For MasterCard, the VocaLink deal looks a good bet. Douglas Blakey comments
The £700m ($920m) cash deal to acquire a 92.4% stake in VocaLink will have a negligible effect on MasterCard earnings, reducing earnings per share by an estimated $0.05 per share for a couple of years.
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For VocaLink’s UK banks owners: RBS for example will no doubt find it handy to book a £150m pre-tax gain; ditto Barclays (£104m) and Cooperative Bank will surely find a good use for the £22m that it will pocket.
In a conference call, MasterCard’s chief financial officer Martina Hund-Mejean said that the deal was an ‘important component of our strategy to actively participate in all types of electronic payments and payment flows’.
The deal will do a little more than that.
MasterCard’s current share of the UK debit card market is a miserable 4% or so. Expect that to rise in the medium term as MasterCard will target new revenue by trying to shift UK banks debit card portfolios away from Visa.
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By GlobalDataVocaLink has enjoyed international success with the expansion of its real-time network and has licensed its technology to support faster payments systems in the US, Sweden, Singapore and Thailand.
MasterCard will no doubt look to cash in on the growing international demand for interbank infrastructure services.
If, however, MasterCard looks to recoup the purchase price through increased connectivity and transaction fees, the VocaLink deal may not look quite such a good deal for all stakeholders in a few years time.
As MasterCard ramps up its cash displacement strategy, how long can UK consumers expect over 97% of all LINK ATM transactions to be free?
The way we bank
The third version of the British Bankers Association’s Way We Bank report (with EY) is out and it is a must read. A number of the channel stats jump out from the pages, such as the one relating to customer bank branch interactions.
They declined from 476 million in 2011 to 278 million in 2016; in 2016, this equates to 71 average branch visits per day – a 32% fall since 2011. This decline is forecasted to continue with a further fall to 51 average branch visits per day by 2021.
Meantime, the BBA reports that there were nearly 11 million logins a day to mobile banking apps in 2015 – a 50% year-on-year rise.
A number of tipping points have been reached in the past year. HSBC, for example, saw the number of logins to its mobile app eclipse the number of logins to its internet banking service for the first time.
Functionality has improved beyond all recognition at a number of banks; RBS’ 3 million m-banking customers can now set up a savings account and cancel their direct debits from their mobiles.
At this rate of relative growth – internet banking logins actually dropped last year to 4.3 million a day in 2015 compared with 4.4 million in 2014 – it may not be long before mobile app payments overtake payments being made using internet banking.
There is much to celebrate as regards UK banks’ digital banking innovation but just in case any hint of complacency creeps in, a sobering note is sounded by the analysts Forrester.
In mid-July it released its 2016 Global Mobile Banking Benchmark report, ranking 46 major banks across 14 countries. Only one UK lender – Lloyds – made it into the top 10.
For the record, Westpac just edged out Caixabank for top spot, ahead of CIBC and Scotiabank, followed by Garanti, Bank of America Bank ZachodniWBK, Wells Fargo and CBA.
