PAX’s H1 2023 Revenue Down 15% YoY as E-payment Terminal Business Hurt by Unfavourable Macroeconomics

  • Revenue contribution from LACIS, EMEA and APAC regions drop YoY in H1 2023.
  • Revenue contribution from APAC region should improve in H2 2023 with India and SEA’s strengthening performances.
  • PAX expects a double-digit percentage decline in 2023 revenue.

PAX Global Technology’s H1 2023 revenue fell 14.7% YoY to $456 million, as the company’s electronic payment terminal business was constrained by slowing global economic growth and high-interest rates. Meanwhile, revenue from its payment terminal-related services segment surged 35.6% YoY during the period, mainly due to the growth in revenue generated from the Software as a Service (SaaS) solutions, maintenance, and installation services.

PAX revenue by segment

During PAX’s earnings call, CEO Jack Lu discussed a few key topics including the adoption of Android smart solutions, macroeconomic challenges and forward-going management strategies.

Macroeconomic Situation and Payment Trend

CEO Jack Lu: “Despite short-term macroeconomic challenges, the proliferation of electronic payments continues to be a significant and ongoing global trend. The continued advancement of payment technology, along with growing consumer appetite for convenient and secure payment options, as well as the cashless initiatives promoted by governments worldwide, have continued to open up new opportunities for PAX solutions.”

Our analyst take: “PAX’s strong portfolio across different sectors, combined with its POS terminal management platform, offers a one-stop solution for businesses. PAX is helping businesses scale their operations by providing seamless payment options. The company has strategically set up a dedicated division called Zolon to expand business Internet of Things (BIoT). PAX’s service segment revenue is expected to receive a further boost from its BIoT solutions, including SaaS (e.g. MAXSTORE) and commercial POS solutions (e.g. Elys). The enterprise IoT solution will mainly target cloud-based services for businesses to secure recurring revenues.”

Management Strategy

CEO Jack Lu: “Looking ahead, the global payment industry continues to embrace a prosperous future. PAX will continue to explore more potential business opportunities by acquiring banks, PSPs and distribution partners, offering future-oriented payment solutions for merchants and consumers across the globe.”

Our analyst take: “The payment industry has undergone fundamental changes in recent years, with a surge in the global acceptance of electronic payment options among consumers and merchants. Governments and financial institutions worldwide now place greater emphasis on their electronic payment acceptance infrastructure and are aiming to implement a more efficient and transparent financial ecosystem. The huge value and potential of the payment terminal market will be further unlocked going forward. PAX’s ongoing strategy is aligned to capture this huge market opportunity and we believe its expanding global presence and increasing investment in R&D will help it drive innovation and increase market share.”

PAX revenue by region

H1 2023 Result Summary:

  • PAX reported gross profit margin of 44% in H1 2023, up 400 bps YoY, driven by lower costs stemming from a weaker yuan and a change in its geographical sales mix. PAX’s SaaS ecosystem rose 84% YoY in H1 2023 and contributed positively to the company’s overall revenue growth. The company had more than 10 million connected terminals being managed on its MAXSTORE platform during the period.
  • In H1 2023, PAX registered a decline in revenue from the Latin America and Commonwealth of Independent States (LACIS), Europe, Middle East and Africa (EMEA) and Asia-Pacific (APAC) Only the United States and Canada (USCA) region saw a record-breaking growth of 20% YoY during the period.
  • The LACIS region posted an 18% YoY decline in H1 2023 revenue to reach $175 million, constrained by the conservative business sentiment in Brazil stemming from challenging economic
  • The EMEA region recorded $148 million in revenue, down 19% YoY in H1 2023, mostly due to economic uncertainties, especially in Europe and the Gulf Cooperation Council (GCC), resulting in a temporary slowdown in market demand. However, PAX is confident that its strong brand recognition and products, as well as a reputable network of channel partners, will continue to positively influence growth in the region.
  • The APAC region saw a 24% YoY decline in revenue to $57 million, hurt by the longer-than-expected sales cycle in India, which offset the growth of other markets in the region. However, going forward, several APAC countries are expected to contribute increased sales revenues as PAX’s brand recognition improves and new products hit the market.
  • During H1 2023, PAX secured a steady increase in shipment volumes from the SEA region as countries like Indonesia and Singapore ramped up the adoption of PAX Android smart products as they move to modernize their electronic payment systems. Riding on this wave, along with India’s strengthening contribution, the APAC region should perform well in H2 2023.
  • The USCA region registered a record-breaking growth of 20% YoY in H1 2023 with $76 million in revenue, mostly driven by increasing market demand for diverse payment options and value-added services. PAX Smart Android solutions have maintained strong sales momentum and positive market reception of the newly launched Elys Solution.
  • In July 2023, PAX was elected to the Board of Advisors of the PCI Security Standards Council (PCI SSC), making it the first and only Chinese company to join the board – this proves how good its products are. PAX should leverage the PCI SSC news to keep gaining market share in the US and Europe.
  • PAX’s expertise in Android SmartPOS technology has enabled it to lead the Android SmartPOS solutions space. However, it faces strong competition in other use cases and form factors from international players like Ingenico and Verifone and homegrown Chinese players like Newland, Tianyu and Castles.
  • With an unwavering dedication to the payment terminal sector for the past two decades, PAX has built extensive expertise, capital prowess and a diversified global footprint supported by a strong portfolio across different sectors catering to different needs of merchants and businesses. This has helped PAX become risk resilient and adaptable to volatile environments.
  • PAX has a bleak outlook for 2023, given the macroeconomic obstacles, decelerating global economic growth, and elevated interest rates. The company has anticipated a double-digit percentage decrease in revenue for the year. Similarly, competitors like Newland, Tianyu and Castles are also grappling with these macroeconomic challenges for their payment terminal businesses.

Related Reports:

PayPal Second Quarter Numbers Get COVID Push

The second quarter of 2020, which was all about COVID-19, turned out to be a phase of accelerated growth for PayPal with the pandemic providing people an additional reason to adopt contactless payment. Introduction of new services, and good results from the partnerships and acquisitions done in the past, contributed to the stellar performance. The company’s revenue rose 14% QoQ in the second quarter compared to a fall of 7% in the previous quarter.

Exhibit 1: Quarterly Change in Revenue of PayPal since Q2 2018

Counterpoint - Quarterly Change in Revenue of PayPal since Q2 2018
Source: Counterpoint Research

Report Card: Q2 2020 Earnings

Counterpoint-Paypal Q2 2020 Earnings

The COVID-19 Factor

Before the COVID-19 pandemic, money in its intangible form was being increasingly adopted by people, with the graph following a steady path. However, COVID-19 gave a big additional push to digital payment platforms following concerns over spread of the pandemic through currency notes. Those who were reluctant to join such platforms before the pandemic took no time in adopting the contactless mode to pay for their essential purchases.

One of the most accepted modes of contactless payment is the QR code. Though it is not the latest form of contactless payment, it caught wider attention when PayPal recently launched the QR code service in 28 markets globally both on the Venmo and PayPal platforms. QR code enables the users to make a payment just by scanning a code. This service has helped many small merchants survive the pandemic. In fact, PayPal marketed the QR facility as a safer mode of payment during the pandemic.

The pandemic has seen a remarkable shift in people towards e-commerce, helping PayPal garner new users at a remarkable rate. However, the company also points to the higher rate of activity by mature users and their loyalty to PayPal.

PayPal registered a fall in revenue from the travel and vertical event segment. However, this segment has a smaller role in the overall numbers since March, when the pandemic accelerated at an explosive rate globally.

Strength of relationships created by PayPal

PayPal, which has its reach in around 200 markets, has been active in entering collaboration, partnership and acquisition deals since its beginning. Some of the major acquisitions include Venmo, Honey, Braintree and iZettle. Honey, Braintree and Venmo continue to outshine their outcome every quarter. In line with the trend, in the last segment of the second quarter, PayPal entered a tie-up with Gojek. The strength of Gojek in Southeast Asia is being seen as an opportunity to have a deeper penetration in that region. In another move, PayPal has extended the Visa Direct partnership across the world with an extra push to global white label Visa direct payment functionality through PayPal, Braintree, Hyper wallet and iZettle.

Exhibit 2: Partnerships & Acquisitions of PayPal

Counterpoint-Partnerships & Acquisitions of PayPal
Source: Counterpoint Research

PayPal role in addressing socio-economic concerns

PayPal is not only focusing on expanding its reach to people but also looking at leaving an impression in their minds that it cares for their socio-economic well-being. To bridge the economic divide, PayPal has contributed more than half a billion dollars towards the black- and minority-owned businesses and communities in the US, also among the hardest hit by COVID-19. Besides, for the US Small Business Administration’s Paycheck Protection Program (PPP), PayPal has contributed $2 billion in loans to more than 76,000 small businesses. PayPal has also acted as a medium for the customers, employees, and partners for the COVID-19 associated donations. The company campaigned across 12 markets and facilitated over $5.6 billion in donations.

Key takeaways

With the competition in the digital payment industry getting tougher at every turn, PayPal has been making efforts to sustain its growth. A wider reach across nations, along with some complements and substitutes, has helped PayPal in leaving its impression globally at the right time. At the same time, it is essential to educate people about digital payment platforms and their functionality.  With the COVID-19 factor still there, the ripple impact of the second quarter is likely to be highlighted in the coming quarters.

Related Posts

COVID-19 as a Catalyst in the Deeper Acceptance of Digital Payment Platforms

Looking at the impact of COVID-19 on digital payment platforms, its acceptance in the near term will be improved leading to a stronger role in the longer term.

COVID-19 has damaged both, demand and supply. With lockdown across various parts of the world, many manufacturing and production units are shutting down. It led to a steep fall in the supply of intermediary as well as final goods. The COVID-19 crisis does not seem to be a short-stay guest, it will result in the exit of many small to medium scale businesses from the market. On the demand side, people are facing a threat to their livelihood, pushing the economy generations back.

Cash as a medium of exchange losing its dominance

During the COVID-19 crisis, cash is seen as a potential carrier of the virus; governments and regulatory bodies are discouraging its use. The urgent need for essential goods is forcing people to switch to digital payments sooner than perhaps they would otherwise have done. For those for whom cash is their only means of payment are finding it harder to make purchases.

Furthermore, with many bank branches also closed, retail stores have limited options for processing cash into their bank accounts and they do not want to be left holding large amounts of cash that may be vulnerable to theft.

Shift towards the digital payment platforms and examples

During the lockdown, the frequency as well as the total monetary value of transactions, has declined. However, with people only buying necessary goods and more goods in one go, the value per transaction is increasing, and people are increasingly relying on digital platforms:

  • Cash use in Britain has halved in just a few days following the government’s imposition of a nationwide lockdown. Stores selling essential goods and services are trying to avoid cash transactions. For transactions of GBP30 (~$40) and under, most stores can accept contactless payment by credit or debit card, or mobile payment, for example Apple Pay.
  • In Australia, basic amenities outlets are also asking customers to use contactless technology to avoid touching EPOS machines.
  • PayCargo, Florida based online payment platform has launched a new service to help the freight and shipping community.
  • While official coronavirus cases in Russia are low, the country has still instituted a lockdown in Moscow and other major cities. Here too, there is a push for digital payments to discourage the circulation of banknotes.

Emerging regions, such as Africa, which is known to have the largest unbanked population, are implementing measures to shift a greater volume of payment transactions toward mobile money and away from cash.

  • M-Pesa, the dominant player in Kenya is waiving fees, and the daily transaction limit has been raised from Ksh70,000 (≈$660) to Ksh150,000 (≈$1400).
  • Paga, a mobile money operator based in Nigeria, with free P2P transfers, now allows for free transfers up to roughly 5000 Naira (≈$15) from customer accounts to bank accounts, to encourage more digital payments.
  • Ghana’s monetary body also eased know-your-customer (KYC) requirements on mobile-money, allowing citizens to use existing mobile phone registrations to open accounts with the major digital payment providers

People’s anxiety about obtaining enough food and medicine is offsetting long-standing concerns about the potential for fraudulent activity that may have prevented stronger uptake so far. This new spike in activity will encourage payment providers to continue investing in service quality and anti-fraud measures, though fraudsters will also see the increased use of digital platforms as a golden opportunity.


Until 2019, digital payment adoption was slow and varied significantly by country. Reasons included cultural, demographic and technological – many of which were a function of economies being at different stages of development. However, the uncertain longevity of the COVID-19 crisis will lead to the public being habituated to digital payment platforms, almost by force. With handset penetration improving significantly, with nearly 5.1 billion total unique mobile users and 3.7 billion unique mobile internet users at the end of 2019, it will help smooth the adoption of digital platforms for payments.

And with more competitors providing digital payment platforms, the competition should help to sharpen the service experience for users as poor performance will lead to users voting with their (digital) wallets.

Behavioral Biometrics: The Next Step For User Authentication

Behavioral biometrics provides a new generation of user security solutions that identify individuals based on the unique way they interact with smart devices such as smartphones, tablets or notebooks. The technology creates a unique profile for each user by tracking various metrics that are likely unique to the individual. These include things like: the angle a smartphone is held at, swipe/scroll patterns, keyboard/gestural shortcuts pattern, walking style/speed, typing style (speed, keypad pressure, finger positioning), and other keystroke dynamics. It uses software algorithms to build a unique user profile, which can be used to confirm the user’s identity on subsequent interactions.

The evolution of such a technology is important to all businesses under the e-commerce umbrella. Apart from fraudulent activities through credit card or SIM cloning, millions of goods are also left unbought due to the long and complex payment authentication process. This is a huge opportunity loss for the seller as well as each company involved in the value chain of the payment process, including the payment gateway provider as well as the bank issuing the credit card. In such a case, the payment authentication system acts a bottleneck for successful transactions.

Behavioral profiling has various applications in authentication and security, as it profiles unique behavior comprising physiology and other factors including social, psychological, health factors, etc.

User Behavior Tracking on Touch-Based Devices

  • Various web services track clicks and mouse cursor activity on web pages and search engines, but in touch-based interfaces such as smartphones, a cursor doesn’t exist, and touch events don’t represent user interest correctly.
  • On small screens, users move the viewing area left-right and up-down to read through the text. Users also zoom in/out to switch among overall layout and enlarge the content of the page to be examined. Thus, tracking these user behavior metrics creates multiple insights.
  • A display can track the user’s behavior of viewing different areas of content and the duration the user spent in each area through bounding boxes and heatmaps. This creates a visualization of the parts of the web page the user focused on.
  • A short dwell-time in a particular region indicates low-user interest, while long dwell-time indicates the user read through the written content in the region.
  • The information can be used for advertising, user profiling, and web-page analysis.

Real Life Implementations

Appsee is one such analytics platform. It provides visual screen usage analytics solutions to clients. The platform records the user interaction with the app and provides information through heatmaps, user flow charts, user navigation path, and other information. Touch heatmap analytics aggregates various gestures used during the interaction with the app, including taps, double-taps, swipes, pinches, etc. The heatmap is shown as a layer placed over the actual app screenshot, making it easier to analyze the interaction with the app. The frequency of interactions is color-coded. The information is useful for app companies to realign the user interface of the apps.

BioCatch, another US-based behavioral authentication, and threat detection solutions firm, partnered with Samsung SDS to integrate behavioral biometrics to detect fraud on popular mobile apps. The app profiles users based on different behavioral metrics such as the angle the phone is held, swipe/scroll patterns, and other behavioral attributes. When unusual behavior is detected, the app raises a red flag and implements additional security measures. According to BioCatch, a combination of behavioral biometrics and other new forms of phone-based ID verification (such as fingerprint and Face ID) will eventually replace the password as a form of security.

With credit and debit card transactions increasingly taking place through smartphones. Companies like Mastercard are investing in behavioral biometrics. In March 2017, Mastercard announced it was acquiring NuData Security, a global technology company that helps businesses prevent online and mobile fraud using behavioral analytics. NuData offers solutions which incorporate biometric, behavioral and device metrics to flag security violations and verify trusted users.

The Regulation Roadblock and Future Outlook

For now, behavioral biometrics are at a nascent stage. As more payments are made through smartphones, the banking and finance sectors are increasingly likely to seek to leverage smartphones sensors to aid in authentication. Meanwhile, user data protection and regulations like GDPR may act as a roadblock to the use of the technology. In this case, the technology can act as an additional layer, if not the core authentication system.

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