July 26, 2016Two of the biggest card brands in the world made significant strategic moves last week. Mastercard followed up its announcement that it would expand its Masterpass digital payment solution into stores with even bigger news that it spent nearly a billion dollars on U.K. direct debit and mobile payment network provider VocaLink. And, Visa announced an extensive partnership with PayPal that could move the online pioneer back into stores and move Visa more heavily into digital payments. Late last week, Mastercard said it will acquire a bit more than 92 percent of VocaLink for £700 million ($920 million). VocaLink operates Britain’s automated clearing house that enables direct credit and debit payments between bank accounts. It also operates the U.K.’s ATM network and a mobile payments app called Zapp. “We’re excited about the opportunity to play a bigger role in payments in the U.K., a very strategic market for us,” said Ajay Banga, president and CEO of Mastercard. “VocaLink is a unique company with outstanding technology, assets and people. We look forward to investing in and maximizing the technology, and embedding it in our products and solutions, both in the U.K. and around the world.” Mastercard said it expects to lose money on the deal for two years before it becomes accretive to earnings. On the same day, Visa said it has partnered with PayPal so the companies can work “more collaboratively” with each other on digital payment solutions. Many have characterized the move as a way for PayPal to get back into payments at the physical point of sale and achieve more certainty around the fees it pays Visa. Others said that PayPal now moves from “disruptor” to “establishment,” no longer an just an online payment method trying to make an end run around the card networks. For its part, PayPal is positioning the move as a way to enhance customer choice. “While we expect this to drive incremental expense, we now have evidence to support the assertion that customer choice will benefit both our business model and our customers’ over the medium term,” said PayPal CEO Dan Schulman in the company’s earnings call on the day of the announcement. “This agreement will allow both companies to offer greater choice to merchants and consumers and increase value to Visa issuers and PayPal customers.” Schulman noted the access to Visa’s tokenization services through the Visa Digital Enablement Program in the U.S. that will allow customers to pay with the PayPal wallet where they see the Visa contactless logo.