The Competition and Markets Authority concerns over Mastercard/VocaLink merger

MasterCard’s $920 million acquisition of the UK-based payment provider VocaLink (92.4% stake) 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.

„A number of industry participants have raised concerns with the transaction and the CMA investigated a number of theories of harm including loss of competition in payment infrastructure services to Bacs, FPS and LINK ATM scheme. In relation to LINK ATM, the CMA found that VocaLink and Mastercard are 2 of the 3 most credible providers of infrastructure services to the LINK ATM network operating across the UK. As such, the merger would reduce the number of bidders and limit the ability of the LINK scheme to obtain good value when tendering for an infrastructure provider.” the CMA says in a press release.

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

Andrea Coscelli, Acting Chief Executive of the CMA, and decision maker in this case, said: „The LINK ATM network provides an essential service for millions of customers. 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 according to finextra. Yet despite these concerns, MasterCard’s acquisition plans were initially approved back in July.

Source: gov.uk