Payment Methods

Is A MasterCard, VocaLink Acquisition In The Cards?

Reports surfaced yesterday (March 3) indicating that MasterCard is considering a bid for U.K. payments provider VocaLink in what could be as much as a $1.4 billion takeover, according to unnamed sources cited by Financial Times.

If reports are to be believed, MasterCard is reportedly bidding against another unnamed company for VocaLink, which processed roughly 11 billion transactions in 2015.

VocaLink is responsible for roughly $8.5 trillion of payments in the U.K. each year. VocaLink processes 90 percent of the nation’s salaries, 70 percent of household bills and nearly the entirety of state benefits — meaning there is basically no business or person in the entire country that didn’t use its technology in some capacity last year.

Neither VocaLink nor MasterCard have provided public comments on the matter.

What makes this particularly noteworthy is that MasterCard’s bid for VocaLink comes at a very interesting time for the U.K. payments industry — one week, in fact, after the U.K. payments regulator pushed big banks to sell their stakes in VocaLink, citing that bank ownership stifles innovation. U.K. Payment Systems Regulator (PSR) Managing Director Hannah Nixon recently noted that divesting itself of bank ownership would enable VocaLink to stimulate more innovation and competition in the U.K. market. A sale to MasterCard would be an interesting twist on bank ownership given that banks are key network stakeholders.

“The evidence we have gathered shows that common ownership is hampering competition and the speed of innovation in the market. There needs to be a fundamental change in the industry to encourage new entrants to compete on service, price and innovation in an open and transparent way,” noted Nixon.

The regulator, apart from the sale, is also advocating for a new procurement process for future payments networks that it believes will better allow for more competitive and transparent procurement.

“This will be an open, independently monitored process, based on best practice,” a PSR report said. “It will be used as soon as an operator’s current contract with VocaLink comes up for renewal.”

The regulatory body is also recommending the introduction of a common messaging standard in the hopes that it will better even out the competitive landscape.

“Our proposals will increase competition and create more opportunities for challengers, FinTechs and other organizations looking to enter the market,” Nixon said. “This will create the conditions for greater innovation, which is in the interests of those that use the infrastructure services directly and the U.K. economy as a whole.”

VocaLink’s ownership has been under scrutiny in the U.K. for some time following discussion from private equity funds that had reportedly entered into discussions with it to acquire larger stakes in the company — which would take away from the bank-owned structure. Reports suggest that MasterCard’s interest in acquiring VocaLink was  expressed prior to the Payment Systems Regulator’s remarks last week.

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