eCommerce

MercadoLibre Banking License Hints At New Arrow In Quiver Vs. Amazon

MercadoLibre

It’s conventional wisdom that Amazon, eventually, gets its hands into everything, everywhere.

And for players in eCommerce — especially larger ones in markets that are booming — the Amazon threat is real and ever present.

It might make sense, then, that as companies craft ecosystems, they want to keep as much as they can in house as possible, including sellers and buyers on their platforms.

So it was not completely surprising when news came this week that MercadoLibre has obtained a license to operate as a financial institution (FI) in Brazil, which will help the company expand its portfolio of credit offerings. The company will have more autonomy in the direct creation and operation of financial services in Brazil, including financing. In addition, the company also has gotten a 400 million reais ($74.2 million) investment from Goldman Sachs to help expand credit services.

In a bit more granular detail on the credit operations, Mercado Credito was formed in 2017 in Brazil and has been tied to mobile wallet service Mercado Pago. Mercado Credito has approved loans for over 4 billion reais ($742 million) for 1.7 million people in around 10 million transactions, PYMNTS reported.

But recent results underscore continued momentum in the loan business. The company said during its recent earnings announcement that it had seen a record number of loan originations, up 157 percent quarter on quarter. Originations to merchants were up 172 percent. Shedding light on the continued demand for eCommerce, the company said the number of items it sold reached 206 million, up 110 percent, and payment volume was up roughly 92 percent year on year as measured in U.S. dollars to roughly $14.5 billion.

The numbers, then, underscore the twin demand for credit and commerce.

To get a sense where all this might be headed, earlier this year, the company’s Osvaldo Giménez, executive vice president and CEO of FinTech, which includes Mercado Pago, told PYMNTS, “the most relevant variables across Latin America are banking penetration and credit card penetration.” And mPOS has also been gaining traction.

“Even today, when we look at our competitors, most of them are already strong in one or at the most two countries,” he said. “Nobody's serving the entire Latin America region, probably because of the complexity and scope of the products we serve."

Amazon, of course, might beg to differ. It just opened up new logistics hubs in Brazil as it does battle against MercadoLibre, which has been called the Amazon of Latin America. Amazon Prime launched in Brazil late last year, and in September, EBANX and Amazon debuted a partnership that lets consumers in Colombia pay for Amazon transactions using preferred payment methods.

Amazon may indeed be moving a bit into financial services, where it is offering new installment financing options with Barclaycard Germany.

When it comes to banking, marquee names might matter. Last year, PYMNTS — in its “Where Will We Bank Next” survey of American consumers — found that as much as 35 percent said they would be interested in using services offered by Amazon. We might extend those same preferences to individual markets, such as in Brazil, where the marquee commerce/credit name is MercadoLibre.

Sometimes, then, the best defense is a good offense — at least when it comes to shoring up eCommerce ecosystems.

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NEW PYMNTS STUDY: ACCELERATING THE REAL-TIME PAYMENTS DEMAND CURVE – NOVEMBER 2020

About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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