MasterCard has announced the acquisition of VocaLink in the UK. Before I start, I should say that I have worked for both organisations, and any comments I make here are mine (nor am I mentioning anything that isn’t in the public domain).
In some ways, the acquisition is surprising given all that’s happening – PSD2, the PSR threatening to fundamentally change VocaLink’s ownership, and the PSF (it’s payments – never too far from an acronym!) talking about replacing the infrastructure altogether. It’s easy to think this is perhaps MasterCard reinserting itself back into the UK market, because since its acquisition of the Switch brand, virtually all the cards have flipped to Visa.
I think it’s actually more for three reasons. Firstly, real-time payments. I’ve written about the charge towards real-time, and VocaLink is well positioned. It operates the UK Faster Payment Service in the UK, and the underlying technology is at the heart of the systems in Singapore, Thailand and The Clearing House in the US. In addition, the market is likely to explode. The ECB said at a recent conference that they expect 60-80% of all SEPA CT transactions to migrate to SEPA Inst. Even at today’s volumes, that’s 12bn transactions in addition to the UK’s 1bn. That’s volume any processor would be eyeing. Coupled with PSD2, where card volumes may well fall, this is rationale alone for the acquisition.
Secondly, look at electronic payments more broadly. The VocaLink core payments engine is award-winning. It was built to win business across Europe in the post-SEPA world, and is capable of handling multiple schemes on the same platform. Indeed, part of Sweden’s transactions run on it today alongside a very different UK scheme. Imagine now the offering that MasterCard has in, say, emerging markets: the ability to deliver 100% of electronic payments.
The third is when you bang together some of the technologies of the two businesses. These are ideas, and of course they are far harder than they sound, but just think about the possibilities:
- Real-time payments + MasterCard global network = true real-time global ACH
- ACH/real-time + low-value debit transactions = decoupled debit on your own transactions
- ISO20222 remittance data + VocaLink B2B skills + MasterCard global network + MasterCard analytics + MasterCard finances = Synegra meets Tungsten Network, but on steroids.
There’s still much to find out, and more to mull over, but the signs suggest some exciting times ahead.
– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Photo: Valeri Potapova, Shutterstock.com