MasterCard’s Possible VocaLink Buy Could Shake Up the U.S. Faster-Payments Scene

MasterCard Inc. reportedly wants to acquire VocaLink Ltd., operator of the United Kingdom’s Faster Payments system, for just under £1 billion ($1.4 billion), according to reports in the British media Thursday. Such a deal, if consummated, could shake up the budding faster-payments movement in the U.S., where VocaLink is building a near-real-time payment system for The Clearing House Payments Co. LLC, a New York City-based clearinghouse and processor controlled by many of the nation’s biggest banks.

A MasterCard spokesperson tells Digital Transactions News that the company doesn’t comment on rumors. VocaLink, based in Rickmansworth, England, just northwest of London, did not respond to a Digital Transactions News request for comment.

VocaLink is owned by 17 financial institutions, including some of the largest banks in Britain. A U.K. regulatory agency last week said the ownership structure was impeding competition, but MasterCard reportedly expressed interest in VocaLink before that development, according to Sky News  The news service also said MasterCard has hired Citigroup Inc. to advise it on the potential deal.

More than 90% of British salaries and state benefits flow over VocaLink’s network. The company’s Web site says VocaLink processed 11 billion transactions last year valued at £6 trillion.

The U.K.’s Faster Payments system was developed to speed up electronic payments, and VocaLink executives have spoken at U.S. conferences as American banks, banking regulators, payment processors, and tech providers try to figure out ways to quicken the clearing and settlement of electronic payments here.

With VocaLink developing the infrastructure for T he Clearing House’s planned near-real-time payments service, the system could be operational next year, says consultant Steve Mott, principal of Stamford, Conn.-based BetterBuyDesign and a member of the Federal Reserve’s Faster Payments Task Force, which is charged with finding ways to speed up electronic payments, and a sister task force working on payments-security issues.

How the possible acquisition of VocaLink by publicly held MasterCard might affect TCH’s plans is unclear. TCH is owned by about two dozen of America’s biggest banks. A TCH spokesperson could not be reached for comment Thursday.

MasterCard, through its gateway system, Maestro PIN-debit network, and credit card network, claims it can reach 93% of the nation’s financial institutions, according to Mott, a former MasterCard executive. What’s more, Mott says company executives have told him MasterCard is capable of doing real-time payments with 75% of those connected financial institutions.

“They [MasterCard] are a legacy player that’s acting like a digital player,” says Mott. “To me, that represents a new and positive shift.”

In addition to TCH, automated clearing house governing body NACHA is working on its own faster-payments initiative to speed up ACH payments, which can take two or more business days to settle. TCH and the Federal Reserve operate the nation’s two ACH transaction switches.

Sarah Grotta, director of the debit advisory service at Maynard, Mass.-based Mercator Advisory Group Inc., expects the VocaLink/TCH system to focus at first on commercial payments. MasterCard, meanwhile, offers debit card holders a fast consumer-to-consumer and consumer-to-business payment service called MasterCard Send.

“The combination [of MasterCard and VocaLink] could provide a more complete platform with consideration of both consumer and commercial faster-payments needs,” Grotta says by email.