So just tested in GW, and his payout absolutely is increasing armor penetration.
I scored two crits each on two different characters, one before and after payout. On Mace Windu, I scored 14,986 before PO, and 16,477 after; on Vader I scored 13980 before and 15,702 after.
Both were a similar level and armor% (24%) and I was able to use the various defense calculators on the web to figure out their armor less Boba's armor penetration, and come up with a new mitigation percent, which was about 11% for both.
My Boba was lead and has 222% critical damage and 3281 physical damage, and the multiplier on his basic is 1.806, so his expected unmitigated critical damage is 3281*1.806*2.72 = 16,117.32. You can see that 16,117*0.89 is quite close to the 14,986, allowing for some damage variance. After PO, Boba would've completely gone through target's defense, so you see again that 16,477 is very close to his expected damage.
For Vader, the numbers also match the corresponding calculation if you subtract the -500 damage variance first.
So it is clear that his payout is boosting armor penetration. Since the defense penetration % under general is 0 for all my characters, I would say it's either a bug line or a placeholder for some additional defense penetration provided by a future gear piece (I'll point out that the g12+ piece of Boba's provides 100 flat armor penetration, not 100% "defense" penetration as stated above).