MasterCard offers remedies to watchdog fears over VocaLink acquisition

MasterCard has put forward proposals to the Competition and Markets Authority (CMA) after the watchdog expressed concern over its acquisition of VocaLink. The CMA said the merger could make it difficult for the UK ATM network Link to negotiate a good infrastructure service because of reduced competition.

The CMA had given MasterCard and VocaLink an ultimatum to remedy its competition concerns or face an in-depth investigation.

The watchdog’s concern was that because VocaLink, MasterCard and Visa are the three most credible suppliers of infrastructure to the Link ATM network, a merger of two of these would reduce competition and “limit the ability of the Link scheme to obtain good value when tendering for an infrastructure provider”.

In June 2016, the Payment Systems Regulator (PSR) stated its wish for VocaLink, which is owned by a small group of big UK banks, to be sold off to increase competition in payment processing. MasterCard later emerged as the company’s favoured acquirer in a £700m deal.

Services run by VocaLink include Bacs and the Faster Payments Service (FPS), as well as Link. Through these and other services, VocaLink processes more than 90% of salaries, 70% of household bills and almost all state benefits in the UK.

Since the CMA ultimatum, MasterCard and VocaLink have proposed allowing any new competitor to use VocaLink’s connectivity to members of the Link ATM network, rather than having to build their own.

They also said they would transfer or license to Link the intellectual property rights relating to the Link messaging standard, which members of the network use to communicate when customers use cash machines. VocaLink also said it would contribute to Link members’ switching costs.

“The CMA has decided that there are reasonable grounds for believing that these proposals, or a modified version of them, might be acceptable to remedy the competition concerns it has identified,” a CMA statement said.

The watchdog has until 15 March 2017 to consider whether to accept the companies’ undertakings, but this might be extended into May. If the CMA does not accept the proposals, the merger will be referred for an in-depth investigation.