Watchdog questions Mastercard takeover of VocaLink

by Mercator Advisory Group 0

Early last year, the UK’s Payment Systems Regulator publically commented that they wanted the big UK banks to divest their ownership of payments platform and developer VocaLink. Their concern was that the banks were inhibiting the competitiveness of the services that VocaLink provided. As way of background, VocaLink is the provider of global real time payments platforms such as the UK’s Faster Payments solution. Additionally, VocaLink runs Bacs which handles direct debit and credit settlement, Link, a major ATM network and other payment services. Mastercard stepped in and offered to buy VocaLink from the banks for the sum of £700 Million. As Finextra reported, the deal is now being scrutinized:

The CMA (Competition and Markets Authority) is concerned that the acquisition will give MasterCard too much of an advantage when it comes to bidding for contracts, specifically for the provision of services to the Link ATM network which accounts for 70,000 cash machines across the UK and Europe

VocaLink currently supplies the software for the Link ATMs but the CMA is concerned that there will be a reduced number of bidders to choose from when its service provision is next put out to tender. The CMA deems that VocaLink and MasterCard are two of just three credible providers – the third being Visa.

This has to be a bit of a blow to Mastercard as the acquisition expands their capabilities into several non-card based activates and seemed to be progressing well with the transaction approved last summer. Although no one anticipates the acquisition to be completely held up, Mastercard may have to consider spinning off some segments:

The CMA has given MasterCard and Vocalink until January 11th to remedy the concern with one likely scenario being that the part of VocaLink that services the LINK network is spun off as a separate entity.

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group

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