PayPal Deepens LATAM Reach With Mercado Libre Integration

Digital payments firm PayPal is turning to Latin America to strengthen its position in the eCommerce payments and remittance arenas.

Today, PayPal announced an expansion of its partnership with Argentinian eCommerce company Mercado Libre –  dubbed the “eBay of Latin America” – as PayPal positions itself to capture more of the Latin America market share.

In a statement published on LinkedIn by president and CEO Dan Schulman, PayPal revealed that Brazil and Mexico-based users of Mercado Libre’s digital payment technology Mercado Pago will now be able to use PayPal to make payments at online checkout at merchants with integrated Mercado Pago. According to Schulman, this integration means PayPal’s 300 million existing users will now have the opportunity to shop and make payments at “thousands of new merchants.” PayPal will also become a payment option at checkout on the Mercado Libre platform.

Further, Schulman noted, PayPal will offer Mercado Pago as a payment method at merchants accepting PayPal, expanding PayPal’s reach to Mercado Pago’s more than 48 million existing users. PayPal is also expanding Xoom, its online money transfer service, to power remittances paid into Mercado Pago wallets in Mexico and Brazil, he added.

Citing PayPal and Mercado Libre’s “shared vision,” Schulman said that the companies are further integrating each others’ technologies to promote an expanded global footprint to help businesses reach a wider buyer pool across borders, while also connecting those buyers to financial technologies that can address their needs as consumers “underserved by the traditional financial system.”

“This is just the beginning of things we can do together,” he said. “By working closely, we can jointly leverage our scale and platform capabilities to help drive inclusion and access to the global digital economy. I could not be more pleased to end 2019 with such a meaningful development and look forward to an exciting and productive New Year.”

PayPal’s expanded integration with Mercado Libre follows PayPal’s strategic investment in the eCommerce conglomerate earlier this year.

In March, Mercado Libre announced a $1.85 billion equity offering, which included PayPal’s $750 million investment in the company through the purchase of common stock. At the time, Mercado Libre CEO Marcos Galperin said that the investment would accelerate the company’s growth and leadership to “foster financial inclusion in Latin America.”

The Latin America Market Opportunity

At the time of the initial investment in Mercado Libre, Schulman released a statement pointing to the market opportunity of the region.

“Digital commerce in Latin America is experiencing tremendous growth and Mercado Libre is well-positioned for continued leadership,” he said, adding that the company sees “great opportunities to integrate our respective capabilities to create unique and valuable payment experiences for our combined 500 million customers throughout the region and around the world.”

Indeed, PayPal and Mercado Libre held an investor call earlier this month to explore the opportunities that Latin America presents, with PayPal noting similarities evolution beyond eBay to the growth trajectory of Mercado Pago beyond Mercado Libre.

According to the report, Mercado Pago has, for the first time, seen total payment volume from transactions made off of the Mercado Libre platform surpass volumes of transactions made on Mercado Libre. PayPal noted that this trend is similar to PayPal’s own history of expansion, with the rise in transactions using PayPal off of eBay critical to demonstrating the independent value of the digital payment technology. Today, Mercado Pago’s own growth independent of Mercado Libre reflects market opportunities for both Mercado Libre and PayPal in markets like Brazil, Mexico, and the broader Latin America region.

The region will continue to become particularly important to PayPal, the company said in the report, as more payment and banking partners single out the region for their own expansion plans.

“We believe competition for payments, credit and banking services in Brazil is intensifying as a result of updated regulations and a new political environment,” the report said, pointing to the significant addressable market opportunity for both PayPal and Mercado Libre: The report estimated that about 50 percent of consumers across Latin America are un and under-banked, while 75 percent of all payments occur in cash. Online commerce penetration in the region remains low, with only about 3 percent of all retail sales occurring online (compared to about 7 percent in Brazil, and 12 percent in the U.S.).

As PayPal and Mercado Libre continue to build up their partnership, the companies also see opportunity in QR code payments, enhanced logistics capabilities to support eCommerce growth, and in Mercado Libre’s consumer credit offering, the report said.