An emerging global POS leader

Consolidation of the global POS equipment market has narrowed the field to just a handful of key players in recent years, making the opportunities for startup companies in this arena seem limited indeed. Electronic payment systems manufacturer PAX Technology Inc. set out to defy the odds when it was founded in Hong Kong in 2000. Since then, PAX has grown to become one of the top-ranked companies in this sector.

In June 2011, The Nilson Report stated that among POS manufacturers "PAX Technology is the fastest growing and is positioning itself to be a global alternative to VeriFone and Ingenico." In 2008, PAX ranked eighth in annual shipments for POS vendors, according to Nilson. And PAX reported sales of its terminals grew by over 71 percent from 2009 to 2010.

But just how a newcomer like PAX was able to gain a respectable chunk of global market share when it faced stiff competition from industry stalwarts is a testament to what the company believes is a simple, yet visionary plan. Heather Hatch, PAX Director of Marketing, said the objective was to "come out with a terminal manufacturing company that not only focused on quality, but also price. Some of the terminal manufacturers were starting to get a little pricey."

She added that for PAX, reliability and ruggedness were key factors in designing its terminal line, as was engineering products that were affordable to average merchants for whom every penny counts. PAX is "a very R&D focused company with over 450 engineers, 150 of which are in R&D itself," Hatch said. The research and development (R&D) and manufacturing plant for PAX is located in Shenzhen, China, which to date has deployed over 2 million terminal shipments to more than 50 nations, Hatch noted.

Another determining factor in PAX's relatively rapid ascension as a global contender was its decision to make an initial public offering (IPO) on the Hong Kong Stock Exchange in the fourth quarter of 2010. Proceeds from the company's IPO have fueled capital investments, including further expansion into the global markets, including the United States, the company reported.

Branching into the U.S. market

In 2008, PAX officially opened its first U.S. office in Atlanta before moving north to its current quarters in Long Island's Melville, N.Y. According to the company, as a full-fledged subsidiary, PAX U.S. represents a long-term, multimillion-dollar commitment supported by an experienced in-house team, as well as over 100 engineers in Shenzhen dedicated to the project.

"All of our U.S. operations are run out of our New York office," Hatch said. "We're industry leaders that have come from large companies like Lipman, VeriFone and Hypercom, so the amount of staff experience and customer responsiveness there, just because we've all been in this industry for so long, is unprecedented."

Hatch also expressed optimism about PAX's continued presence in the U.S. market moving forward. "I think our time is now, with the whole VeriFone/Hypercom thing that went down," she said. "There's definitely room in the industry for another player in the U.S. I think you'll start seeing some great things come out about what we're doing."

Core products and features

According to Hatch, PAX offers a full line of POS products including PIN pads and countertop, mobile, multilane and contactless readers. The company plans to expand its line of mobile commerce-focused POS products in the near future, she said.

In the meantime, PAX has built its reputation on the reliable performance of its S-Series, which is Payment Card Industry (PCI) compliant, according to the company. "Our basic workhorse of the company is the SP20 Secure PIN pad, which emulates the VeriFone PIN pad," Hatch said. "If you have a VeriFone dial-up sitting there, you can just swap it, and it works. It's an extremely inexpensive, yet secure PIN pad. That's where PAX came into the market with that PIN pad. Then now it's moved up to the mobile terminals."

The PCI Payment Transaction Security (PTS) 2.1 certified SP20 PIN pad offers both Data Encryption Standard (DES) and 3DES encryption with a built-in privacy shield. The fully programmable SP30 model, which is EMV L1 and L2 certified, features dial modem or Ethernet/Internet Protocol connectivity, with contactless or magnetic stripe card reader options, PAX reported.

"We've just done some integration with Casio in our SP30 PIN pad, which is a more robust PIN pad," Hatch said. "It handles full payment within the PIN pad." The company's countertop terminals include the SP30-T and the S80, which feature additional ports and Wi-Fi connectivity.

The company noted the PAX S90 mobile payment terminal offers the same certifications as the SP30 PIN pad and provides a transceiver that can capture weak radio signals for reliable transactions.

The S90 also features a built-in PIN pad, four ATM-style side keys, multi-application support and a high-speed thermal printer. PAX describes its S90 as a compact and secure hand-held device for conducting card-based payments over wireless networks, with store-and-forward capabilities.

With the S90 mobile terminal, battery capacity reportedly delivers up to 40 hours of standby time. Compared to other terminals available today, the battery capacity of the PAX terminal is approximately double that of most competing products, Hatch said.

The compact MT30 multilane PAX terminal bundles a touch screen with stylus and signature capture capabilities. It also has Visa Inc. payWave and MasterCard Worldwide PayPass certifications.

The PAX R30 and R50 contactless readers are equipped to process radio frequency identification payments. The R30 weighs in at a mere 3.7 ounces and measures 5 by 3 by 1 inches, so it can fit into tight spaces. The R50, though slightly larger than the R30, offers more angle adjustments, functionality and memory for uploading multiple applications, according to the company.

"One of the main things about PAX that's different from other providers is it's easy to integrate to our products," Hatch said. "Anybody who can write a Microsoft web page can integrate to our product, so it's easy and cheap for development.

"The terminals are obviously PCI secure. We've taken care of the hard stuff and locked down any security or PCI standards that nobody can change. The terminals are basically 'turn them on and go.'"

She noted the company's products also are equipped with EuroPay/MasterCard/Visa (EMV) technology. "So as that's coming into the market as Visa is going to start mandating that that needs to happen, the terminals themselves are already EMV-certified," Hatch said.

Mission forward

"One of the things we've been working on lately is finalizing all the direct certifications into the processors," Hatch said. "I know in the past when people thought of PAX when they came into the U.S. in 2008, they didn't have all of the certifications done yet, so I think they'll start to see those being announced fairly soon." Earlier this year PAX's S90 mobile terminal received Class-A certification through Apriva, Hatch noted, adding that since the certification, sales of the S90 mobile terminal have taken off dramatically.

"The S90 seems to be a great model," said Marc Diamond, Manager of Technical Support Resolution for Century Bankcard Services, a longtime ISO that has worked with PAX since it first opened its U.S. subsidiary.

"We've also been using the PIN pads," Diamond said. "The PAX PIN pads are cost-effective and have fewer errors. ... It seems to be a lot less temperamental than some of the other devices out there. I think it's just better hardware. We've had these terminals out in the field and never had any of them come up tampered."

To further enhance terminal data security, PAX joined the Voltage SecureData Open License Program in January 2011. "One of our primary goals is to deliver highly secure and affordable data protection to our customers," the company stated.

According to PAX, the company's POS devices encrypt payment card primary account numbers and other sensitive data, and secure the data at all points - whether the data is at rest, in transit or in use.

PAX also reported that, in addition to PCI PTS certification, its POS terminals have achieved a growing list of quality and security certifications issued by international organizations, including ISO9001:2000 quality management system, EMV 2000 and RoHS certification. "We provide terminal management systems and software development tools for channel partners and resellers who wish to write secure payment and value-added software applications," PAX stated online.

Hatch believes the affordability and ruggedness built into the PAX line will assist ISOs in the process of upgrading merchants from less secure terminals. Hatch said, "I think a lot of ISOs are scared to move to next-generation products, because they always think, 'Well, then I'm going to have to pay more. Why would I want to do that?'" But for merchants with older systems, the risk of data compromise increases exponentially with each passing day, she added.

"Our focus is to work with customers as long-term business partners providing POS solutions, system integration and support," PAX stated on its website. "We provide a full range of services including consulting, installation, technical support, custom development, training and remote terminal management." In terms of product availability in the U.S. market, Hatch said PAX routes its products through the same distribution channels as competing POS equipment manufacturers.

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