British banking system ends up with the US
MasterCard has said “that will do nicely” to itself and is going to spend up to $1.14 billion on buying a majority stake of a crucial part of the UK’s payments infrastructure.
Up for grabs is VocaLink runs Link, the network that provides interoperability between British ATMs, as well as BACS, the clearing house for payments between bank accounts, and Faster Payments, the inter-bank transfer system for Internet and telephone-based payments.
According to MasterCard the deal would create “the first true combination of the traditional person-to-merchant cards business with a clearing business”. That is, of course, presuming it clears regulatory scrutiny.
It is responsible for processing more than 90 percent of British salaries and over 70 percent of British household bills. It also handles almost all state-issued benefits.
VocaLink developed the Zapp payments tool for British mobile banking apps, and the Paym mobile payments system, which identifies recipients of payments by their mobile phone numbers. Both have a lot of buy-in across U.K. banks, and it also licenses its technology to countries including the US, Sweden, Singapore, and Thailand.
VocaLink is currently owned by a consortium comprised of big banks and building societies, such as Barclays, HSBC, and Royal Bank of Scotland the current shareholders would hang onto 7.6 percent of the company for at least three years.
MasterCard would pay out around $920 million at the start.
MasterCard chief Ajay Banga said that VocaLink was unique with outstanding technology, assets and people.
The UK payment systems regulator said in February that the common ownership of VocaLink by “a relatively small number of banks” was harmful to innovation and competition. It recommended that the banks sell their stakes.