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Confirming months of speculation, MasterCard Inc. announced Thursday that it has a definitive deal to acquire VocaLink Holdings Ltd., operator of the United Kingdom’s automated clearing house and faster-payments systems, for £700 million, or approximately $920 million, in cash.
London-based VocaLink operates BACS, the U.K.’s ACH network, as well as the country’s Faster Payments service for real-time account-to-account payments via online systems, mobile devices, and telephone. VocaLink also runs the U.K.’s Link ATM network. In Sweden, VocaLink processes ACH transactions, and it has rolled out a faster-payments system in Thailand. The company’s Zapp mobile-payment app, meanwhile, accesses fast ACH technology.
In the U.S., VocaLink has become a key player in the budding faster-payments movement by providing the technology that New York City-based The Clearing House Payments Co. is using for its planned faster-payments service.
How extensively MasterCard will be involved in U.S. faster payments through VocaLink, however, was not immediately clear. MasterCard chief executive Ajay Banga played up the deal’s potential to boost MasterCard in the big U.K. payments market, where VocaLink processed 11 billion transactions last year worth £6 trillion ($7.9 trillion).
“We’re excited about the opportunity to play a bigger role in payments in the U.K., a very strategic market for us,” Banga said in a statement. “VocaLink is a unique company with outstanding technology, assets, and people. We look forward to investing in and maximizing the technology, and embedding it in our products and solutions, both in the U.K. and around the world.”
On a conference call with analysts early Thursday, other MasterCard executives said the deal will give MasterCard a foothold in non-card business-to-business, government, and consumer payments.
“This is all about offense,” said Michael Miebach, MasterCard’s chief product officer. “We will have a much more pronounced position.”
VocaLink CEO David Yates, who will join MasterCard’s management committee, said in a statement that the deal “is positive news” for his company, and that it will enable VocaLink to “invest in further innovation to power competitive payments solutions for consumers and businesses around the globe.”
Researcher Sarah Grotta, director of the Debit Advisory Service at Maynard, Mass.-based Mercator Advisory Group Inc., calls the acquisition “a smart move” and consistent with other recent activities by MasterCard, such as its re-branding, to reduce its dependence on card transactions.
“The real interesting piece of the deal is, of course, the faster-payments capabilities that VocaLink brings to the table,” Grotta tells Digital Transactions News by email. “This not only gets MasterCard into more payment types, but also neutralizes the impact that faster payments could have on card transactions.”
The planned acquisition will give MasterCard a 92.4% stake in VocaLink, which is owned by 13 banks and building societies. Current owners have the potential for an earnout of an additional £169 million ($220 million) if performance targets are met. Under the agreement, a majority of VocaLink’s shareholders will retain a 7.6% ownership stake for at least three years, MasterCard said.
The deal needs regulatory approvals and could take anywhere from three to 12 months to close, according to MasterCard chief financial officer Martina Hund-Mejean.
