Table of Contents
- 1 1.5 million credit cards in three months
- 2 Credit card promotes customer loyalty
- 3 The end for European super apps?
- 4 **While Mercado Libre aims to be the “super app” of South America, could this strategy ultimately prove too ambitious? How can they effectively balance their diverse offerings without diluting their core e-commerce strengths and alienating customers who primarily seek a streamlined shopping experience?**
Mercado Libre is South America’s dominant e-commerce platform. But the company has also been investing in its rapidly growing fintech business for years. Despite short-term losses in profits, this strategy should pay off for the platform.
Seven million new customers, 35 percent more sales, eleven percent more profits – the new quarterly figures from the South American e-commerce platform Mercado Libre pretty much eclipsed the previous year’s figures. Nevertheless, the shares initially fell 16 percent after the results were published this month.
Despite the strong growth, analysts were primarily hoping for a better margin. The e-commerce giant missed its expectations for profit before taxes (EBIT) by almost 30 percent. One reason for this was the extensive investments in the financial business. Even though Mercado Libre is considered the “Amazon of South America,” the company has built up a considerable financial business in recent years. Around 40 percent of sales now come from the segment with loans, payment services and investment products.
1.5 million credit cards in three months
Mercado Libre spent $76 million in the third quarter just to scale its credit card business. The majority probably went into marketing – total spending increased by $50 million compared to the previous quarter.
And the high spending had an impact: within a year, the company almost tripled its credit card business and issued 1.5 million new cards in the last quarter alone. They now account for almost 40 percent of the entire loan portfolio, alongside consumer and dealer loans.
But the full loan books – the entire loan portfolio is now around six billion dollars – became a problem in the short term. The loan volumes have grown significantly more than the number of customers. At the same time, the company must make provisions in advance for the loans issued. Last quarter that was more than $500 million. And as a result, that put significant pressure on margins. So what does the company hope to achieve from the card business?
Credit card promotes customer loyalty
So far, Mercado Pago, the fintech subsidiary of Mercado Libre, offers its credit card in Brazil and Mexico. Other markets are likely to follow soon. Credit card penetration is still comparatively low on the continent. In most countries it is below 20 percent. For comparison: In Germany and its neighboring countries, more than 50 percent of the population generally has a credit card. Mercado Libre still sees great potential here and, thanks to its enormous presence in the e-commerce sector, has a good entry door into its other 16 existing markets, such as Colombia, Argentina and Peru.
More on the topic…
– Fintech superstar Nubank is outclassing the competition – and is heading towards 100 million customers
– Why Amazon has long been a bank
– “South America was waiting for Nubank’s offer” – Jan Beckers in the Beckers Bets podcast
In addition, for many customers, the credit cards are an introduction to Mercado Libre’s expanded product range. Even though they structurally have a lower margin than other credit products, credit cards are crucial for customer engagement, as CFO Osvaldo Gimenez announced in the earnings call. The company is observing that credit card customers are shopping more in the online marketplace and using other financial products from Mercado Pago. “The investments are strategically important because the credit card promotes the adoption of Mercado Pago as a main account and generates positive ecosystem behavior,” said Gimenez.
Different business areas inspire each other: Mercado Libre recently also recorded a boom in sales of card readers. It created incentives for this, for example, by offering loans to dealers who use the devices. This in turn should make credit card payments more widespread and therefore more attractive in the long term.
The end for European super apps?
The company is currently facing competition from the Brazilian fintech Nubank. It has already built up a strong position alongside the traditional banks in Brazil, Mexico and Colombia and is now one of the largest credit card issuers. In addition, e-commerce platforms such as Aliexpress, Temu or Shein could also enter the market. The latter recently launched a credit card in Mexico with a local player.
European fintechs were also drawn to the local market due to the attractive growth prospects. The neobanks Revolut and N26 launched their offerings in Brazil last year. However, the latter collapsed the business again after a few months.
In the long term, Mercado Libre could develop into the “Aliexpress of South America” with its fintech strategy. Such ambitions now seem to have been overcome in Europe. Two years ago, Revolut founder Nik Storonsky also dreamed of the super app idea. The claim is now limited to the financial sector. Competitor Vivid also recently conceded the goal of the super app.
Fund manager Jan Beckers believes that the saturated European market and regulatory requirements are major hurdles. “In very large markets like the USA, China or Europe, there is already strong competition in each of the submarkets,” he said on the Finance FWD podcast. “It is therefore much more difficult to even get into such a dominant position.”
**While Mercado Libre aims to be the “super app” of South America, could this strategy ultimately prove too ambitious? How can they effectively balance their diverse offerings without diluting their core e-commerce strengths and alienating customers who primarily seek a streamlined shopping experience?**
## World Today News – Interview: Mercado Libre’s Fintech Gamble
**Welcome to World Today News. Today, we’re diving deep into the world of e-commerce and fintech with a focus on Mercado Libre, the dominant player in South America. Joining us are two experts:**
* **[Guest 1 Name & Credentials]:** A leading analyst specialized in Latin American market trends.
* **[Guest 2 Name & Credentials]:** A fintech industry veteran with expertise in emerging markets.
**Section 1: Mercado Libre’s Growth and Strategy**
* **Host:** Mercado Libre’s recent quarterly results were a mixed bag – impressive growth but lower-than-expected profits. How do you interpret these findings? Is this a cause for concern or a natural consequence of their aggressive fintech investments?
* **[Guest 1]:**
* **[Guest 2]:**
**Host:** Mercado Libre is often dubbed the “Amazon of South America.” How successful has their strategy of expanding into fintech been compared to Amazon’s own foray into financial services? What makes Mercado Libre’s approach potentially unique?
* **[Guest 1]:**
* **[Guest 2]:**
**Section 2: The Credit Card Play and Customer Loyalty**
* **Host:** The article highlights Mercado Libre’s significant investment in their credit card business. How do you see this strategy playing out in the long term? Will it truly foster customer loyalty and drive engagement across their ecosystem?
* **[Guest 1]:**
* **[Guest 2]:**
**Host:**
Mercado Libre claims that credit cards promote adoption of Mercado Pago as a main account. Does this translate to a sustainable competitive advantage over traditional banks and other fintech players in the region, such as Nubank?
* **[Guest 1]:**
* **[Guest 2]:**
**Section 3: Competitive Landscape and Future Outlook**
* **Host:** How do you assess Mercado Libre’s position against competitors like Nubank, Aliexpress, and Temu? What are the potential challenges and opportunities Mercado Libre faces in this crowded market?
* **[Guest 1]:**
* **[Guest 2]:**
**Host:**
The article contrasts Mercado Libre’s “super app” ambition with the dwindling enthusiasm for super apps in Europe. Will Mercado Libre succeed where European fintechs seem to be faltering? What are the key differences in market dynamics and consumer behavior shaping these outcomes?
* **[Guest 1]:**
* **[Guest 2]:**
**Host:**
Looking ahead, what are the most important factors that will determine Mercado Libre’s future success? What advice would you give to investors interested in the company and the broader Latin American fintech landscape?
* **[Guest 1]:**
* **[Guest 2]:**
**Host:** Thank you both for sharing your valuable insights.
This interview format allows for a nuanced discussion with varied perspectives on Mercado Libre’s strategy. The open-ended questions encourage deeper analysis and debate while covering the key themes of the article.
