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Watchdog questions Mastercard takeover of VocaLink

04 January 2017  |  17586 views  |  1 Mastercard logo

MasterCard's £700m acquisition of UK-based payment provider VocaLink has hit a snag after the Competition and Markets Authority (CMA) voiced concerns over the deal.

The CMA 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.

In addition, VocaLink also supplies software for Bacs, the automated clearing house which processes the majority of UK salary payments and state benefits.

"The Link ATM network provides an essential service for millions of customers," said CMA acting chief executive Andrea Coscelli.
"It's important that Link has a good choice of providers when it comes to supplying the necessary infrastructure so it can take advantage of the opening up of payment systems to competition. These concerns warrant a closer investigation in the event that Mastercard cannot address them at this stage."

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.

In a statement, Mastercard says: "In its announcement, the CMA noted that it has no concerns related to providing payment infrastructure services to BACS or the Faster Payments Service. We’re pleased to have the opportunity to address their one concern, regarding the LINK ATM scheme, in the timeframe provided."

The CMA's intervention, which  it says is a response to concerns from the industry, comes after the UK's Payment Systems Regulator, back in February 2016, suggested a new ownership structure for VocaLink, which is currently owned by a small number of banks including Barclays, Lloyds and HSBC, and a more open and transparent procurement process for payment networks.

Yet despite these concerns, MasterCard's acquisition plans were initially approved back in July.

Comments: (1)

Anish Kapoor
Anish Kapoor - AccessPay - Manchester | 04 January, 2017, 16:54

The proposed sale of Vocalink to MasterCard, threatens to kill innovation in UK Payments – This was my damning verdict back in AUG 2016. I put some thought into this whole acquisition back then and my reasoning for the statement above can be found in a Finextra blog post. Read it here: Selling VocaLink to MasterCard will Kill Innovation in UK Payments.

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