VocaLink aims to bring the functionality and capability of real-time systems to home turf in the next five years. Anna Milne gets the lowdown from industry experts about MasterCard’s acquisition of VocaLink, and what its future holds
Since the news of MasterCard’s acquisition of UK payment system operator VocaLink broke, industry commentators have proffered their views and opinions on what the new deal spells for the payments ecosystem both in the UK and abroad.
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VocaLink has exported and developed a real time payments system that has been deployed in Sweden, the US, Singapore and Thailand and is planning on bringing it home (to the UK) in the next five years.
Speaking to CI, David Yates, CEO of VocaLink and now also on the management committee team at MasterCard, explained how VocaLink views the market and its place therein, citing MasterCard research, which found that across the top 50 markets around the world, 50% of all payment markets are carried across automated clearing house (ACH) systems.
Convergence of networks
“From that point of view, VocaLink- regarded as a world leader in ACH- enables them to have the right tools to tackle those paymentflows on a global basis.
“What ACHs have typically been very good at is transporting bulk payment and in doing very automated regular payments like direct debits and standing orders.
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By GlobalData“Traditionally, ACHs have not been very good at doing commerce- you can’t use your bank account at POS or to buy something online. This is where Zapp comes in.
“As cards dematerialise, it doesn’t matter which money transmission network you use, whether it’s a card clearing network or an ACH clearing network, you’re just moving money from one bank account to another,” Yates continued.
“Our view is there will be convergence, and all of this functionality just needs to be provided efficiently.
“We think that in a world of electronic commerce and mobile commerce, the pre-requisite is a real-time system, and we happen to have one.”
Industry view: VocaLink’s acquisition by MasterCard could mean big changes for payments in the UK and globally
Jeremy Nicholds, strategic advisor to fintech startups
“MasterCard’s acquisition of Vocalink, including its Zapp subsidiary, is an inspired move – albeit a move which Visa would not have been allowed to make on competition grounds.
“It places them right back in the game with current account-funded transactions.
“With Visa’s tight grip on UK debit cards unlikely to be broken in this new world of regulated fees, MasterCard otherwise faced relatively slow transaction growth from its credit portfolios, as well as potential exposure – and disintermediation – from PSD2-instigated direct merchant-to-bank transactions.
“With the Vocalink transaction they are now playing in new and attractive spaces, including faster payments and the still-emerging mobile payments business.
“This is a great deal for the Vocalink team, including Zapp, which MasterCard can help to internationalise. It is also another big payday for Britain’s big banks, and a step forward for developing electronic payments generally.”
Tom Hay, head of payments, Icon Solutions
“MasterCard’s acquisition of VocaLink has created a new payment powerhouse in Europe and beyond, and represents a win-win for both companies.
“VocaLink knows that payments processing is a scale game, and having a virtual monopoly in the UK, the only way to drive further scale is to pick up volumes in mainland Europe and beyond.
“For MasterCard the rationale is twofold: The first is VocaLink’s Immediate Payments System, which is live in Singapore and forms the basis of VocaLink’s solution for US Faster Payments. This gives MasterCard a presence in non-card payments, and its global reach and network of banks would drive a level of market penetration that VocaLink could never achieve alone.
“Mastercard is now well placed to offer a pan-European Instant Sepa Credit Transfer service, bypassing national clearing houses.
“The second jewel in the crown is the Zapp system. Zapp has been struggling to achieve ignition, and MasterCard’s backing could provide the boost that it needs to get it across the line. This would give MasterCard a new route into UK debit payments, which Visa has dominated for years now.
“The concept could also be rolled out in Europe, giving MasterCard a dominant position in alternative (non-card) retail payments and potentially relieving the downward pressure on card fees that would result from other players offering alternative payments.
“As real-time payments become ‘the new normal’ we may finally be seeing the convergence of card payment networks with non-card payment networks.
“A global MasterCard network offering real-time payments of both types is a force to be reckoned with.”
David Parker, CEO, Polymath Consulting
“This is a very logical move for MasterCard. Its business, one could argue, is owning the infrastructure that banks and consumers rely on to make payments and move money.
“Vocalink – both in the UK but also globally in other markets – is in the business of creating interbank and consumer bank no-scheme rails. This therefore offers a very good fit for them.
“How much competition authorities may be concerned with the greater concentration of payment rails is another question.”
