The pair said the merged company would create a payment processor ready to compete on a pan-European scale when the Single Euro Payments Area (SEPA) system comes into force in 2008.
When the merger is formally completed, subject to Office of Fair Trading approval, VocaLink will have the range of services necessary to compete in this environment, said the two firms.
The first services from the new company will include SEPA-ready and real-time payment services designed to accelerate domestic and cross-border payments.
The combined organisation will deal with over eight billion transactions this year. VocaLink will be able to offer a broad range of services for both cash machines and automated payments.
Voca’s operations process 90% of the UK’s salaries and 15% of Europe’s automated payment volumes. Link is an international leader in ATM-based services and real-time transactions, operating one of the biggest ATM networks in the world.
The two companies are already working together to build the infrastructure behind the UK’s Faster Payments initiative, which will deliver real-time payments to the UK market by the end of the year.
Current Voca chief executive Marion King will be the merged company’s CEO charged with running the business.
King said, “We’re already working together successfully to build the UK’s Faster Payments system and the operational and intellectual synergies are clear. The move will create the broad product portfolio needed to compete in a wider European market in light of the introduction of SEPA.”
Under the terms of the proposed agreement VocaLink will be managed through a new board including independent non-executives. Peter Presland, Link’s current chairman, will assume the role of non-executive chairman.
But if the new company is to be successful, it has some technical obstacles to overcome.
Gareth Lodge, an analyst at financial services advisory firm TowerGroup, said, “The combined company is a giant in volume terms. However, without the various kinds of payments processing the two partners provide running on the same platform, it remains to be seen as to what the actual benefits are in the short- to mid-term, other than a broader range of services for both companies.”
Lodge added, “The OFT will be studying the merger in great detail. The OFT has been studying retail banking closely for some time, and the combined body will have a dominant position in payment systems, something the OFT might object to.”
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