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Mastercard to acquire UK payments system provider Vocalink

Mastercard has entered into a definitive agreement to acquire the majority shareholding of Vocalink, a UK-based payment systems provider and the parent company of Zapp mobile payments.

The deal, which is worth approximately £700 million, will ensure Vocalink's existing shareholders have the potential for an earn-out of up to an additional £169 million if certain performance targets are met. Under the agreement, a majority of Vocalink's shareholders will retain 7.6% ownership for at least three years.

New technology is quickly changing the way consumers pay for goods and Mastercard's strategy is to be active in all types of electronic payments. Taking over Vocalink will allow the card scheme to play a more active role in the UK payments ecosystem, and provide multiple new services for its customers.

Vocalink's payment platforms include BACS – the Automated Clearing House, which enables direct credit and direct debit payments between bank accounts. It also owns LINK – the UK ATM network, and Faster Payments, a real-time account-to-account service that facilitates payments via mobile, internet and telephone.

Ajay Banga, president and CEO of Mastercard, said: "We're excited about the opportunity to play a bigger role in payments in the UK, a very strategic market for us.

"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."

Analysts have pondered what the future holds for the likes of Mastercard and Visa following the recent emergence of mobile payment platforms created directly by banks and companies such as Vocalink-owned Zapp. With this week's deal, Mastercard has arguably taken out a significant section of its future competition.

Upon closing the transaction, which is currently undergoing regulatory approval, Vocalink CEO David Yates will join the Mastercard management committee.

Mastercard interchange fees

Last week Mastercard was ordered to pay supermarket group Sainsbury's £68.6 million plus interest after a UK Competition Appeal Tribunal ruled that historic interchange fees charged to the retailer were too high.

The Sainsbury's case is one of multiple claims filed by UK retailers against Mastercard and its rival card scheme, Visa, relating to alleged over-excessive fees and anti-competitive practices.

Concurrently, Mastercard is facing a consumer lawsuit which could cost the company up to £19 billion. The damage claim alleges that unlawfully high interchange fees imposed on retailers were then passed on to shoppers over a 16-year period.

According to former financial services ombudsman, Walter Merricks – who is leading the claim against Mastercard and has instructed US legal firm Quinn Emanuel  – the consumer case has been strengthened by the Sainsbury's judgement.

"I am bringing the claim on behalf of the class of UK consumers to whom the overcharge was passed on, and we are in a position to claim damages," Merricks announced last week.

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