RS Software – Will they pay investors too?

Let’s try and demystify the RS Software puzzle before us:
[Disclaimer: This is half-baked work-in-progress – discussions on with payments domain experts; Inviting VP members experienced/connected with domain experts to raise their hand and help take the discussion/examination forward]

1. Undeniable technology platform/architecting/product strengths: UPI Platform is handling monthly transaction volumes of 12Bn+; June 2024 volume was 13 Bn up from June 2017 volume levels of 10Mn 0r about 1300x in 7 years. Especially noteworthy is EFRM (Fraud & Risk Management) product (RSSL owned IP till last year; co-shared with NPCI from 2023) scaling up in tandem to support that volume of transactions with high availability, without degrading customer experience, with transactions getting completed within 5-6 seconds. No other Real Time Payment (RTP) infrastructure is anywhere near these transaction volumes – or has seen that kind of scaling up and therefore cannot claim that kind of high availability, high performance having been delivered.

2. High foot-in-the-door Convincing/Success rate: RSSL was and still is a very small company when it own the UPI Tender in 2015 competing against ~70 other competitors – many were much bigger, well-entrenched payment companies like FICO, FIS, Fiserv and others like Volante, Vocalink. Yes, they were probably helped by some like FICO who refused to share the source code (mandatory for our sovereign payment infrastructure) and withdrew, but most others stayed in contention. Which means only one thing, RSSL could demonstrate RTP technology, process, and architectural superiority over other contenders. They won again the design and architecture contract for Payments Canada Real Time Rail (RTR) project. Implementation was through Intertec – but launch has been delayed several times, now pushed to 2026!

3. Unable to Leverage/Build on early success: On the other hand, RSSL hasn’t been able to leverage these early successes and scale up on the revenue front (annually still somewhere at 60-80 Cr), although profitability is back with a bang and operating margins at all time highs of 36% in latest Qr). Surprisingly some other small businesses like Volante (in almost similar payments modernisation space) has scaled up 10x in revenues and profitability since 2018 (FY23 Revenues 206 Cr, EBITDA 35 Cr).

4. Big Guns protecting Payments Modernisation Turf (?): The biggest global payment processing networks are Amex (TTM 52 Bn), Visa (TTM 30 Bn, MasterCard (TTM $22Bn), and SWIFT (TTM $). With the inevitable shift to RTP (driven by consumer demand and regulatory tech) gradually happening, its no wonder that the biggies would try and ensure continued/scaled up presence in RTP infrastructure and with Banks and FIs.

5. Investments by Networks/Large Banks/Fis in RTP Vendors: