R S Software (India) Ltd Management Discussions.

*What were the key initiatives by the Company, from an HR and employee perspective, and market reach perspective, during FY2020-21?

Employee focused key initiatives

• The foremost initiative was to respond to the Covid-19 impact. Quick Adoption of the Work from Home model, keeping employee safety as the top criterion, and ensuring there is no impact on Customer Delivery and Business Operations across all geographies.

• Enhanced health insurance facilities with added benefits and included Covid-19 coverage.

• Introduced RS Cafe, a virtual online social platform for RSites to stay connected with each other while working from home.

• Effective Risk Management to ensure close to 100% availability of Infrastructure to support Delivery, Operations, and Innovation.

• Support teams available to all employees who needed the support at any time.

• HR process enhanced to ensure all elements of human touch, while working from remote.

Market focused key initiatives

• Implemented tools and processes for digital marketing and to enable digital sales execution.

• Increased our digital marketing through social media to promote our products.

• Launched digital marketing war room where our Sales and Marketing team, Practice team and Executive teams meet on an average twice a week to discuss and brainstorm the various sales and marketing initiatives in progress.

• Engaged with industry experts to validate our market opportunity, and help in identifying partnerships to expand our global reach.

• While the company has made significant investments in sales and marketing, approximately $13 M over the last 5 years, generating revenue of about $45 M, what has become clear is that the best go to market strategy, especially for the products is to partner with companies that have global reach and are focused on the market segments where our products and capabilities best fit. The company has been in discussions to seek partnership since December 2019, but the efforts intensified during fiscal 21. Inspite of the challenges brought about by our inability to meet in person because of Covid-19 impact, we have been successful in closing a partnership that has infact resulted in us winning an important deal in a developed world country. We have some more partnerships in discussion. Such partnership cycles are indeed long and therefore consume significant time and investment.

• Expansion of the board to enhance availability of marketing expertise.

* What are the principal trends increasing the market opportunity for RS Software?

The key trends in Payments, globally, are in the following areas -

i. Country-level central real-time payments (RTP) infrastructure for account-to-account (A2A) payments.

ii. Adoption of RTP at banks/financial institutions (FIs).

iii. Accelerating adoption of RTP through high-volume use-cases such as bill/invoice payments - therefore, bill/ invoice payment solutions (central infrastructure or bank/ bill aggregator solutions).

iv. Fraud and risk management solution at banks or as part of the central payment infrastructure.

v. Modernization of banks payment systems to offer digital services (through, say, a digital overlay service layer).

vi. Merchant acquiring and value- added services, including combining payments and data.

Before we elaborate on the market opportunity size, it is important to emphasize that RS Software has invested significantly in building products and platforms for each of these opportunities. Economies (countries) are moving away from cash, either gradually (e.g. UK or Germany) or by leapfrogging (e.g. China, India). New digital transactions are increasingly captured by non-card payment methods. E.g. in Sweden, cards have experienced a 25% decline in ‘new transactions between 2015 and 2016, and that trend has continued over the past 4 years in almost all countries that have adopted RTP (account-to-account) payments. The buyers (central banks of most countries) goal is to shift to digital payments and make them as cheap as possible for merchants. Account to Account (A2A) payments can be cheaper than cards by leveraging "cent rather than %" fee structure. Increasing A2A volumes will enhance the productivity of the nations in the long-term and hence unrelenting focus by regulators across the globe.

The number of central RTP systems in use around the world has increased 35% between 2018 (40 countries) and 2019 (54 countries), and has grown nearly fourfold since 2014. 60+ countries today have implemented central payment infrastructure systems catering to real-time/faster payments, and some of them have included applications and value-added services to accelerate the adoption of RTP. Some of these countries are upgrading to 3rd generation systems, rationalising by complying to standards such as ISO 20022 protocol. Most other countries (mostly developing economies) who do not have a central payment infrastructure for RTP are in the process of planning to implement it basis learnings from the countries who have successfully adopted RTP. Only few G20 countries are yet to modernize or develop their legacy systems (e.g. Canada is expected to go live with their upgraded platform in 2022). On the contrary, emerging markets still need to invest in RTP, with Africa and Middle East being the next opportunity.

Therefore, implementing 3rd generation central payment infrastructure platforms and greater adoption of RTP is clearly one of the key focus areas for most countries and their central banks.

Implementation of country-level central RTP platforms and their modernization also involves connecting banks/ FIs to this central infrastructure to be able to participate in the RTP/ 2A transactions. Therefore, there is significant opportunity at the banks/FIs to implement solutions to establish this connectivity.

Countries are looking to accelerate the adoption of RTP/A2A payments, and one of the high volume use-cases is bill/invoice payments. There are multiple options to enable bill/invoice payments - country-level central platform with participating entities (banks/FIs and billers/businesses), or individual solutions offered/hosted by banks and fintechs (biller aggregators). Following the EU regulations, invoice payment solutions will now have to adopt the request-for-pay message protocol. Many of the existing solution providers (biller aggregators) will soon have to implement this.

With the accelerated adoption of RTP, fraud and risk management (FRM) becomes a key requirement to be addressed. While most banks globally have FRM solutions for card-based payments and for their core banking transactions, there is a need for a FRM solution for RTP based transactions, and therefore a potential opportunity to have a holistic FRM solution or at least an aggregated view to facilitate controls and actions across all payment channels.

As banks/FIs connect into the central payment infrastructure to leverage RTP/A2A, bill/invoice payments, etc, they are also modernizing their own payment systems and implementing solutions to be able to offer more and more digital services through, say, a digital overlay service layer.

With the opportunity in the digital payments space growing significantly and at a rapid pace, there is an increasing number of payment gateway (merchant acquiring and acceptance) and value-added services providers entering this space.

Some of the more sought-after value-added services that are becoming an integral part of the payment infrastructure are mandate management, mobile payment app, dispute management, QR code standard, digital identity management, invoice validation and notification, account portability/switching, confirmation of payee, etc. With the focus on modern technology, design and architecture, and emphasis on modular and API-first systems, businesses are seeing the value of additional value-added services such as omni-channel payments, open banking, banking-as-a-service and payment data analytics in order to achieve more efficient financial flows.

Central banks are looking for central infrastructure solutions that also address the needs around cross-border payments and central bank digital currency. There are a number of global solution providers and operators who are aiming to get a significant share of the opportunity in each of the 3 areas - country-level central payment infrastructure, connectivity (banks/ FIs), and value-added services. The opportunity size is also in the same sequence - lowest (central infrastructure) to highest (application areas/value-added services). Although the core central infrastructure services is not the more attractive revenue generator, most major players are very keen to participate in this as it brings ‘soft benefits in the broader payments ecosystem and therefore the larger opportunity. Participating in the core infrastructure space provider exposure to payment regulators, FIs, payment solution/service providers, and other stakeholders (fintechs, etc). Participation in multiple markets boosts a providers reputation and positions it as a strong contender for the opportunities in the broader payments space. Further, relationships and brand value nurtured in core central infrastructure discussions can also lead to successful cross-selling in the connectivity (banks/FIs) and value-added services areas, which are relatively larger sized opportunity areas. Ideally, the intersection of all the three areas is the ‘sweetest spot to go after.

*What/Where has been our primary focus w.r.t. sales and marketing activities during the fiscal 20-21, and what are your plans for fiscal 21-22?

The primary focus of our sales execution in 2020-21 was

• Accelerating our digital marketing reach

• Identifying strategic partnerships to expand the global market reach for our products and platforms

Improving our direct sales efforts, and complement with channel sales

• 70% increase in website traffic as a result of our focus on digital marketing, increased viewership of our products section by 82.28%. Our posts on our products - RS IntelliEdge™, RS DigitalEdge™, RS BillAbhi™ was well accepted by the LinkedIn network and received the highest number of impressions, shares and likes.

• Identify and close target partners

- (a) large global players with coverage of all opportunity areas, and (b) those with specific market focus - to seal strategic partnerships.

• We engaged with large potential partners who were interested in pursuing opportunities in central payment infrastructure (especially RTP), connectivity (banks/FIs), bill/invoice payments, FRM, modernization of banks payment systems, merchant acquiring and acceptance, and value-added services. We successfully converted one of the partnerships and continue to be in dialog with more. Strategic partnerships are our go to market for our products and platforms.

• Direct sales: We created/pursued 7 opportunities - 4 with existing large customers and 2 with new large customers


• Bill Payments O FRM

• Digital Overlay Service Layer Our plans for fiscal 2021-22

• Cross-sell and grow in all our existing accounts in the areas of RTP, Bill Payments and FRM.

• Intensify the efforts to grow through partnerships in place.

• Target 2 additional strategic partnerships for global opportunities in the areas of RTP, Bill Payments and FRM, and through these partnerships, target to win 2 large opportunities in the global markets.

• Intensify digital marketing reach with a goal to complement our direct sales and channel sale.

* As you embark on intensifying your growth, what are your initiatives in the areas of Quality & Benchmarking?

Quality & Benchmarking

What are the major achievements during fiscal 2020?

The Q&B process is strategic to the company since its inception, and the company has pursued global benchmarking all thru its existence, of its process architecture.

• Re-certification of ISO 27001:2013

• Identifying and mitigating risks across processes and projects

• Developing a thorough understanding of project dynamics by detecting points of failure and generating alarms

• Conducting weekly reviews of project reported metrics and customer status reports

• Conducting defect and root cause analyses

• Measuring customer satisfaction through independent surveys

• Process automation

• Organising training sessions, workshops, planned and unplanned audits, quality weeks and other academic and non-academic seminars

• Carrying out routine audits of quality systems by third parties

• Security Standard certification for payment platforms

What are your plans for FY22?

As the company is quickly transitioning to offering products and platforms in addition to services, Q&B process will pay particular focus to the following:

• Re-Certification of ISO 9001:2015

• Business Process Automation to drive productivity

• Introduce defect metrics, and causal analysis for products and platforms

• Benchmark product development to global standards

• Regular review of companys transition of its business model

What are the key actions taken by HR during the Fiscal 2021?

Fiscal 21 has been an exceptional year for people as a result of Covid-19 impact. Even before the fiscal year began, the pandemic had hit and we jumped straight to action. It was like going to an emergency room in the hospital. Immediate actions were:

• Set up ‘war room for employee safety

• Arranged supplies of disinfectants and masks at all physical premises of the company

• Worked with O&S process to arrange frequent Covid- heavy duty cleaning

• Worked with the Executive team and decided tha employees work from home, starting March 23rd, 2020

• Worked with the Facility process to ensure adequat telecommuting infrastructure be available for all employees, to ensure that no client work is impacted

• Worked with O&S process to ensure full available to employees who had to come to the physical premises for any mission critical work

• Put in place frequent employee communication

• Introduced RS Cafe, a virtual online social platform for RSites to stay connected with each other while working from home

• Held counselling sessions on need basis

• Worked with Finance and O&S processes to enhanc health insurance to include expenses on account of Covid-19 impact

• Detailed feedback to the Board for all Covid-19 relat actions, and implemented all suggestions received

• Frequent status updates and actions taken thr the fiscal year, based on the developments related to Covid-19

• Negotiated with hospitals to help employees ge vaccinated for Covid-19, as vaccines became available

What are the key practices in HR that are helping the company to achieve the goals set by the transformation the company is pursuing?

• Focus on new competencies building by RS School of Payments new competencies required

• Performance goals realigned to meet the identified growth areas including product development, and taking the products to the market, responding to RFPs,etc.

• Performance management system that meets the goals of the individual and that of the organization

• A people process and performance-oriented culture that recognizes that our human capital are the drivers for our transformative growth

What are HRs plans/goals in FY22?

The HR plans/goals for FY22 are defined and measured with key metrics for various HR success parameters or KPIs:

• Attracting and retaining talent to meet the iden growth areas, product and platform development

• Ensure Employee morale as new practices emer result of Covid-19 impact

• Talent management target indices -right hire for right role, employee performance management & feedback, competency development and talent mobility

• Employee satisfaction index - lower a and productive employees

• Measures aligned to corporate objectives t organization growth - adherence to process implementation throughout the organization, with human touch

Risk and Response

What is the impact of Covid-19 on your company?

The impact of Covid-19 is going to be significant in all markets where the company operates. Fortunately for us the impact is positive as it creates a major growth in going digital, which translates to acceleration in the use of digital payments. For instance China is already starting to see Ecommerce/Mcommerce ahead of physical retail.This trend is likely to accelerate globally in all markets. At the same time we have increased the overall governance of all policies and practices brought about by the impact of Covid-19, especially people focused impact.

What are the Internal control systems in place and the governance for its implementation?

The Companys internal audit system has been continuously monitored and updated to ensure that assets are safeguarded, established regulations are complied with and pending issues are addressed promptly. The Audit Committee reviews reports presented by the internal auditors on a routine basis and takes corrective actions if and when necessary. It maintains a constant dialogue with statutory and internal auditors to ensure that internal control systems are operating effectively.

People are the largest asset, how do you ensure people being current in their knowledge to contribute to the growth of the company? Are there any technology risks?

The Company is focused to ensure increase in the value of human capital through the development of individual and collective skills and knowledge that remain essential for continuous growth. The Company continues to implement programs for skill development. Knowledge management. RS School of Payments and RS Payments Innovation Lab are the key assets for the growth of our people, and the company is proactive in ensuring that we remain current on adoption of relevant technologies at all times.

I Are there regulatory risks in your industry?

Yes,the payments industry is going through major transformation, which is making the regulators very active, sometimes proactive, and sometimes reactive. Fortunately,all this is positive for the growth of the payments industry,creating a larger market opportunity.

Can you please explain the Cautionary statement made by the company?

The statement made in this section describes the Companys objectives, projections, expectations and estimations which may be called ‘forward looking statements within the applicable Securities Laws and Regulations. Forward looking M statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized by the Company. Actual results could differ materially from those expressed or implied in the statements due to the influence of external factors beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statement on account of any subsequent development, information or events.