Silicon, Software & Settlement: A Payments Trifecta
Own the hardware, middleware, and cross-border tailwind driving the next trillion digital transactions.
Model Portfolio Allocation
Fiserv (FI) – 2.0% weight
Pax Global (327 HK) – 1.0%
dLocal (DLO) – 0.5%
Company Overview – “End-to-End Transaction Stack”
Platform at Scale (Fiserv). The world’s largest merchant processor pairs acquiring, issuer processing and core banking assets under one roof. Merchant margins run 39% and Financial Solutions 52% thanks to high recurring processing revenue and heavy operating leverage. Management highlights 39 consecutive years of double-digit EPS growth and calls the model “high recurring, strong incremental margin, and healthy free cash flow.”
Device Layer (Pax Global). Shenzhen-based Pax ships Android smart POS terminals to >100 countries and monetises post-sale software via its MAXSTORE marketplace. FY-24 gross margin hit 47% on disciplined BOM control and a weaker RMB. Over 11 million live terminals are connected to MAXSTORE, generating >HK$100 m SaaS revenue and meaningfully raising switching costs for acquirers.
Cross-Border EM Rails (dLocal). One-API pay-in / pay-out network operating in 40+ emerging markets. Q1-25 TPV grew +53% YoY to $8.1 bn; revenue rose +18% and net income leapt 163% YoY to $46.7 m with a 27% adjusted EBITDA margin.
Collectively the three names capture the processor, the point-of-sale device and the cross-border settlement leg of a single global payment.
Executive Summary
Core thesis: Volumes and software mix will compound faster than the basket’s blended ~15× forward P/E implies.
What the market misses:
FI’s operating leverage still expands despite scale.
327 HK’s SaaS attach is masking a hardware trough and sits on HK$6bn net cash.
DLO has digested governance noise yet trades at half the multiple of other high-growth networks.
Value unlocks: FI’s FIUSD stablecoin rails, Pax’s MAXSTORE attach, and DLO’s license expansion all offer near-term catalysts.
Compelling Positives
1 | Fiserv ($FI) – scale-plus-software flywheel
Operating leverage still climbing.
“Adjusted operating margin rose 170 bps to 39.4% while organic revenue grew 16%” proof that even at $19 bn run-rate revenue, incremental margins are expanding.Unified omnichannel wins.
“We added large enterprise clients … on the strength of our unified offering, modern gateway and growing value-added solutions” (CEO) indicates that the First Data + Clover stack is resonating with top-tier merchants.Clover still in hyper-growth. Management highlights four value-add products adopted per Commerce-Hub client after one year, raising ARPU and stickiness.
2 | Pax Global ($327 HK) – margin power hiding in “hardware”
MAXSTORE turning devices into SaaS annuities. “>11 million devices connected to MAXSTORE; SaaS revenue topped HK$100m”. This converts a one-off terminal sale into recurring, higher-multiple revenue.
CEO signals ecosystem focus. Jack Lu: “We will strengthen the MAXSTORE ecosystem to maximise Android solutions”. Growing app attach elevates switching costs and future pricing power.
3 | dLocal ($DLO US)– EM rails back on track
Volume and profit re-accelerate. Q1-25 TPV $8.1 bn (+53 % YoY); net income $46.7 m (+163 % YoY); adj. EBITDA margin 27% best quarter since IPO.
Licence moat widening. “In 2024 we added nine licences, incl. UK FCA API” increasing regulatory barriers for new entrants.
Cross-border mix tilt. Cross-border TPV +76 % YoY, now 53% of total, higher-growth corridor with lower competitive saturation than local-only processors.
Key Risks & Mitigants
Competitive Advantages
Fiserv
Deep integration moat. Only processor operating at scale in both merchant and issuer tech; over 10k financial-institution clients and 6m merchants. High switching costs (core banking conversions take 2–3 yrs) reinforce 99% client retention.
Pax Global
Cost + ecosystem edge. Shenzhen R&D and in-house firmware cut BOM; Android first-mover gave Pax >50 % of shipments on smart devices. 11 m+ connected terminals provide a distribution network for 14k apps, difficult for Verifone/Ingenico to replicate quickly.
dLocal
Regulatory and network moat. One API covers 40+ EMs and 900+ local payment methods. Nine new licences in 2024 include UK FCA API and UAE Central Bank PSP, raising the compliance barrier while improving unit economics through direct settlement rails.
Competitive Landscape
Processors. FI’s 39% segment margin and 16× fwd P/E compare with Global Payments at 3% and 13×; FIS merchant spin at 11×; Adyen at 38× on 55% margin. Investors pay for pure growth or pure value; FI offers both mid-teens growth and cash yield.
Hardware. Pax at 8× TTM earnings vs. Verifone (taken private at ~15×) and Worldline’s Terminals unit (spun at 12× EV/EBITDA). Pax couples low multiple with SaaS optionality others lack.
Cross-border. DLO’s 27% EBITDA margin dwarfs EBANX (private, est. sub-10 %) and PayU LatAm (Naspers), while its licence footprint now matches PayU India. Adyen and Stripe compete only in ~15 of DLO’s 40 markets, mostly tier-one EMs.
Bottom Line
This Payments Infrastructure Basket captures the full journey of a transaction:
Fiserv records and settles it with high-retention software.
Pax Global supplies the smart device that initiates it.
dLocal moves the funds seamlessly across borders.
Each layer carries its own moat, currency mix, and growth engine. Blended, we own mid-teens EPS compounding with upside from:
FI’s stablecoin rails and Clover SaaS share gains,
Pax’s PCI-driven refresh cycle plus MAXSTORE attach,
dLocal’s licence-led expansion into Africa, GCC, and SE Asia.
Current valuation still prices the group closer to legacy processors than high-conviction infrastructure. Execution on the above catalysts can unlock multiple expansion and deliver an attractive risk-adjusted return without concentration in any single geography or revenue model.
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