RS2 Software plc - EMI Licence

On 18 May 2021, RS2 Software plc announced that its subsidiary in Germany – RS2 Financial Services GmbH – has been granted an E-Money Institution (‘EMI’) licence by ‘BaFIN’ which is the German Federal Financial Supervisory Authority. The EMI licence allows RS2 to provide a wider range of financial services and opens up business opportunities in all other EU/EEA countries, thus enjoying from benefits of the single European financial market within Single Euro Payments Area (‘SEPA’) for passporting purposes.

RS2 noted that to date, it uses external market leading service providers to complete its service offering for financial service providers and merchants with respective back-up alternatives available. As an EMI institution, the Group will now be able to provide direct acquiring and issuing services to merchants, and in fact RS2 will be offering such services as from the second half of 2021.

RS2 Financial Services will be sponsored towards VISA and MasterCard. The initial focus will be on the German market however the Group is expecting to eventually passport its licence to other European countries at a later stage. The product offering will cover international credit and debit card acquiring, Girocard (German interbank network and debit card service) acquiring, point-of-sale (‘POS’) terminals, as well as payment service provider (‘PSP’) and network service provider (‘NSP’) services.

The Group also explained that it expects to ramp up its business by initially cross-sell acquiring services to RS2 Zahlungssysteme GmbH (formerly KALICOM Zahlungssysteme GmbH) and eventually through organic growth via on boarding of payment facilitators (‘PayFacs) and potential selective add-on acquisitions of profitable merchant portfolios.

In conclusion, RS2 noted that obtaining the EMI licence is a crucial milestone for the launch of its Merchant Solutions business line as it will enable the Group to expand its service offering within the payment value chain. Moreover, for its Merchant Solutions customers, RS2 will be able to charge a percentage of the transaction value, rather than a flat fee per transaction, which is currently the case with Processing Solutions customers. This will result in a substantial change in the revenue model for the Group as it is continues with the transformation from dependence on one-time licence fees to ongoing and recurring revenue based on the number and value of transactions processed.