BUENOS AIRES (Reuters) - Latin America’s top e-commerce firm is revving up its digital payments engine as shops shift online amid the coronavirus pandemic, and is looking toward China for inspiration to bring the region’s un-banked and cash-loving savers online.
Transactions on the platform of Mercado Pago, the finance arm of MercadoLibre MELI.O, more than doubled in the second quarter, and its CEO sees Chinas Alibaba 9988.HK and its huge payment affiliate, Ant Group, as a model to follow.
"Many of the things we did were inspired by how they have worked in China," Osvaldo Gimenez, Mercado Pagos chief executive, told Reuters, adding the unit also had close ties with Tencent Holdings Ltd 0700.HK, Indias Paytm and U.S. firm PayPal Holdings Inc PYPL.O, which invested $750 million in MercadoLibre last year.
“When we saw what Ant Financial had done with their investment fund, we replicated that with our investment funds in Argentina, Brazil and Mexico,” he added, referring to a money market fund for savers akin to Ant’s Yu’e Bao.
MercadoLibre’s payments drive offers a tantalizing prospect of an e-commerce-to-digital-wallet ecosystem that could come to dominate in Latin America in the same way Alibaba and Ant are ubiquitous in the world’s No. 2 economy.
The firm’s market capitalization has doubled this year alone to $61.6 billion, though that is still a far cry from Ant’s targeted valuation of $250 billion. Mercado Pago’s fund, luring savers to invest small sums for higher returns than at banks, has over 11 million users, again far smaller than Yu’e Bao.
Half the population in Latin America lacks bank accounts, and digital payment firms are blossoming, including players like banking app Uala and unicorns dLocal and Nubank. The region’s mobile payments market is forecast to hit $302.7 billion by 2025, according to a report from consultancy PayNXT360, up from $50 billion in 2016.
Gimenez said downloads of the Mercado Pago app have risen to almost match those of MercadoLibre in some markets, which he said was a major shift from two or three years ago when there were closer to 20 downloads of the e-commerce app for every download of Mercado Pago.
Purchases on MercadoLibre now account for just 35% of total Mercado Pago transactions as more people use the platform, which offers QR code payments, debit cards, a digital wallet and transfers, for other tasks.