MercadoLibre could begin to rival PayPal


Daniel Webber
Daniel Webber
Founder & CEO
Daniel is Founder and CEO of FXcompared and FXC Intelligence and has 18 years of experience in the international finance world focusing on cross-border payments, technology and the property sectors.… Read more
  • MercadoLibre’s payment processing platform is the new PayPal, a Bloomberg report says
  • The company was incorporated in the United States but its biggest market is Latin America
  • Mercado Libre, Inc. is working with eBay, PayPal’s former parent company

E-commerce retailer MercadoLibre just released its fourth quarter earnings and its payments segment reportedly grew more than MercadoLibre itself. The Argentine company, incorporated in the United States, has been making waves lately because of its payments platform MercadoPago.

According to Susquehanna, MercadoPago and MercadoLibre’s current situation is reminiscent of PayPal and eBay when the latter still owned the payments processing giant.

MercadoLibre’s online marketplace is doing well, reports note, but analysts are seeing great potential in its payments and fintech segment. In the company's earnings release, “their payments operation MercadoPago saw more payments for the first time off platform”, a Bloomberg report says. While there is still no talk about transferring money internationally through MercadoPago, observers are positive that this will likely be the path that the payments segment will take. With overseas transfer rates becoming more expensive, new payments and remittance companies have sprouted to fill the need for affordable transfers.

The off platform payments that the company is referring to are payments done through merchant services, wallet payments with QR codes, and mobile points of sales instead of payments right on their e-commerce site. Bloomberg adds that shares of MercadoPago rose by over 20% in Q4 of 2018.

"This suggests that there’s an identity for the MercadoPago product outside of the MercadoLibre marketplace", said Jamie Friedman, a Susquehanna analyst.

Analysts say that when PayPal separated from its parent company eBay, its stocks soared. Back in 2002, eBay purchased PayPal for its payments processing. It later became more valuable than the e-commerce platform. It’s not just analysts from Susquehanna that noticed this, according to reports. BTIG noted the same thing. Payments giant PayPal got a divorce from eBay in the year 2015 so that it could concentrate on its own expansion.

"We remind investors that PayPal, once just a piece of eBay, is now worth 3 times more than its former parent", BTIG’s Marvin Fong told Bloomberg.

Although MercadoPago is part of a company worth $20 billion, HSBC’s Ravi Jain said that the brand is likely worth around $8 billion on its own.

MercadoLibre is owned by an Argentine company called Mercado Libre, Inc. It is incorporated in the United States but also operates its marketplaces in Latin America. In fact, is quite popular in the region. MercadoLibre has operations in Argentina, Colombia, Costa Rica, Brazil, Bolivia, Dominican Republic, Chile, Guatemala, Mexico, Ecuador, Honduras, Venezuela, Panama, Peru and Uruguay.

According to the company, the e-commerce platform has around 180 million users in Latin America. Interestingly, eBay had a 20% stake in the company until 2016, but the two are reportedly close and have been working together so that eBay sellers can sell their items in Latin America too.

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