Since going public in 2006, Mastercard Inc (NYSE:MA) has been on a tear, returning an absolutely amazing 2,750% return to investors who were fortunate and far-sighted enough to buy and hold throughout its public existence. As most investors know, Mastercard is a payment network used for card and digital payments. Every single time one of its branded cards is swiped, dipped, or otherwise used to make a purchase, Mastercard earns a transaction processing fee and, depending on whether the transaction was facilitated in the home country of the issuing bank, either a domestic assessment or cross border volume fee. In the company's most recently reported quarter, Mastercard earned about 85% of its revenue through these means.

Mastercard's remaining 15% of revenue was earned through what it refers to as its "other revenue," a slew of services ranging from fraud protection and data analytics to consultation and reward program management. While this segment is relatively small compared to Mastercard's other streams of revenue, it is among the company's fastest growing divisions. In the 2017 second quarter, the segment's revenue increased 18% year-over-year.

Last summer, Mastercard announced it would be acquiring London-based VocaLink Holdings Limited for approximately $920 million. After the proper British regulatory agencies finally approved the deal in April, the purchase was finalized in May. VocaLink provides real-time bank account transfers, also known as Fast ACH, in key financial markets around the world including the U.K., Singapore, and Thailand. Through a partnership with the Clearing House, VocaLink will be bringing its Fast ACH capabilities to the United States later this year.

Person holding phone above payment terminal on counter. Phone displays MasterPass app.

Mastercard believes it can offer services and capabilities that no other payment network can match. Image source: Mastercard Inc.

Why Mastercard wants VocaLink

Mastercard believes the addition of VocaLink will help it become a full-service payments network, one which allows the company to approach any bank or merchant with confidence that it can offer value and services that no other competitor can match -- possibly not even arch-rival Visa Inc (NYSE:V). In the company's second-quarter conference call transcript, provided by S&P Global, CEO Ajay Banga described the advantages he believes VocaLink brings to the company:

"Now VocaLink and Fast ACH complement our MasterCard Send push payment service. Now what that does is it facilitates the delivery of funds in near realtime ... to virtually all debit card accounts in the United States ... So what we have now is a unique combination of product offerings that we believe will allow us to better facilitate consumer choice, and through that process, capture an even greater set of new payment flows. What we will have is card rails, which we had for years. We have Mastercard Send, and now Fast ACH rails. With this, MasterCard can become a one-stop shop for our customers, banks, merchants and governments."

But was the acquisition even necessary?

Yet some would question if Mastercard even needed to acquire a company with ACH payment rails to accomplish what the company says it wants. When addressing whether the addition of VocaLink put Visa at a disadvantage to Mastercard, CEO Al Kelly was fairly adamant that not only was there no disadvantage, but that Visa already had the same capabilities that VocaLink possessed. At the annual J.P. Morgan Global Technology, Media, and Telecom Conference, he stated:

"VocaLink, look, somebody would have to ask MasterCard what their logic is and how they feel about it and what their game plan is? Our view is that we have a perfectly terrific answer to VocaLink, which is something we call Visa Direct."

Kelly then added that Visa Direct was even better than VocaLink because it was a global system while ACH rails were always self-contained within a country. For good measure, he concluded, "So we're not really plussed by [VocaLink]."

If what Kelly says is true, then Mastercard's acquisition of VocaLink is especially peculiar because Mastercard already offers a service nearly identical to Visa Direct with Mastercard Send. Analysts picked up on this same question and asked variants of why the VocaLink acquisition was even necessary more than once during Mastercard's second-quarter conference call. After answering the question multiple times by explaining VocaLink's capabilities, Banga answered that the B2B opportunities for Fast ACH payment rails was "enormous".

A Foolish verdict

Banga said that, of course, Mastercard loved what you could accomplish through card payments and Mastercard Send, but that those solutions could only take you so far. He then offered the payment volume numbers that VocaLink facilitated in the U.K. last year to illustrate his point:

"In the U.K. alone, VocaLink's domestic real-time platform carries last year about 1.4 billion transactions per annum. And the combined value of that is $1.5 trillion. Whatever you can look at addressing through card rails and through the equivalent of MasterCard Send rails would be a fraction of that number."

It's virtually impossible for outsiders to discern whether Mastercard or Visa is right on this matter. What Mastercard shareholders can say right now is that the early results look promising. This past quarter, Mastercard won some pretty big deals that it says it won not on price but, rather, on the differentiated services it can now offer.

Whether Visa can offer the same services or not, if Mastercard can continue to win bank portfolios and merchant co-brand opportunities-based on Fast ACH and the other extra capabilities it offers with its core payment network platform, investors will rightly judge the VocaLink acquisition as being well worth the $920 million price tag.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.