NEWS | Wednesday, 14 May 2008

Ambitious plans for RS2

As banking software firm RS2 sets off with making itself known to the public, David Darmanin takes a peek at what’s in store for the company’s future

Up until when it launched its bid for an initial public offering (IPO) a couple of weeks ago, the RS2 brand in Malta was at best known among banking executives.
“Our only client in Malta is HSBC, otherwise our client portfolio is all based abroad,” said RS2 CEO Mario Schembri, explaining the reason why RS2 is deemed to have kept a very low profile.
It all started when in 1988, Reinhold Schaeffter and Richard Stacks united to provide card systems to small banks, founding RS2.
“What made the system they created so effective was that it ran on PC rather than on mainframe, which at the time was unheard of,” Schembri explained.
“After initially making contact with Eurocard, now known as MasterCard, the two founders had a chance meeting with Mid-Med bank in Malta – leading to the provision of the solution to their local branches. HSBC in Malta in fact, still operate on the same system.”
In a matter of twenty years, banking systems provided by RS2 became known in 23 countries around the world.
Explaining what seemed to be a major development for RS2, Schembri continued: “With the fall of the iron curtain in 1989, RS2 tapped the Eastern European market, where the banking industry was suddenly working hard to catch up with technology.”
After RS2 completed a high volume engine (HVE) four years ago, their flagship software BankWORKS was benchmarked at IBM and HP, clocking an impressive three million transactions per hour.
“Since then we have been able to target larger institutions, making the software available to service providers in charge of processing on behalf of banks,” he said. “We now provide an end-to-end solution, based on a modular system. This means that if a bank would need any software related to card systems, we will be able to provide it in separate modules. Banks do not necessarily have to purchase the entire system, but only those parts that would address their immediate needs, of course with the potential to add on modules as requirements change. The software is also highly parameterised, so you will not need a software developer to configure the system. After training, bank employees will be able to set specific parameters without needing RS2’s assistance.”
Asked how he handles current and prospective competition, Schembri explained how the market RS2 is involved in is extremely restricted, with a clear advantage of operating in an environment whose competition is limited by nature.
“There are very few companies providing card systems with the same solutions, maybe eight or ten in the whole world. We are very specialised and it takes a very long time to set up anything of the sort. I cannot see how start-up companies would be able to wait long enough to enter this market successfully,” he explained.
As the product practically markets itself, Schembri admitted that so far, RS2 has acquired most of its contracts by means of word-of-mouth recommendations and through response to public calls including introductions by the card schemes like VISA and MasterCard.
“We have now opted to complement this approach by plans to set up offices in strategic regions to market and provide support for our product. We are now planning to create a strategy that is joined with key partners, taking a more pro-active approach,” he said.
On human resources, Schembri said that although staff turnover is inevitable in Malta’s booming IT field, he likes to believe that theirs is low. The success in staff retention, he explains, is mainly attributed to the application of a simple and effective formula.
“We first of all expect to have highly skilled and qualified software engineers. Secondly, we ensure that the structure here at RS2 is as flat as possible. Basically there is a Chief Technical Officer and a Chief Project Officer. Both manage linear teams and they all report to their respective officer. This structure is designed to keep hierarchy as limited as possible, letting our employees feel comfortable and part of a linear team.
Besides, our salaries are very, very competitive, although one must not consider salaries as being the only incentive available to keep staff happy. We also offer a good working environment, with the latest tools and equipment. On a more social aspect, our little dos at the end of every month, where we simply get together for a drink and some pastizzi at the office has proven to be really effective with keeping teams motivated. Of course, besides that, our social committee is active in organising a host of motivational activities,” he said, adding that finding staff is not easy at all, which is why it is central for them to keep as low a turnover as possible.
Exciting developments are underway as RS2 now plans to open new offices in the Middle East, Scandinavia and the U.S., where new staff will be employed to provide first line support and marketing.
While asserting that software development will remain in Malta, Schembri did not discount options to further extend his technical workforce on the island. Asked about his plans to attract new recruits, bearing in mind the difficulty of enrolling IT staff, Schembri said: “we will see what option suits our requirements best, as we have always done.”
RS2’s most impressive clients are based in Scandinavia, where their relationship with Norway’s leading service provider Edb and Finnish Bank S-Pankki have by far contributed to RS2’s success.
“Using our platform, S-Pankki alone account for 1.6 to 1.8 million transaction per day,” he said.
CSC in Lebanon, another of RS2’s key clients, service over 130 banks in the Middle East.
RS2’s application to issue an IPO, Schembri explains, has mostly been driven by the will to grow further and steadily. Other plans for RS2 include investment in Research and Development, including the objective of opening a training academy for their clients and partners.
In conclusion, Schembri explained how this sector has practically remained unfazed with the fall of the sub-prime market, leading to a European-wide crunch claiming hundreds of billion dollars in losses for the banking and financial sector.
“Investment in card systems has not decreased due to sub-prime losses. Things need to be taken into perspective. As banks endure billions of losses due to a mortgage related crisis; one, two or three million investment in software for banking cards will not hurt the cash flow of major banks as much as it is thought.”