Banking on the future

THE RS2 SOFTWARE GROUP IS A GLOBAL PROVIDER OF PAYMENT SOLUTIONS TO THE FINANCIAL SERVICES INDUSTRY, WHICH CHOSE TO BASE ITS DEVELOPMENT CENTRE IN MALTA. THE GROUP HAS DEVELOPED THE BANKWORKS SOFTWARE SYSTEM, WHICH IS IN USE IN SOME 80 BANKS AND FINANCIAL INSTITUTIONS IN MORE THAN 30 COUNTRIES. DAVID LINDSAY SPOKE TO RS2 CO-FOUNDER AND CEO REINHOLD SCHAEFFTER TO DISCOVER WHY MALTA WAS CHOSEN AS A DEVELOPMENT CENTRE AND WHAT THE FUTURE HOLDS FOR THE COMPANY

Over the last 10 years, RS2 Software has made major headway in the financial software sector. However, the sector is immensely challenging and, to succeed, one must always keep one’s thumb on the pulse of the industry and on the advancement of technology.

The software group is a global provider of card payment solutions, IT consultancy and related services to international and domestic banks, service providers, retailers and other financial organisations.

Mr Schaeffter speaks about the origins of the company, "RS2 was founded by Richard Stacks, an old friend of mine, hence the initials.

"I had previously been working for 25 years at American Express until Richard and I decided to take on the new venture. We decided to take advantage of the upcoming powers of microcomputers, ie PCs, to create a banking system for that technology, for which we could see that there would be a sizeable market, mainly in small and medium sized banks.

"At the same time we had the advent of the falling of the Iron Curtain and suddenly a whole new region for banks longing for new technology presented itself."

With this in mind, RS2 developed the BankWORKS system, which, at the beginning, provided banks with data on transactions carried out through ATM machines with clients’ smart cards.

BankWORKS is an end-to-end solutions for payment systems, supporting all aspects of online authorisations and message switching, merchant acquiring, card issuing, domestic and international clearing, including full multi-currency facilities for cross-border business activities.

The system makes optimum use of new business opportunities within the scope of Smart Cards, e-Commerce, Mobile Banking, Business-to-Business, Corporate Banking, and Internet Branch Banking and Consumer Services.

Mr Schaeffter explains why Malta was chosen as a development centre for the company, "Business was growing and with two people and just 24 hours in a day, we identified the need to set up a permanent development centre.

"We were very encouraged by the business climate in Malta and we started to hire staff, which was relatively easier than it would have been in other locations. Furthermore, the standard of IT students emerging from the University of Malta was also very encouraging.

"We were very impressed with our Maltese recruits and they were technically well-versed and hungry to learn this international banking aspect which we brought in. So it was a wonderful symbiosis.

"At the same time we decided to change technology from the former DOS platform into Windows. By doing this we followed industry standards and were always able to offer the latest in technology.

"The company kept growing and with the system then being based on Windows NT and Oracle, we were able to push into the rest of the market.

"With the global presence that we have, the hub for the centre of activities is ideally based in Malta. The company was founded in Malta, our development centre has always been in Malta and out of the 30 that we employ here, only five are non-Maltese.

"Malta became a very strong development centre for us. Meanwhile, with our growing clientele in various areas, it became essential to have support centres very close to our clients, as such, wherever we have a cluster of business, we have a technical office nearby.

"When we negotiate a contract with a bank, the requirement of having local support almost surmounts all other aspects of the contract. However, now with the Internet we have no problems in logging into a system to perform routine maintenance and tweaks."

RS2 Software has, over its last decade or so of operations, been growing exponentially at a rate of some 30 to 35 per cent per year. However, while it is still a relatively small company, its predictions for growth are very promising.

Mr Schaeffter contends that one of the keys of the industry lies in accurately predicting what technological developments lie on the horizon.

The Group’s established policy of carrying out continuous systems upgrades conforming with market changes, international card organisation mandates, or regulatory authorities, as well as by incorporating technological advances the Group continuously ensures that its clients are well positioned to take full advantage of market opportunities.

He explains, "We have to be very careful in smelling out the next moves in the industry and so far we have always been in time to capitalise on innovations in technology.

"However, there have been times when there would be a fork in the road and we wouldn’t know which way the trend would go. But so far we have always been able to choose the right path at the right time and take steps in the right direction.

"Now, with the advent of high Internet usage rates, we are aiming to focus on this aspect of banking."

In order to take advantage of expanding Internet capabilities available to the public and the financial services industry, RS2 has developed Internet Banking Services. IBS is a product offering improved customer service capability to banks, service providers as well as other financial organisations by allowing a direct on-line cardholder or merchant access to card-related financial information.

Up to date balances or transactions data via Internet and Intranet is possible through the system, while Internet Card Banking also includes on-line capability for card issuers and acquirers to enter applications at central or branch locations.
However, with the development of UMTS and the pickup of mobile technology in Malta, Mr Schaeffter was asked whether he has noted any interest from local banks in the scenario of mobile banking, to which he answers, "Not yet. Banking is a very conservative business, and many banks shy away, as a matter of policy, from jumping into waters that have not yet been thoroughly tested."

However, this, by no means, implies that RS2 hasn’t developed technologies to cater for the budding sector. In fact it has taken full advantage of the new technology to serve banking customers through SMS and WAP User Interfaces.

To this end, RS2 recently released a new Mobile Banking module, which gives cardholders easy access to personal information such as credit limits, authorisations, available balances, and latest transactions. RS2 is also planning to expand the module to allow cardholders to pay their credit card bills through the mobile phone.

The company is also currently taking part in the Visa Smart Partner Programme, which intends to introduce a cost effective chip migration programme to all Visa member banks in the regions of Central Europe, the Middle East and Asia.

Mr Schaeffter explains, "Many banks today are holding back from investment in chip-based products because of cost, risk, and the lack of infrastructure to support market acceptance. It is just a matter of time before things change. Many countries in the CEMEA region have already agreed on national chip migration plans within the mandated Visa context. RS2 is able to offer integrated chip card products with rapid migration from magnetic strip to chip-based cards in just a few months."

Malta uses the magnetic strip system. There are currently some 42 million Visa smart cards in use around the world, with the biggest interest in the European Union. Such smart cards give credit and debit cards new levels of security, greatly increased protection against fraud, and can interact with ATMs and point-of-sale machines to make transactions quicker and cheaper.

RS2 later this year expects to launch an e-Commerce feature to its BankWORKS system. The feature is currently under development and is expected to take full advantage of industry standard technology to provide the utmost in secure electronic commerce.

The e-Commerce module currently under development will process all payment transactions through channels such as the Internet, mobile telephones, pay phones and digital televisions.