Thursday 21 July 2016 1:28 pm

Mastercard snaps up Vocalink giving banks a £700m windfall

Mastercard has snapped up a majority stake in Vocalink, the payments processor that probably handles your salary payment, in a £700m deal giving the biggest UK banks a windfall.

The deal comes after the UK regulator urged banks to sell their stake in Vocalink, the system which governs trillions of payments in the UK, from bacs salaries to bank transfers and the Link ATM network.

A further earn out of up to £169m will be based on performance targets. The banks will retain a 7.6 per cent stake in Vocalink for at least three years

Read more: Mastercard plots £1bn bid for payments handler Vocalink

Vocalink is collectively owned by 18 banks, including Barclays, Royal Bank of Scotland, Lloyds, HSBC and Sanatander. The Payment Systems Regulator (PSR) told them to give up their stake in the payments business to increase competition in the market in February.

“We’re excited about the opportunity to play a bigger role in payments in the UK, a very strategic market for us,” said Mastercard president and chief executive Ajay Banga.

“VocaLink is a unique company with outstanding technology, assets and people. We look forward to investing in and maximising the technology, and embedding it in our products and solutions, both in the UK and around the world.”

Read more: Banks told to sell stakes in £6 trillion UK payment systems

Mastercard said it expects the cost of the acquisition to dilute earnings for up to two years by five cents per share if the deal closes early next year. It will be subject to approval by regulators.

Chancellor Philip Hammond welcomed the deal. 

“The Payment Systems Regulator recommended the UK’s biggest banks sell their stakes in Vocalink to improve banking competition in the UK which will deliver clear benefits for challenger banks, FinTechs, UK consumers and small businesses.”

“MasterCard’s decision to buy Vocalink shows that Britain remains an attractive destination for international investors. Britain is and continues to be an open and globally facing country in which to do business,” he added.

The deal follows Softbank’s acquisition of Ftse-listed ARM for £24.3bn earlier this week.