CMA competition concerns over Mastercard and VocaLink merger

4th January 2017

The Competition and Markets Authority (CMA) has found that Mastercard’s acquisition of VocaLink gives rise to competition concerns.

Mastercard UK Holdco Ltd, a subsidiary of Mastercard International is buying VocaLink Holdings Ltd (VocaLink). It already owns and operates credit and debit card schemes Mastercard, Maestro and Cirrus, and has also bid to supply infrastructure services to UK interbank payment systems.

VocaLink is a supplier of payment infrastructure services to 3 major UK interbank payment systems: Bacs, the automated clearing system allowing credit and debit payments between bank accounts; the Faster Payments Service (FPS), which enables near ‘real-time’ payments between bank accounts within the UK; and the LINK ATM network.

The Competition and Markets Authority (CMA) has assessed the merger in the context of an ongoing review by the Payment Systems Regulator (PSR) into the ownership and competitiveness of infrastructure that supports the 3 major UK payment systems. The PSR has made a series of recommendations intended to improve competition in payment systems.

A number of industry participants have raised concerns with the transaction and the CMA investigated a number of theories of harm including loss of competition in payment infrastructure services to Bacs, FPS and LINK ATM scheme.

In relation to LINK ATM, the CMA found that VocaLink and Mastercard are 2 of the 3 most credible providers of infrastructure services to the LINK ATM network operating across the UK. As such, the 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 CMA has not found concerns in the provision of payment infrastructure services to Bacs or FPS since there are many credible alternatives to VocaLink and Mastercard.

The companies can avoid the merger being referred for an in-depth investigation if they can offer a remedy to address the competition concerns identified. They have until 11 January 2017 to do so.

Andrea Coscelli, Acting Chief Executive of the CMA, and decision maker in this case, said: “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.”