KUALA LUMPUR: Electronic payment solutions provider ManagePay Systems Bhd is bracing for a hard landing in the current financial year ending Dec 31, 2016 (FY16) brought on by the slow roll-out from banks of the chip-and-pin payment card acceptance project.

ManagePay managing director and chief executive officer (CEO)Chew Chee Seng said the group is likely to post its worst-ever top line since its initial public offering on the ACE Market of Bursa Malaysia in March 2011, when it reported a revenue of RM6.48 million for FY10.

However, he believes growth is going to be exponential from FY17 when the migration to chip-and-pin payment transactions from the current chip-and-signature moves into full swing.

Last year, ManagePay saw its revenue decline 17.4% to RM8.74 million from RM10.58 million in FY14, mainly due to lower sales after the completion of one of its key projects in the small and medium enterprise segment.

“Last year, we wrote off our first-generation mobile POS (MPOS) dongles because we were the first to move into the MPOS space. The device is not able to support the new chip-and-pin requirement,” Chew told The Edge Financial Daily in an interview.

ManagePay burst into the e-money scene with its first-generation MPOS dongle, which supports only chip-and-signature payment, back in 2013, only to find out a year later that it would be rendered obsolete with the announcement of Bank Negara Malaysia’s (BNM) new payment card reform framework in December 2014, which became effective on July 1, 2015.

As a result, it had to write off its first-generation chip-and-signature technology-related inventory totalling RM7.2 million in the third quarter of FY15.

Chew said the group had been hit particularly hard by delays in the roll-out of the chip-and-pin payment card acceptance project. According to the mandate set by BNM, all banks are required to replace the signature-based system for credit and debit cards with personal identification number verification from July 1, 2017 to improve financial security and prevent credit-card fraud.

“Our company’s revenue will be low this year because of the delay in the launch of new products and services related to chip-and-pin technology,” he said.

“Last year, we were still able to generate revenue from chip-and-signature card host and terminal solutions. These card acceptance devices are now unable to support the new [pin-and-pay payment] requirement, but we are trying to sell them overseas,” Chew added.

ManagePay’s revenue dropped 64% to RM1.19 million in the first quarter ended March 31, 2016 (1QFY16) from RM3.3 million a year ago. It also reported a first-quarter net loss of RM1.58 million compared to a net profit of RM102,000 in 1QFY15.

Nevertheless, Chew said the group remains hopeful of a turnaround in 4QFY16, supported by its online wallet (MPay Balance and MPay Wallet) and prepaid card (MPay Mastercard) payment services. In February 2015, ManagePay received approval from BNM to issue electronic money via the two applications.

ManagePay is hoping to roll out its new chip-and-pin devices to the market in September.

“We have already received 2,000 to 3,000 payment acceptance devices, both terminal and chip-and-pin MPOS devices, and we are waiting to replace and roll it out to merchants,” said Chew.

Under BNM’s chip-and-pin deployment, it is targeting a total of 800,000 new terminals that would accept the new cards by 2020, whereby the current 200,000 or so old terminals in the market need to be changed and another 600,000 new terminals to be installed.

“Apart from the credit-card terminal, over 40 million cards held by current bank customers would need to be changed while more than 20 issuing banks would need to upgrade their card management systems too.

“The [banks’] hosts need to be upgraded to be able to produce the cards. The cards need to go to the market first, only then the terminals will be updated,” said Chew.

“I personally think BNM’s target is too aggressive for banks. There are too many things to be done and that’s why we cannot even roll out [chip-and-pin devices],” he added.

To ramp up the group’s earnings, ManagePay is also entering into partnerships with industry players. On June 9, it inked an agreement with the Malaysia Retail Chain Association (MRCA) to introduce the MPay MRCA Ringgit Rewards Card Programme and it is on track to introduce this MRCA co-branded card to the market next month.

Chew said the group targets to grow its merchant base to 200,000 by 2020 from 20,000 currently and he believes the goal is achievable as the focus is to roll out low-cost chip-and-pin devices for MPOS. It acquired a 29.5% stake in digital security firm Trustgate Bhd on Jan 20, in which ManagePay will be able to leverage Trustgate’s services to beef up its e-money platform and vice versa.

He also said 80% of the group’s revenue is gleaned from merchant acquisition-related service fees and monthly rental fees of credit-card payment terminals rolled out to banks. It currently has 5,000 payment terminals contractually rolled out to its banking customers.

ManagePay also earns revenue from other services like customisation and report reconciliation services. It counts Malayan Banking Bhd, Bank Islam Malaysia Bhd and Singapore’s Oversea-Chinese Banking Corp Ltd as its clients.

“We have two more banks in Malaysia coming up,” Chew said, declining to reveal the banks until formal announcements are made.

Chew also pointed to ManagePay’s cash position and liquidity, which remained robust with a healthy cash equivalent balance of RM27.97 million as at March 31, 2016 from RM76.8 million as at Dec 31, 2015.

“More importantly is how we conserve [our] cash position. We do not overspend and we plan to launch new products progressively, not rush into the market. We will try to manage our resources carefully,” he said.

Year to date, ManagePay’s share price had fallen 32.8% to close at 19.5 sen last Friday, with a market capitalisation of RM138.54 million.