Competition concerns in the payment systems market
The UK’s Competition and Markets Authority (CMA) has found that Mastercard’s acquisition of VocaLink gives rise to UK competition/anti-trust concerns. Mastercard UK Holdco Ltd, a subsidiary of Mastercard International Incorporated (Mastercard), is buying VocaLink Holdings Ltd (VocaLink).
Mastercard 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 three 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 CMA has assessed the merger in the context of an ongoing review by the UK Payment Systems Regulator (PSR) into the ownership and competitiveness of infrastructure that supports the three 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 two of the three 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.