RS2 plc - Interim Directors’ Statement

On 27 December 2019, RS2 Software plc issued a detailed Interim Directors’ Statement updating the market on its business development initiatives during 2019 as well as an explanation of the strategy going forward. In this respect, RS2 noted that during the past twelve months, the company continued to build on the success of the previous year in terms of regional and business expansion. More specifically, during the second half of 2019, RS2 executed strategic milestones to increase its customer base and diversify its businesses in Europe and globally. This took place as the company continues to enhance its platform in order to board more businesses being large financial institutions, independent software vendors (“ISVs”), payment facilitators (“PayFacs”), and merchants from various industries such as travel, hospitality, retail, gaming, foreign exchange and health care on its platform globally. This is being done by providing issuing and acquiring processing services throughout Europe, Middle East, North America, Latin America and Asia Pacific, covering various industries, while reducing the cost of the BankWORKS® platform infrastructure.

RS2 further explained that its success is derived from the unique features of BankWORKS® which is a single platform deployed on the cloud covering all payment channels. This allows RS2’s various customers to transact globally through one single application programming interface (“API”), thus consolidating and streamlining the business of domestic and international businesses, and providing access to the entire information and reporting through one single view. These advantages allow the customer to analyse and predict the performance of their business and mitigate risk where relevant, while improving their approval which, in return, increases their business.

The implementation and deployment of significant customers of RS2 Smart Processing Ltd (which is the transaction processing services arm of RS2) is in the final stages to launch services in early 2020. New customers in Europe are concluding processing agreements to launch their services during H2 2020. Furthermore, current customers of RS2 Smart Processing Ltd have been ramping up their volumes and consolidating their entire cross-regional business on the platform.

RS2 also reiterated the main benefits of its strategy shift from the sale of perpetual licences of its platform to managed services, namely: (i) the managed services pillar has eliminated the fluctuations in revenue recognition with shorter implementation time in comparison to licencing; (ii) increasing its margins as managed services and term licences (selective per region) are more cost effective once clients scale with the platform; (iii) increasing predictability of revenues as managed service revenue is predominantly transaction-based.

Meanwhile, RS2 continued to increase the value of its shareholders through the implementation of the acquiring business. In this respect, the company is already engaged with merchants from different industries to start direct acquiring in Europe and Latin America. In order to accelerate the process, RS2 is obtaining its financial institution licence from the German regulator which is expected to be issued during mid-2020. In order to launch its acquiring business during the first quarter of 2020, RS2 signed a sponsorship agreement with a European acquirer in order to utilise their relationship with the card organisations (such as Mastercard and Visa) for its acquiring subsidiary RS2 Financial Services. Once the e-money licence is issued, RS2 will then be able to gradually execute the following financial services: (i) acquiring payment transactions; (ii) issuing of payment instruments; (iii) deposit transaction business; (iv) cash withdrawal business; (v) payment business without credit line; (vi) payment business with credit line; (vii) money remittance; (viii) payment initiation services; (ix) account information services; (x) factoring in connection with payment services; and (xi) e-money business.

In North America, RS2’s subsidiary, RS2 Software Inc is now offering a global, complete and modern cloud-based processing platform (issue/settle/acquire) for any form of payment (including crypto-currency), with rich functionality and API enablement. RS2 Software Inc. is also positioned as a payment-as-a-service company which means that it enables innovators to create their own payment ecosystem, thus representing a real alternative to existing players and also focused on filling the void created by mega-mergers. Targeted customers are technical independent sales organisations (“ISOs”), ISVs, PayFacs and technology companies with a merchant base. RS2 Software Inc. is in the final stages of signing several agreements in different industries in the US.

RS2’s strategy for the Asia Pacific region is mainly focusing on two areas: (i) delivering payment as a service for issuing and acquiring to financial institutions of any size; and (ii) offering term licenses for issuing and acquiring to large international banks. RS2 will also be establishing sponsorship relationships with its card customers currently in the Philippines, Vietnam, Malaysia, Australia and New Zealand in order to be able to service multinational corporates in the region. In this respect, RS2’s wholly-owned subsidiary in the region – RS2 Software APAC Inc. which operates out of the Philippines – will be managing the sales and marketing activities and client support, including implementation and customisation services for the license clients and running the operation for the managed services clients. At the same time, the subsidiary will also be providing cross services to RS2 such as call centre activities and chargeback processing.

Finally, in Latin America, the strategy of RS2 is currently to continue increasing the services to its current customers in Brazil, Argentina and Colombia by supporting their regional expansion.