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Why Mastercard Bought VocaLink for $920 Million

For 50 years Mastercard was focused on so-called P2M payments—person to merchant, a.k.a. the classic retail transaction.

But P2P—person to person—payments are suddenly all the rage, thanks to PayPal-owned Venmo and others. Who needs to write a check or withdraw cash when you can digitally send other people money using your smartphone?

Why should anyone ever end a restaurant meal with a calculator and a headache?

There is a catch with P2P payments, though. Companies like PayPal haven’t yet figured out a way to make money from the technology. (Better to stoke adoption first.) Nonetheless, seemingly every consumer-facing financial services company is entering the fray, including Mastercard, which plunked down about $920 million for a majority stake in a British company called VocaLink.

In an interview in August, I asked Mastercard chief product officer Michael Miebach about the company’s broader strategy in this area. “We should be participating in a much broader range of payment flows,” he said.

How? Watch the video of our conversation, embedded at the top of this post.