various intermediary services, including the opening of PayPay Securities accounts, through its PayPay mini-app. Therefore, PayPay Corporation has registered with the Director of the Kanto Local Finance Bureau as an intermediary with PayPay Securities Corporation as its entrusting financial instruments business operator.\n\nThe Director of the Kanto Local Finance Bureau is authorized to issue a business suspension order, or cancel PayPay Corporation’s registration, if PayPay Corporation fails to comply with the regulations applicable to financial instruments intermediary services under the FIEA.\n\nOrdinance for Enforcement of the Labor Standards Act\n\nRegulations on Payroll Services\n\nUnder the Labor Standards Act, wages must, in principle, be paid in cash. However, with the consent of the employee, an employer may pay wages by transferring funds to the employee’s account with a funds transfer service provider designated by the Minister of Health, Labour and Welfare (the “Designated Funds Transfer Service Provider”). PayPay Corporation has been designated by the Minister of Health, Labour and Welfare and provides PayPay Payroll service.\n\nTo be designated by the Minister of Health, Labour and Welfare, a funds transfer service provider must, among other things, meet the following requirements:\n\n(i)\nSetting the maximum wages that can be received in an employee-designated account at JPY 1 million or less. If the balance exceeds JPY 1 million, the excess must be transferred to another account designated by the employee within the same day, taking measures to ensure that the balance in the employee-designated account remains at or below JPY 1 million.\n\n(ii)\nEstablishing a system to reimburse employees for the full amount of any debt (including amounts other than wages) related to the balance of the employee-designated account in a timely manner (within six business days of the employee filing a claim with the Designated Funds Transfer Service Provider or guarantee institution following the bankruptcy filing) if a filing is made for commencement of bankruptcy proceedings for the Designated Funds Transfer Service Provider or if the Designated Funds Transfer Service Provider becomes unable to fulfill its obligations related to funds transfer transactions.\n\n(iii)\nImplementing a mechanism to compensate employees for any losses resulting from unauthorized use of the balance in the employee-designated account contrary to the employees’ intent or from other causes not attributable to the employees.\n\n(iv)\nTaking measures to ensure that the debt related to the employee-designated account can be fulfilled for at least 10 years from the date of the last funds transfer related to the account, unless there are exceptional circumstances.\n\n(v)\nTaking measures to enable funds transfers to the employee-designated account, including wage payments, to be made in increments of one yen.\n\n(vi)\nEstablishing a system to enable employees to withdraw the balance of their employee-designated accounts in increments of one yen through ATMs or other means and to enable employees to make such withdrawal by such method without bearing any fees or other charges at least once a month.\n\n(vii)\nEstablishing a system to report to the Minister of Health, Labour and Welfare on the status of operations related to wage payments and the financial condition, including businesses other than funds transfer services, regularly or upon request.\n\n(viii)\nPossessing the technical capability to properly and reliably perform operations related to wage payments and having sufficient social credibility.\n\n62\n\n[Table of Contents](#toc_page)\n\n \n\nThe Minister of Health, Labour and Welfare is authorized to cancel PayPay Corporation’s designation if PayPay Corporation fails to meet these requirements.\n\nPayPay Card Corporation\n\nThe Money Lending Business Act\n\nIn Japan, the Money Lending Business Act regulates the business of lending money or acting as an intermediary for the lending or borrowing of money on a regular basis (the “money lending business”). A money lending business provider must register with the Director of the relevant Local Finance Bureau or the relevant prefectural governor. Because PayPay Card Corporation extends cash advances to cardholders, PayPay Card Corporation has registered with the Director of the Kanto Local Finance Bureau. Under the Money Lending Business Act, PayPay Card Corporation is supervised by the FSA, which has the authority to review the operation of PayPay Card Corporation and inspect its records to monitor compliance. The Director of the Kanto Local Finance Bureau has the authority under the Money Lending Business Act to issue a business improvement order when it deems it necessary to do so, and, upon PayPay Card Corporation’s substantial non-compliance with the Money Lending Business Act or a failure to comply with certain administrative orders, to suspend its money lending business and cancel its registration as a money lending business provider.\n\nIn respect of the money lending business of PayPay Card Corporation, the Money Lending Business Act requires it to provide borrowers (and any guarantor) with a written or electronic notice of: (a) the terms and conditions of the loan at the time of, or promptly after, execution of the loan agreement or any guarantee agreement; and (b) the amounts received from a borrower for repayment and the respective amounts of the principal and the interest which were repaid by the amounts received as well as the borrower’s remaining balance at the time of, or immediately after each repayment.\n\nPrior to extending a loan, a money lending business provider is required to investigate the ability of borrowers to repay the loan. In granting a loan to an individual borrower, a money lending business provider is required to use credit information (shinyou jouhou) available from a designated credit bureau (shitei shinyou jouhou kikan) in conducting the above-mentioned investigation. A money lending business provider is generally not permitted to extend a loan to an individual borrower if the aggregate outstanding amount of the borrower’s loans from all money lending business providers, after the extension of the loan, will exceed one-third of the borrower’s annual income.\n\nRegulation on Interest Rate\n\nIn Japan, the Interest Rate Restriction Act and the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates regulate the imposition of interest on a loan. Thus, the interest charged for cash advances extended by PayPay Card Corporation is regulated under these acts. Both acts set limits on the maximum interest rates permissible on loans. Any loan agreement with an interest rate exceeding the statutory limits under the Interest Rate Restriction Act is void with respect to the portion of any interest in excess of such limits, without any exemption. In addition, a money lending business provider, who has concluded a loan agreement at more than 20% interest rate, may be subject to criminal penalty under the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates.\n\nThe Installment Sales Act\n\nIn Japan, the Installment Sales Act regulates the intermediation of comprehensive credit purchases, such as a credit card business. A comprehensive credit purchase intermediary must register with the Director of the relevant Bureau of Economy, Trade and Industry. Because PayPay Card Corporation offers credit payment services, PayPay Card Corporation has registered with the Director of the Kyushu Bureau of Economic, Trade and Industry as a comprehensive credit purchase intermediary. To maintain its registration, PayPay Card Corporation must continue to meet certain requirements, including a capital requirement of having a capital amount of ¥20 million or more. Under the Installment Sales Act, there are no regulations on the amount of fees for the intermediation of credit purchases, including any maximum limit, but the METI requires credit purchases intermediaries to set a fee rate within the maximum interest rates specified under the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates. Under the Installment Sales Act, PayPay Card Corporation is supervised by the METI and the Director of the Kyushu Bureau of Economy, Trade and Industry, which have the authority to issue a business improvement order if it deems that PayPay Card Corporation has violated the Installment Sales Act and to suspend its credit payment services and cancel the registration of PayPay Card Corporation as a comprehensive credit purchase intermediary under certain circumstances set forth in the Installment Sales Act.\n\n63\n\n[Table of Contents](#toc_page)\n\n \n\nRegulations on Intermediation of Comprehensive Credit Purchases\n\nUnder the Installment Sales Act, before delivering a credit card to an individual customer or increasing the credit limit of a credit card of an individual customer in respect of the intermediation of comprehensive credit purchases, a registered comprehensive credit purchase intermediary must investigate the individual customer’s payment capacity by reviewing certain matters as specified under the Ordinance for Enforcement of the Installment Sales Act (the “Enforcement Ordinance”). These include the individual customer’s annual income, bank deposits, payment status of debts involving the intermediation of credit purchases, etc. (the “Customer Information”), using specified credit information (tokutei shinyou jouhou) available from a designated credit bureau (shitei shinyou jouhou kikan). A registered comprehensive credit purchase intermediary is generally prohibited from delivering a credit card or increasing a credit limit if the credit limit of the credit card to be delivered or the credit limit after the increase exceeds a certain amount calculated based on the Customer Information.\n\nRegulations on Credit Card Number, etc. Handling Contractors\n\nIn addition, the Installment Sales Act regulates persons who enter into contracts with merchants involving the handling of credit card number, etc. Because PayPay Corporation and PayPay Card Corporation have entered into such contracts with merchants, PayPay Corporation has registered with and is supervised by the Director of the Kanto Bureau of Economy, Trade and Industry and PayPay Card Corporation has registered with and is supervised by the Director of the Kyushu Bureau of Economy, Trade and Industry as a credit card number, etc. handling contractor. A credit card number, etc. handling contractor is required to investigate merchants on certain matters specified in the Enforcement Ordinance as necessary to prevent the unauthorized use of credit card numbers, etc. by the merchants prior to entering into the contracts involving the handling of credit card number, etc. with them, and is prohibited from entering into any such contract if it is found that the merchant’s management of credit card numbers, etc. may be inappropriate. A credit card number, etc. handling contractor is also required to investigate merchants periodically and as necessary, and to take necessary measures to prevent the unauthorized use of credit card numbers, etc. by merchants, including the cancellation of contracts with the merchants involving the handling of credit card number, etc.\n\nPayPay Bank Corporation\n\nSupervision of Banks in Japan\n\nFinancial Services Agency\n\nAlthough the Prime Minister has supervisory authority over banks and bank’s major shareholders in Japan, except for matters prescribed by cabinet order, this authority is generally entrusted to the Commissioner of the FSA.\n\nUnder the Banking Act, the Prime Minister’s authority over banks and bank’s major shareholders in Japan extends to various areas, including granting and cancellation of licenses, ordering banks to suspend business in whole or in part, requiring submission of business reports or materials regarding banks and approval and cancellation of approval, ordering bank’s major shareholders to ensure compliance with certain criteria and requiring submission of business reports or materials regarding bank’s major shareholders.\n\nUnder the prompt corrective action system, the Commissioner of the FSA may take corrective actions in the case of deterioration of the capital adequacy ratios of banks and their subsidiaries and affiliates. These actions include requiring a bank to formulate and implement reform measures, requiring a bank to reduce assets or take other specific actions and ordering a bank to suspend all or part of its business operations.\n\nUnder the prompt warning system, the FSA may take precautionary measures to maintain and promote the sound operations of banks, even before those banks become subject to the prompt corrective action. These measures include requiring a bank to improve its sustainable profitability, credit risk management, stability and cash flow.\n\nThe Bank of Japan\n\nThe BOJ is Japan’s central bank and serves as the main instrument for the execution of Japan’s monetary policy. The principal measures by which the BOJ implements monetary policy include adjustment of the basic discount rate and basic loan rate, open market operations and imposition of deposit reserve requirements. Banks in Japan are allowed to obtain borrowings from the BOJ. Moreover, most banks in Japan maintain current accounts under agreements with the BOJ pursuant to which the BOJ is entitled to carry out examinations of the banks. The functions of examinations by the BOJ are intended to enable settlement of funds to be smooth among banks and other financial institutions, thereby contributing to the maintenance of an orderly financial system, whereas the supervisory authority of the Prime Minister or the Commissioner of the FSA is intended to maintain the sound operations of banks and promote the security of depositors.\n\n64\n\n[Table of Contents](#toc_page)\n\n \n\nLicensing and Authorization\n\nUnder the Banking Act, obtaining a license from the Prime Minister is required in order to engage in banking activities such as (i) acceptance of deposits or installment savings, as well as the lending of funds or the discounting of bills and notes and (ii) dealing in funds transfer transactions. Since PayPay Bank Corporation engages in activities such as accepting deposits or time deposits, lending funds or discounting bills, conducting foreign exchange transactions, and offering online betting services for public competitions, it obtained a banking license from the Financial Reconstruction Commission before its merger with the FSA on September 26, 2000.\n\nUnder the FIEA, a financial institution must be registered with the Director of the relevant Local Finance Bureau to engage in any of the (i) brokerage with written orders, (ii) securities business related to government bonds, etc., (iii) mutual fund business, (iv) a business related to foreign securities that have the characteristics of government bonds, (v) Business related to other securities on a regular basis, or if it seeks to provide investment advisory and agency business or engage in securities, etc. management. Since PayPay Bank Corporation conducts over-the-counter derivative transactions, it is registered as a financial institution.\n\nCertain Restrictions and Regulations under the Banking Act\n\nAs a Japanese banking institution, PayPay Bank Corporation is subject to restrictions and regulations under the Banking Act on various aspects of our banking business, including restrictions on the scope of PayPay Bank Corporation’s business, PayPay Bank Corporation’s shareholdings of other companies, corporate restructuring and credit limits, and capital adequacy ratio requirements. Certain of the provisions of and regulations under the Banking Act are briefly described below.\n\nRestrictions on Scope of Business\n\nUnder the Banking Act, banks in Japan are permitted to engage only in the business of acceptance of deposits or installment savings, loans of funds or discounting of bills, and exchange transactions (such businesses are referred to as the “Primary Business”), certain businesses incidental to the Primary Business (such businesses other than the Primary Business are referred to as the “Incidental Business”), and certain other businesses permitted under the Banking Act and other acts.\n\nRestrictions on Scope of Business of Subsidiaries\n\nThe Banking Act restricts the types of businesses in which Japanese banks may engage through their subsidiaries to, among other things, banking businesses, certain securities businesses and certain financial-related and other Incidental Businesses, with the prior authorization of, or prior notice to, the Commissioner of the FSA. The FSA requires the similar restrictions for (i) a company in which another company holds the majority of voting rights, in addition to a domestic company in which a bank or its subsidiary holds more than 5% of the voting rights in aggregate, (ii) a substance standard subsidiaries and (iii) a related company under the Companies Act and accounting through non-legally binding guidelines.\n\nRestrictions on Shareholdings of Other Companies\n\nWith the exception of certain companies that banks are permitted to hold as subsidiaries as described under “—Restrictions on Scope of Business of Subsidiaries” above, the Banking Act generally prohibits a bank and/or its subsidiaries from acquiring or holding in the aggregate more than 5% of the total voting rights of all shareholders of another domestic company. Similarly, the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade generally prohibits a bank from acquiring or holding more than 5% of the total voting rights of all shareholders of another domestic company without obtaining prior authorization of the Fair Trade Commission, pursuant to standards established by the Fair Trade Commission.\n\nCorporate Restructuring\n\nUnder the Banking Act, if PayPay Bank Corporation engage in the following acts without obtaining prior authorization from the Commissioner of the FSA, with certain exceptions, such acts will not be effective:\n\n•\nany merger involving a bank as a party where the surviving company or the company established by the merger is a bank;\n\n•\nany corporate split to which a bank is a party; or\n\n•\na transfer or acquisition of all or part of a business to which a bank is a party.\n\n65\n\n[Table of Contents](#toc_page)\n\n \n\nCredit Limits\n\nThe Banking Act restricts the aggregate amount of loans to any single customer or customer group for the purposes of avoiding excessive concentration of credit risks and promoting the fair and extensive utilization of bank credit. The current limits are 25% of the total qualifying capital of the bank and its subsidiaries, including subsidiaries whose decision making organization, organization which determines policies of finance and operation or business, is controlled by the bank and/or its subsidiaries, with respect to a single customer or customer group.\n\nMatters Required to be Reported\n\nThe Banking Act provides for matters required to be reported to the Commissioner of the FSA, which include the following:\n\n•\nplanned issuance of stock acquisition rights or bonds with stock acquisition rights;\n\n•\nplanned early redemption of bonds with stock acquisition rights;\n\n•\nplanned repurchase of shares;\n\n•\nplanned increase of the amount of stated capital; and\n\n•\nimplementation of the matters for which a bank had obtained authorization pursuant to the Banking Act.\n\nRestrictions Applicable to Shareholders of Banks\n\nUnder the Banking Act, a holding company which intends to hold a bank as its subsidiary is required to obtain prior approval of the Commissioner of the FSA. Such a holding company which has obtained such approval is, as a bank holding company under the Banking Act, subject to restrictions and regulations on various aspects of its banking business, including restrictions on the scope of businesses of the bank holding company and its subsidiaries, the shareholdings of other companies by the bank holding company’s group, corporate restructuring activities, credit limits on the bank holding company’s group, and consolidated capital adequacy ratio requirements, as well as the supervisory authority of the Prime Minister (which is generally entrusted to the Commissioner of the FSA, similar to its supervisory authority over banks).\n\nUnder the Banking Act, a person who intends to hold 20% (in certain cases, 15%) or more of the voting rights of a bank is required to obtain prior approval of the Commissioner of the FSA. In addition, the Commissioner of the FSA may request reports or submission of materials from, or inspect, any principal shareholder who holds 20% (in certain cases, 15%) or more of the voting rights of a bank, if necessary in order to secure the sound and appropriate operation of the business of such bank. The Commissioner of the FSA may order such principal shareholder to take such measures as it deems necessary. Also, the Commissioner of the FSA may request any principal shareholder who holds 50% or more of the voting rights of a bank to submit an improvement plan if necessary in order to ensure the sound and appropriate management of a bank and order such principal shareholder to take the measures necessary to ensure such sound and appropriate management of a bank as it deems necessary.\n\nFurthermore, under the Banking Act, any person who becomes a holder of more than 5% of the voting rights of a bank must report its ownership of voting rights to the Commissioner of the FSA or the Director of the relevant Local Finance Bureau, as the case may be, within five business days. In addition, a similar report must be made in respect of any subsequent change of 1% or more in any previously reported holding or any change in material matters set forth in reports previously filed, with some exceptions.\n\nCapital Adequacy Ratios\n\nOverview\n\nThe FSA has taken actions to implement new capital adequacy ratio requirements in accordance with the approach adopted in Basel III. Following the amendments to the capital adequacy ratio requirements applicable only to international standard banks (i.e., banks with international operations) (which came into effect in March 2013 with certain transitional measures), the FSA further enacted certain amendments to the capital adequacy ratio requirements applicable to domestic standard banks (i.e., banks with no international operations), including us, with the aim of improving quality of their capital. As a result of these amendments, regulatory capital used in calculating the capital adequacy ratio of domestic standard banks under Basel III is basically limited to common stock and preferred stock that is mandatorily convertible into common stock, while other preferred securities and subordinated debt are excluded. In addition, the amendments in order to implement the finalized capital adequacy ratio requirements under Basel III including with respect to credit risks, credit valuation adjustment (CVA) risks, market risks and operational risks have been applied from March 31, 2024 in respect of international standard banks and domestic standard banks\n\n66\n\n[Table of Contents](#toc_page)\n\n \n\nwhich use internal models to calculate the amount of risk, and have been applied from March 31, 2025 in respect of other domestic standard banks including PayPay Bank Corporation (in both cases, banks that have notified the FSA that they wish to apply finalized Basel III standards earlier have applied the amendments from March 31, 2023 at the earliest).\n\nCapital Adequacy Ratio Requirements for Domestic Standard Banks\n\nUnder the current capital adequacy ratio requirements for domestic standard banks, including PayPay Bank Corporation, the FSA requires a minimum capital adequacy ratio of 4.0% on both a consolidated and a non-consolidated basis for banks, which is calculated by dividing the amount of Core Capital (as defined below) by the amount of risk-weighted assets.\n\nCore Capital is generally defined as the sum of the amount of common stock and retained earnings, which have high loss-absorbing capacity, and preferred stock that is mandatorily convertible into common stock, general reserve for possible loan losses (up to an amount not more than 1.25% of credit risk-weighted assets) and certain other items, less the amount of adjustment items including certain deferred tax assets.\n\nThe amount of risk-weighted assets is calculated as the sum of credit risk-weighted assets (the amounts of the relevant assets multiplied by risk weights applicable thereto), an amount calculated by dividing the market risk (the amount of risk of loss due to market fluctuations, such as fluctuations in interest rates, stock prices and currency rates) by 8% and an amount calculated by dividing the operational risk (the amount of risk of loss due to various accidents, such as operational accidents, internal operating system troubles, fraudulent activities and troubles arising from external factors) by 8%. We have, however, adopted special exemptions for market risk amount under which we have not included the amount calculated by dividing the market risk by 8% in our risk-weighted assets.\n\nThe amended capital adequacy ratio requirements for domestic standard banks are being phased-in over a transitional period, which began on March 31, 2014, or the Applicable Date. Depending on the matters subject to the transitional arrangements, transitional periods were established. The first period ended in 2019, and other periods ended in 2024 and will end in 2029, respectively.\n\nLeverage Ratio\n\nTo prevent the occurrence of deleveraging and of resulting damage to the broader financial system and economy and to reinforce the risk based capital adequacy ratio requirements, the Basel Committee introduced the non-risk based leverage ratio requirements in the Basel III framework in December 2010. The text of the leverage ratio has been revised several times, including in June 2013, January 2014 and December 2017.\n\nUnder the revised text of the leverage ratio, leverage ratio is defined as the ratio of the capital measure to the exposure measure. In Japan, the relevant FSA regulations have been promulgated to require international standard banks to publicly disclose their consolidated and non-consolidated leverage ratios from March 31, 2015. Furthermore, international standard banks have been required to maintain a leverage ratio of at least 3% on both a consolidated basis and a non-consolidated basis from March 31, 2019. The FSA implemented G-SIB surcharge from March 31, 2023 in respect of international standard banks and amended the leverage ratio requirements under the Basel III finalization framework, which have been applied to international standard banks from March 31, 2024 (banks that have notified the FSA that they wish to apply finalized Basel III standards earlier have applied the amendments from March 31, 2023 at the earliest). The FSA raised the minimum leverage ratio to 3.15% from April 1, 2024.\n\nAlthough, as of the date of this Annual Report, specific regulations in respect of the leverage ratio applicable to Japanese domestic standard banks, including PayPay Bank Corporation, have yet to be issued in Japan, the FSA may introduce such regulations in the future.\n\nLiquidity\n\nThe Basel III framework is aimed at strengthening global liquidity regulations. In December 2010, the Basel Committee announced the liquidity portion of the Basel III framework. This framework is intended to set out requirements for holding more qualified capital and better risk coverage, and it introduced two global liquidity standards.\n\nThe first of the two new global liquidity standards is the Liquidity Coverage Ratio, or the LCR, intended to promote short-term resilience in the liquidity risk profile of banks by ensuring that they have sufficient high-quality liquid assets to survive a significant stress scenario lasting 30 calendar days. The second is the Net Stable Funding Ratio, or the NSFR, which has been developed to ensure a sustainable structure of assets and liabilities, taking into\n\n67\n\n[Table of Contents](#toc_page)\n\n \n\naccount their maturities, with the goal of promoting resilience over longer time horizon by creating additional incentives for banks to secure funds from more stable sources of funding on an ongoing basis.\n\nThe Basel Committee revised the text of the LCR and NSFR in January 2013 and October 2014, respectively, which provide the framework to require banks to maintain minimum LCR and NSFR of 100%, which is the minimum requirement in normal conditions.\n\nIn Japan, the LCR requirements applicable to international standard banks were introduced on March 31, 2015 and was fully implemented on January 1, 2019. The NSFR requirements applicable to international standard banks were also introduced on September 30, 2021. With respect to sound management of liquidity, international standard banks are required to (i) disclose quantitative information regarding the LCR and NSFR on a quarterly basis, (ii) disclose qualitative information regarding the NCR and NSFR on a semi-annual basis and (iii) disclose matters relating to management of liquidity risk annually, as well as maintain minimum LCR and NSFR of 100%.\n\nAlthough, as of the date of this Annual Report, specific regulations in respect of the LCR or the NSFR applicable to Japanese domestic standard banks, including PayPay Bank Corporation, have yet to be issued in Japan, the FSA may introduce such regulations in the future.\n\nDuty to provide information\n\nIn relation to acceptance of deposits or installment savings, a bank is required to provide depositors with the information by clearly indicating interest rates for principal deposits, fees pertaining to handling the deposits and deposits which are subject to receive payment of insurance as prescribed in Article 53 of the Deposit Insurance Act, explaining corresponding to a request of depositor by using a document stating, among others, name of financial instruments, scope of persons subject to acceptance, period of deposit, minimum amount of deposit, unit of deposit method of payment, matters concerning interest and fees. In addition, if a bank concludes an agreement regarding deposits or installments savings that may incur losses on their principal due to fluctuations related to the indicators, such a bank must comply with the regulation under the Financial Instruments and Exchange Act such as (i) advertising restrictions, (ii) obligations to provide written documents prior to contract conclusion, (iii) obligations to provide written documents at the time of contract conclusion, (iv) prohibitions on compensation for losses, and (v) the principle of suitability.\n\nAs part of its information management system for customer-related data, banks are required to implement necessary and appropriate measures to secure information pertaining to individual customers. This includes supervising employees and third parties to whom the handling of such information is outsourced, in order to prevent any leakage, loss, or damage. In the event of any leakage, loss, or damage, or if there is a risk of such an event, a bank must promptly report the incident to the Commissioner of the FSA etc. and take other appropriate actions.\n\nInspection and Examination of Banks\n\nThe Banking Act authorizes the Commissioner of the Director of the relevant Local Finance Bureau (the Commissioner of the FSA shall not be prevented from conducting inspections) to inspect banks in Japan at any time. The FSA inspects the soundness and appropriateness of banks’ operations, including the status and performance of their control systems for business activities, by inspecting evaluations performed by banks’ self-assessment systems, and reviewing their compliance with laws and regulations. The inspections of banks are performed pursuant to “the approach and procedures for the inspection and supervision of loans after the abolition of the Manual” published on December 18, 2019.\n\nCurrently, the FSA takes the “better regulation” approach in its financial regulation and supervision in pursuit of improvement of the quality of financial regulation and supervision. This consists of four pillars: optimal combination of rules-based and principles-based supervisory approaches; timely recognition of priority issues and effective response; encouraging voluntary efforts by financial institutions and placing greater emphasis on providing them with incentives; and improving the transparency and predictability of regulatory actions.\n\nThe BOJ also conducts examinations of banks separated from the inspection of banks undertaken by the FSA. The examinations involve reviewing actual conditions of operation and risk management systems. Through these examinations, the BOJ seeks to identify problems at an early stage and give corrective guidance where necessary.\n\nIn addition, the Securities and Exchange Surveillance Commission examines banks in connection with their financial instruments business activities in accordance with the FIEA.\n\n68\n\n[Table of Contents](#toc_page)\n\n \n\nDeposit Insurance Act\n\nUnder the Deposit Insurance Act of Japan, or the Deposit Insurance Act, depositors are protected through the Deposit Insurance Corporation of Japan, or the DIC, in cases where financial institutions fail to fulfill their obligations. The DIC is supervised by the Commissioner of the FSA and the Minister of Finance.\n\nThe DIC receives annual insurance premiums from insured financial institutions. For the year ended March 31, 2026, a premium rate of 0.022% for the deposits that bear no interest and are used primarily for payment which were raised from the rates applicable for the year ended March 31, 2025 of 0.021% and settlement purposes and a premium rate of 0.014% for other ordinary deposits were applied.\n\nThe insurance money may be paid out to depositors in the case of a suspension of deposit repayments, license revocation, dissolution or bankruptcy of a financial institution. For each depositor, pay-outs are generally limited to a maximum of ¥10 million of principal amount covered by the deposit insurance with any interest accrued thereon. Only non-interest bearing deposits, redeemable on demand and used by depositors primarily for payment and settlement functions are protected in full.\n\nParticipation in the deposit insurance system is compulsory for city banks, regional banks, trust banks, shinkin banks and credit co-operatives, labor banks and other financial institutions.\n\nGovernmental Measures to Treat Troubled Institutions\n\nGeneral Framework of Resolution Procedure\n\nThe basic method of resolution for a failed financial institution under the Deposit Insurance Act is cessation of the business by paying insurance money to the depositors up to the principal amount of ¥10 million plus accrued interest per depositor, the so-called “pay-off,” or transfer of the business to another financial institution with financial “aid provided within the cost of pay-off.” Generally, transfer of the business is regarded as the primary method. In order to enable a prompt transfer of the business, the following framework has been established.\n\n•\nA Financial Reorganization Administrator will be appointed by the Commissioner of the FSA and will take control of the management and assets of the failed financial institution. Such Financial Reorganization Administrator is expected to efficiently search for a financial institution that will succeed to the business of such failed institution.\n\n•\nIn the case where no successor financial institution can be immediately found, a “bridge bank” will be established by the DIC for the purpose of the temporary maintenance and continuation of the failed financial institution’s operations, and the bridge bank will seek to transfer the failed financial institution’s assets to another financial institution or dissolve the failed financial institution.\n\n•\nIn order to facilitate or encourage a financial institution to succeed a failed business, the DIC may provide financial aid such as (i) donation of money, (ii) loans or depositing of funds, (iii) purchase of assets, (iv) guarantees of obligations, (v) assumption of obligations, (vi) subscription for preferred shares, etc., and (vii) collateralization of damage or indemnify any loss incurred as a result of such succession. In addition, the DIC may provide loans in order to protect depositors and promote equity among creditors of failed financial institutions.\n\nAddressing Potential Financial Crises\n\nIf the Commissioner of the FSA recognizes that the failure of a bank falling within any of the circumstances described in (i) through (iii) below has the potential to cause significant problems in maintaining the financial order in Japan or the region where such bank is operating (“systemic risk”), unless the measures described in (i) through (iii) below are taken, the Commissioner of the FSA may confirm the taking of any of such measures, following deliberations by the Financial Crisis Management Meeting: (i) if the bank is not a bank described in (ii) or (iii), the DIC may subscribe for shares or subordinated bonds of or extend subordinated loans to the bank, or subscribe for shares of the holding company of the bank, in order to enhance the bank’s capital adequacy; (ii) if the bank is at risk of suspending or has suspended repayment of deposits or its liabilities exceed its assets, financial aid necessary to meet obligations to depositors in excess of deposit insurance may be made available to such bank; and (iii) if the bank is at risk of suspending or has suspended repayment of deposits and its liabilities exceed its assets, and systemic risk cannot be avoided through measures described in (ii) above, the DIC may acquire all of the bank’s shares. Expenses for the implementation of the above measures will be borne by the banking industry, with an exception under which the government may provide partial subsidies for such expenses.\n\n69\n\n[Table of Contents](#toc_page)\n\n \n\nPursuant to certain amendments to the Deposit Insurance Act that were promulgated in June 2013 and became effective on March 6, 2014, a resolution regime for financial institutions was introduced in Japan. Under these amendments and related implementing ordinances, this regime is applicable to financial institutions including banks, insurance companies and securities firms and their holding companies.\n\nThe resolution regime provides, among other things, that if the Commissioner of the FSA recognizes that failure of a financial institution falling within either (a) or (b) below may cause significant disruption in financial markets or other financial systems in Japan, unless measures described in (a) or measures described in (b) are taken, the Commissioner of the FSA may confirm the taking of any of such measures, following deliberations by the Financial Crisis Management Meeting: (a) if the financial institution’s liabilities do not exceed its assets, the DIC shall supervise the operations of, and the management and disposal of assets of, such financial institution, and may provide it with loans or guarantees necessary to avoid the risk of significant disruption in financial systems in Japan, or subscribe for shares or subordinated bonds of or extend subordinated loans to such financial institution, in each case as necessary taking into consideration the financial condition of the financial institution; and (b) if the financial institution’s liabilities exceed or are likely to exceed its assets, or the financial institution has suspended or is likely to suspend repayment of its obligations, the DIC shall supervise such financial institution, and may provide financial aid necessary to assist a merger, business transfer, corporate split or other reorganization in respect of such financial institution. The expenses for the implementation of the measures under this regime will be borne by the financial industry, with an exception under which the government may provide partial subsidies for such expenses.\n\nIf the taking of measures described in (b) above is determined with respect to a financial institution, the Commissioner of the FSA may order that such financial institution’s operations and assets be placed under the control of the DIC. The business or liabilities of a financial institution subject to supervision of the DIC as set forth in (b) above may also be transferred to a “bridge bank” established by the DIC for the purpose of the temporary maintenance and continuation of operations of, or repayment of the liabilities of, such financial institution; and the bridge bank will seek to transfer the financial institution’s business or liabilities to another financial institution or dissolve the financial institution. Financial aid provided by the DIC to assist a merger, business transfer, corporate split or other reorganization in respect of a financial institution, as described in (b) above, may take the form of purchase of assets, subscription of preferred stock or subordinated bonds, extension of subordinated loan, or loss sharing.\n\nAct on Special Measures for Strengthening Financial Functions\n\nThe Act on Special Measures for Strengthening Financial Functions of Japan, or the Strengthening Financial Functions Act, was enacted in 2004 in order to establish a scheme of public money injection into financial institutions and thereby enhance the soundness of such financial institutions on or prior to March 31, 2008 and revitalize economic activities in the regions where they do business. In 2008, certain amendments to the Strengthening Financial Functions Act took effect. These amendments relaxed certain requirements for public money injection into Japanese banks and other financial institutions under the prior scheme and extended the period of application therefor, which had expired on March 31, 2008, to March 31, 2012. These amendments aimed to promote not only the soundness of such financial institutions but also loans or other forms of credit extended to SMEs in order to revitalize local economies. In 2011, in response to the March 2011 Great East Japan Earthquake, an amendment to the Strengthening Financial Functions Act was enacted to further extend the expiration date described above to March 31, 2017. This amendment was also intended to facilitate capital injections into financial institutions affected by the March 2011 Great East Japan Earthquake that required capital enhancement in order to smoothly extend loans in their principal business regions. In 2016, an amendment to the Strengthening Financial Functions Act was enacted that further extended the expiration date to March 31, 2022. In 2020, in the wake of the COVID-19 pandemic, the expiration date was further extended to March 31, 2026, after relaxing the requirements for applications and removing the deadline for repayment of the injected public money. In 2021, an amendment to the Strengthening Financial Functions Act was enacted to maintain financial functions that support the post COVID-19 recovery and revitalization of the regional economy in areas with declining populations.\n\nAct on Emergency Measures for the Revitalization of the Financial Functions\n\nThe prompt corrective action system requires financial institutions to establish a self-assessment program that complies with related acts such as the Financial Revitalization Act. Under “the approach and procedures for the inspection and supervision of loans after the abolition of the Manual,” financial institutions are required to establish a self-assessment program reflecting their own policies based on their business strategy and business environment. The results of self-assessment should be reflected in the amount of write-offs and reserves according to the standard established by financial institutions pursuant to the guidelines issued by the Japanese Institute of Certified Public Accountants. Based on the results of the self-assessment, financial institutions may establish reserve amounts for their loan portfolio at the relevant balance sheet reference date, even if all or part of such reserves may not be immediately tax deductible under Japanese tax law.\n\n70\n\n[Table of Contents](#toc_page)\n\n \n\nAct on Limitation on Shareholding by Banks and Other Financial Institutions\n\nThe Act on Limitation on Shareholding by Banks and Other Financial Institutions of Japan requires Japanese banks and their subsidiaries to limit the aggregate market value (excluding unrealized gains, if any) of their holdings in equity securities (excluding certain equity securities prescribed by the related cabinet order) to an amount equal to 100% of their consolidated capital (calculated according to the formula provided for calculating the numerator of the capital adequacy ratio stated in “—Certain Restrictions and Regulations under the Banking Act—Capital Adequacy Ratios” above) in order to reduce exposure to stock price fluctuations.\n\nOther Regulations\n\nPayPay Bank Corporation is also subject to certain regulations concerning registered financial institutions under the FIFA (see “—PayPay Corporation—The FIEA”), the Interest Rate Restriction Act (see “—PayPay Card Corporation—Regulation on Interest Rate”) and the Act on the Provision and the Improvement of the Environment of Financial Services (see “—PayPay Securities Corporation—The Act on the Provision and the Improvement of the Environment of Financial Services”).\n\nPayPay Securities Corporation\n\nThe FIEA\n\nThe FIEA regulates most aspects of transactions and businesses that relate to financial instruments in Japan, including public offerings, private placements, and the secondary trading of securities; ongoing disclosure by securities issuers; tender offers for securities; the organization and operation of securities exchanges and self-regulatory associations; and the registration of financial instruments business operators (the “FIBOs”), such as PayPay Securities Corporation. The Commissioner of the FSA has the authority to regulate financial instruments businesses. The Securities and Exchange Surveillance Commission is vested with the authority to conduct day-to-day monitoring of the securities markets, and to investigate irregular activities that hinder the fair trading of securities, including the authority to inspect FIBOs. Furthermore, the Commissioner of the FSA delegates certain authority to the Director of the relevant Local Finance Bureau, to inspect local FIBOs and branches. A violation of the applicable laws and regulations may result in various administrative sanctions, including the revocation of a registration or authorization, a suspension of business operations, or an order to discharge any director or audit and supervisory board member who has failed to comply with applicable laws and regulations. In addition, PayPay Securities Corporation is subject to the rules and regulations of the Japanese stock exchanges and the rules and regulations of self-regulatory associations, including the Japan Securities Dealers Association.\n\nAny person seeking to engage in any of the following businesses must obtain registration as a Type I FIBO: (i) businesses related to highly liquid securities; (ii) businesses related to commodity-related market derivatives transactions; (iii) businesses related to over-the-counter derivative transactions; (iv) businesses related to the underwriting of securities; (v) businesses related to private trading systems (PTS); or (vi) businesses related to the receipt of deposits of securities or money, the opening of accounts, and the transfer of bonds or other securities. PayPay Securities Corporation handles Japanese stocks, U.S. stocks, and investment trusts, supports users’ transactions, and conducts business related to highly liquid securities, over-the-counter derivative transactions, and securities management. As such, PayPay Securities Corporation is registered with the Kanto Local Finance Bureau as a Type I FIBO.\n\nA Type I FIBO, such as PayPay Securities Corporation, is required to maintain adjusted capital at specified levels, as compared with the quantified total of its business risks, on a non-consolidated basis. PayPay Securities Corporation as a Type I FIBO is required to calculate its capital adequacy ratio and notify the Director of the Kanto Local Finance Bureau of the capital adequacy ratio at the end of each month. In addition, PayPay Securities Corporation as a Type I FIBO is required to calculate its capital adequacy ratio and immediately notify the Commissioner of the FSA of the capital adequacy ratio whenever the ratio falls below 140%, and to prepare a notification of its capital adequacy ratio for each business day and submit it to the Director of the Kanto Local Finance Bureau without delay. If a Type I FIBO’s capital adequacy ratio falls below 120%, the Commissioner of the FSA may order it to take certain measures to rectify the situation. A Type I FIBO whose capital adequacy ratio falls below 100% may be subject to additional proceedings, including, in certain circumstances, the temporary suspension of its business, or the revocation of its registration as a Type I FIBO.\n\nIn addition, each of the minimum amount of stated capital and the minimum net assets of a Type I FIBO is 50 million yen.\n\nA Type I FIBO may not conduct any business other than the financial instruments business and other businesses stipulated by the FIEA.\n\n71\n\n[Table of Contents](#toc_page)\n\n \n\nIn addition, Mizuho Securities Co., Ltd. holds 24.8% of the shares of PayPay Securities Corporation, and since Mizuho Financial Group, Inc. (a bank holding company under the Banking Act) is the parent company of Mizuho Securities Co., Ltd., PayPay Securities Corporation falls under the category of “affiliated corporation, etc.” of a bank holding company under the Banking Act. Under the Banking Act, PayPay Securities Corporation is required to be classified as a company specialized in securities, and the scope of PayPay Securities Corporation’ business is limited to the scope of business permitted for a company specialized in securities under the Banking Act.\n\nPrior to entering into a financial instruments transaction contract, FIBOs are generally required to provide customers with information such as their trade name, registration number, an outline of the relevant contract to be entered into, the fees to be paid by the customer, matters related to market risks, and other material matters of the relevant financial instruments business that may have an impact on customers’ judgment. In addition, FIBOs are generally obligated to provide explanations in a manner and to the extent necessary for the customer to understand the information provided. FIBOs are also generally obligated to provide customers with information regarding matters related to financial instruments transaction contracts at the time of contract conclusion.\n\nAs a Type I FIBO, PayPay Securities Corporation is subject to firewall regulations. Specifically, PayPay Securities Corporation is generally prohibited from conducting a purchase and sale or other transaction of securities or an over-the-counter derivative transaction under terms and conditions which differ from ordinary ones and are likely to be detrimental to the fairness of transactions with its parent corporation, etc., including PayPay Corporation, or subsidiary corporation, etc., including PPSC Investment Service Corporation (Arm’s Length Rule). In addition, receiving or providing non-public information about customers from parent corporation, etc. or subsidiary corporation, etc., or soliciting the conclusion of financial instruments transaction contracts by using non-public information about customers obtained from parent corporation, etc. or subsidiary corporation, etc. is generally prohibited, except in cases where there are statutory exceptions.\n\nMoreover, PayPay Securities Corporation, as a Type I FIBO, is required to establish an appropriate conflict of interest management system within the company.\n\nA shareholder who has acquired 20% (or 15%, if there are certain facts indicative of material influence over the decisions of the company in relation to its financial and operational policies) or more of the voting rights of a Type I FIBO, or a Type I FIBO Principal Shareholder, such as PayPay Corporation, is required to submit a notification describing, among other things, the ownership of the shares and the purpose of the acquisition, to the Director of the relevant Local Finance Bureau. In limited circumstances, the Commissioner of the FSA may order a Type I FIBO Principal Shareholder to take actions to resign from the position as a Type I FIBO Principal Shareholder, including requiring the disposition of such shares as are held by the Type I FIBO Principal Shareholder. A prompt filing with the Director of the relevant Local Finance Bureau is also required when a person or entity ceases to be a Type I FIBO Principal Shareholder. In addition, the Commissioner of the FSA may request the submission of reports or materials from, or may conduct inspections of, any Type I FIBO Principal Shareholder as well as Type I FIBOs.\n\nThe Act on the Provision and the Improvement of the Environment of Financial Services\n\nThe Act on the Provision of Financial Services imposes a duty of good faith on financial service providers (including PayPay Securities Corporation) to conduct their business fairly and in good faith toward their customers, taking into consideration the best interests of their customers. The Act on the Provision of Financial Services also provides for measures to protect customers by (i) requiring financial instruments providers to explain adequately to customers certain material matters such as risks of losses incurred by customers, and the mechanisms of financial products causing losses and (ii) requiring financial instruments providers to ensure that their solicitation of customers to purchase financial products are made in a fair manner, taking into account the customer’s knowledge, experience, financial condition, and purpose; and prohibiting financial instruments providers from providing deceptive or misleading information in respect of uncertain matters in connection with the sale of financial products. Further, this Act holds financial instruments providers liable for damages caused by a failure to follow these requirements. The amount of damages is refutably presumed by this Act to be the loss of principal.\n\nOther Regulations\n\nAct on the Promotion of Ensuring National Security Through Integrated Implementation of Economic Measures\n\nRegulations on Specified essential infrastructure business\n\nUnder the Act on the Promotion of Ensuring National Security Through Integrated Implementation of Economic Measures, the competent minister may designate those who engage in specified essential infrastructure businesses as specified essential infrastructure service providers. This designation applies when the suspension or degradation of the function of the specified critical facilities in use is highly likely to cause a situation that undermines the security\n\n72\n\n[Table of Contents](#toc_page)\n\n \n\nof Japan. “Specified essential infrastructure business” is the provision of certain specified services forming the basis of the lives of the Japanese citizenry or economic activity, and the hindrance of stable provision of such services is likely to cause a situation that undermines the security of Japan. “Specified critical facilities” are facilities, devices, equipment or programs that are critical for the stable provision of specified essential infrastructure services and are likely to be used as a means for interference, originating outside Japan, with the stable provision of these services.\n\nPayPay Corporation is designated in connection with its funds transfer business and third-party prepaid payment instruments issuing business under the Payment Services Act, and PayPay Card Corporation is designated in connection with its intermediation business of comprehensive credit purchases under the Installment Sales Act as specified essential infrastructure service providers, respectively. In principle, when a specified essential infrastructure service provider introduces specified critical facilities from third parties or outsources material maintenance, management or operation of specified critical facilities to third parties, the specified essential infrastructure service provider must, in advance, notify the competent minister of a plan regarding such planned introduction or outsourcing. Specified essential infrastructure service providers that have made such notification may not carry out such plan until 30 days have passed since the day on which the competent minister receives the relevant notification; provided, however, that this period may be shortened when the competent minister finds that a screening is not necessary or, as a result of a screening, that the relevant specified critical facilities are not highly likely to be used as a means for interference actions. During the screening process, the competent minister may recommend the specified essential infrastructure service provider to take measures necessary to prevent interference actions or to suspend the notified activities. In addition, even after a screening has been completed and a specified essential infrastructure service provider is authorized to proceed with the relevant plan, the competent minister retains the authority to recommend that the specified essential infrastructure service provider implement inspections or maintenance checks, change the outsource, or take other necessary measures to prevent interference actions.\n\nIn connection with funds transfer business and third-party prepaid payment instruments issuing business, information processing systems designed to perform all or part of the data processing related to funds transfer services and the issuance of third-party prepaid payment instruments under the Payment Services Act (limited to cases where the suspension of such processing would likely cause significant disruption to the relevant business) and the information processing systems that operate such information processing systems are designated as specified critical facilities. In connection with intermediation business of comprehensive credit purchases, information processing systems that (i) handle matters related to credit card, etc. membership agreements, or centrally manage information related to credit card, etc. membership agreements, (ii) confirm the identity of persons who have received cards or other items prior to concluding comprehensive credit purchase brokerage agreements, (iii) send and receive information related to applications for comprehensive credit purchase brokerage agreements, (iv) detect unauthorized use of credit card numbers, etc., or the possibility thereof based on the information referred to in (iii), (v) confirm whether to accept applications for comprehensive credit purchase brokerage agreements based on information referred to in (i) and (iii), or (vi) replace the system referred to in (v) in the event of temporary suspension of the system or in other cases are designated as specified critical facilities. Therefore, if PayPay Corporation or PayPay Card Corporation intend to introduce or entrust the critical maintenance and management of such systems, PayPay Corporation or PayPay Card Corporation must comply with the above regulations.\n\nRegulations under the Foreign Exchange and Foreign Trade Act\n\nWe comply with the following regulations under the Foreign Exchange and Foreign Trade Act for the purpose of preventing money laundering and terrorist financing:\n\n•\nPayPay Corporation, a funds transfer service provider, and PayPay Bank Corporation, as a bank, are classified as foreign exchange transaction operators. Therefore, they are required to set certain standards and comply with the standards when making a payment or receiving payment (collectively, “payments” in this paragraph), conducting foreign exchange transactions related to such payments of customers, or conducting capital transactions or specific capital transactions (collectively, “foreign exchange transactions” in this paragraph). The content of these standards includes, for example: (i) identifying various risks, including the risk such as the possibility of conducting transactions that may fall under regulated transactions as defined in the Foreign Exchange and Foreign Trade Act, analyzing and evaluating the degree of such risks, and preparing a document containing the results of the analysis and evaluation; (ii) preparing a procedure manual that specifies policies and measures to sufficiently reduce the risks described in a document created in (i) and conducting foreign exchange transactions in accordance with such manual.\n\n73\n\n[Table of Contents](#toc_page)\n\n \n\n•\nPayPay Corporation, a funds transfer service provider, and PayPay Bank Corporation, as a bank, are required to confirm in advance, prior to conducting foreign exchange transactions, that either (i) the payments made by customers do not fall under (a) the payments requiring the approval of the Minister of Finance or (b) the payments related to capital transactions requiring the approval of the Minister of Finance, or (ii) they have obtained such approval.\n\n•\nPayPay Corporation, a funds transfer service provider, and PayPay Bank Corporation, as a bank, are required to verify the identity of customers (excluding Exchange non-residents) when conducting foreign exchange transactions related to payments from Japan to foreign countries or the payments with Exchange non-residents (limited to amounts exceeding JPY 100,000).\n\n•\nPayPay Bank Corporation, as a bank, and PayPay Securities Corporation, as a financial instruments business operator, are required to verify the identity of customers when conducting capital transactions with customers.\n\nThe Act on Prevention of Transfer of Criminal Proceeds\n\nUnder the Act on Prevention of Transfer of Criminal Proceeds, fund transfer service providers, issuers of high-value, electronically transferable prepaid payment instruments, credit card providers, money lending business providers, banks, financial instruments business operators and other entities, including PayPay Corporation, PayPay Card Corporation, PayPay Bank Corporation and PayPay Securities Corporation, are required to perform verification procedures of customer identifications and keep records of customer identifications and transactions with customers as prescribed by a ministerial ordinance. The Act on Prevention of Transfer of Criminal Proceeds also requires fund transfer service providers, issuers of high-value, electronically transferable prepaid payment instruments, credit card providers, money lending business providers, banks, financial instruments business operators and other entities, including PayPay Corporation, PayPay Card Corporation, PayPay Bank Corporation and PayPay Securities Corporation, to report to a competent authority if they determine that there is suspicion that any property received from a customer has been obtained illegally or the customer conducts certain criminal acts.\n\nThe Act on the Protection of Personal Information\n\nThe Act on the Protection of Personal Information and related guidelines cover all business operators that utilize or maintain databases containing personal information, and thus apply to PayPay Corporation, PayPay Card Corporation, PayPay Bank Corporation and PayPay Securities Corporation. Pursuant to this Act, business operators are required to (i) specify the purpose for which personal information will be used prior to handling the information, (ii) save for cases expressly permitted under the Act, refrain from using such personal information beyond the purpose specified without obtaining the prior consent of the person to whom such information relates, (iii) save for cases expressly permitted under the Act, refrain from disclosing such personal information to a third party without obtaining the prior consent of the person to whom such information relates, and (iv) take necessary and appropriate measures to securely manage and prevent leakage, damage and loss of the personal information.\n\nThe Act on Prohibition of Private Monopolization and Maintenance of Fair Trade\n\nSince PayPay Corporation has a large market share in the code-based payment service, changes to our operations and offerings of new services may be limited in order to comply with the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade.\n\nC Organizational structure\n\nWe are part of the corporate group headed by SoftBank Group Corp. (the “SoftBank Group”). Within the SoftBank Group, we operate a digital financial services platform business in Japan. As of the date of this annual report, the principal SoftBank Group entities with equity interests in us are: B Holdings Corporation, which is jointly owned by SoftBank Corp. and LY Corporation; SVF II Piranha (DE) LLC, an investment fund ultimately controlled by SoftBank Group Corp.; and SoftBank Corp. and LY Corporation, each of which also holds a direct equity interest in us.\n\nOur significant subsidiaries are PayPay Bank Corporation, PayPay Securities Corporation, and PayPay Card Corporation, all of which are incorporated in Japan.\n\nThe following diagram illustrates our corporate structure as of May 31, 2026, including our significant subsidiaries and the proportion of ownership interest and, unless otherwise indicated, voting power held by us in each such subsidiary. Certain entities that are immaterial to our results of operations, business and financial condition are omitted.\n\n74\n\n[Table of Contents](#toc_page)\n\n \n\nCorporate Structure\n\nNote: As of May 31, 2026\n\n \n\nD Property, plants and equipment\n\nRefer to \"Item 4. Information on the Company—B. Business Overview—Facilities\" for information about material tangible fixed assets."}