LONDON – The UK’s Competition and Markets Authority (CMA) is ordering changed to MasterCard’s planned £700 million ($859 million) takeover of London-based payments company VocaLink due to “competition concerns.”
The CMA said on Wednesday that “a number of industry participants have raised concerns … including loss of competition in payment infrastructure.”
The watchdog said it investigated and agrees that the deal would give MasterCard too great a control over bidding for contracts with the UK ATM network.
Both MasterCard and VocaLink provide services to the LINK ATM network, which accounts for 70,000 cash machines across the UK and Europe. VocaLink provides software to the network.
The CMA says MasterCard and VocaLink’s “merger would reduce the number of bidders and limit the ability of the LINK scheme to obtain good value when tendering for an infrastructure provider.”
The watchdog is giving MasterCard and VocaLink until January 11 to propose a remedy to its concerns before launching a full investigation. A likely remedy would be the selling off or spinning out the part of VocaLink that works with LINK.
Andrea Coscelli, acting CEO of the CMA, says in Wednesday’s statement: “The LINK ATM network provides an essential service for millions of customers. It’s important that LINK has a good choice of providers when it comes to supplying the necessary infrastructure so it can take advantage of the opening up of payment systems to competition.
“These concerns warrant a closer investigation in the event that Mastercard cannot address them at this stage.”
A spokesperson for MasterCard told Business Insider over email: “The thoroughness of the CMA’s review reflects the significance of this deal and its potential for the industry. In its announcement, the CMA noted that it has no concerns related to providing payment infrastructure services to BACS or the Faster Payments Service.
“We’re pleased to have the opportunity to address their one concern, regarding the LINK ATM scheme, in the timeframe provided. This acquisition promises to bring greater choice and innovation to the payment ecosystem, enabling people, governments and businesses to pay the way they want to pay.”
MasterCard first announced plans to swoop for VocaLink last July. MasterCard said at the time the deal will allow it to “play a more strategic role in the UK payments ecosystem.” VocaLink provides the technology that deals with 90% of UK salary payments and almost all state benefit payments. Last year it processed 11 billion transactions and had revenues of £182 million.
BI Intelligence’s fintech analyst Sarah Kocianski flagged potential competition concerns at the time, saying: “It’s surprising that MasterCard has been able to buy such a large chunk of Vocalink because in February this year [2016] the UK payments regulator (PSR) ordered it broken up. The regulator found that having a ‘small number of big banks own and control the infrastructure’ hindered competition and innovation.”
A group of 13 banks and building societies including HSBC, RBS, Lloyds, and Barclays currently own VocaLink.
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