The contract signed by the two companies represents a multi-year agreement for a EUR 3 billion replenishing loan commitment under which private credit funds and accounts managed by KKR will purchase up to EUR 40 billion of Buy Now, Pay Later (BNPL) loan receivables originated by PayPal in France, Germany, Italy, Spain, and the United Kingdom.
Under the terms of the agreement, KKR's private credit funds and accounts will acquire substantially all the European BNPL loan portfolio held on PayPal's balance sheet at the close of the transaction and will also acquire future originations of eligible BNPL loans. PayPal will remain responsible for all customer-facing activities, including underwriting and servicing, associated with its European BNPL products.
Although split instalment payments for consumer purchases have been a long-standing concept, and PayPal has strategically provided online consumer financing since 2008, the popularity of buy now, pay later (BNPL) has experienced a significant surge in recent years. Since introducing its initial BNPL service in 2020, PayPal has emerged as a prominent instalments provider, offering Buy Now, Pay Later products and granting over 200 million loans to more than 30 million customers across eight global markets. In 2022, PayPal processed a BNPL payment volume of over USD 20 billion worldwide, representing an increase of approximately 160% compared to 2021.
Officials from PayPal said that Buy Now, Pay Later has become a major asset to PayPal's checkout experience, driving engagement, payment volume growth, and repeat use while delivering high-value customers to our merchants. Their collaboration with KKR will allow them to accelerate their PayPal Pay Later originations alongside market demand in Europe while preserving free cash flow for other strategic initiatives. This transaction is yet another example of their disciplined approach to capital allocation.
Representatives from KKR explained that having the ability to work exclusively with a scaled and high-quality strategic partner like PayPal is a testament to the strength and maturity of their Asset-Based Finance business. They look forward to growing our relationship further and serving the financing needs of consumers across Europe through this transaction.
Subject to certain conditions, this transaction is expected to close in the second half of 2023. Upon closing, PayPal expects this transaction to initially generate approximately USD 1.8 billion of proceeds to be used for a combination of increased capital return to shareholders and general corporate purposes. The transaction is already contemplated in PayPal's full year 2023 guidance for GAAP and non-GAAP earnings per share, and non-GAAP operating margin announced on 8 May 2023. Following closing, PayPal expects to allocate approximately USD 1 billion to incremental share repurchases in 2023, contributing to an updated outlook of approximately USD 5 billion in total share repurchases in 2023.
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