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  Title	MercadoLibre Races Into Fintech Turf War With Rival Nubank
  ID	4961811
  External ID	7378586442
  Author	Leda Alvim Tue, Cristiane Lucchesi
  Published Date	Dec. 10, 2024, 8:18 a.m.
  Summary	(Bloomberg) -- Latin American e-commerce giant MercadoLibre Inc. is increasingly battling for the same turf as the region's other big success story, digital bank Nu Holdings Ltd., in a fight for domin
  Tags	None
  URL	https://finance.yahoo.com/news/mercadolibre-races-fintech-turf-war-120000961.html
  Sentiment	Negative: 0.01538    Neutral: 0.38091    Positive: 0.60371
  Relevance	0.01099

• Content Details

  Content ID	21436203
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  Content	(Bloomberg) -- Latin American e-commerce giant MercadoLibre Inc. is increasingly battling for the same turf as the region's other big success story, digital bank Nu Holdings Ltd., in a fight for dominance that will shape the industry for years to come. Most Read from Bloomberg Brace for a Nationwide Shuffle of Corporate Headquarters A Chicago Skyscraper Cements the Legacy of a Visionary Postmodern Architect Cloud Computing Tax Threatens Chicago's Silicon Valley Ambitions NYC's Run-Down Bus Terminal Gets Approval for $10 Billion Revamp Kansas City Looks Back on its Long, Costly Ride With Microtransit The companies' leaders are friendly rivals who emerged from the startup scene together, and both downplay the idea that they're gunning for each other. But MercadoLibre has amassed tens of millions of users for shopping and transactions whose data it can mine to offer products from insurance to personal loans. That's bringing it into the same orbit as Nubank, as the fintech is known. Both are making aggressive pushes with financial products in Mexico, which could play a kingmaker role if either are able to crack the large but notoriously difficult market. They also find themselves competing more and more for tech-savvy Brazilian users, and both are present in the less-developed but potentially interesting Colombian market. MercadoLibre this year became the most valuable public company in Latin America, at $94 billion. Nubank passed Itau Unibanco Holding SA to become the region's biggest financial company, with a market value of $58 billion. As they amass users and market clout, the pair are drawing new customers to the banking system and pushing the industry to offer more digital services. “We must be faster than they are to accelerate the digital transition,” said Andre Chaves, who oversees MercadoLibre's financial unit, Mercado Pago, in Brazil, referring to Nubank. “We're looking at them as a benchmark, one that we should go faster than but not necessarily beat.” Osvaldo Gimenez, the head of Mercado Pago, puts it another way: “We can become the biggest digital bank in the Latin American market.” The race between Nubank and Mercado Pago “remains something of a dead heat,” with Nubank boasting a substantial benefit in consumer credit while MercadoLibre has a much larger small and medium enterprise reach and underwrites more consumer loans on its commerce platform, said Sean Dunlop, senior equity analyst at Morningstar. “It's unlikely that we'll be christening a winner over the next few years given the early stages of market growth in Brazil and particularly in Mexico,” he said. Mercado Pago's key challenge ahead is that “it still has to gain experience in underwriting, and the learning curve will be volatile given the risky nature of credit,” said Neha Agarwala, an analyst at HSBC. Payment Wallet Nubank Chief Executive Officer David Velez has maintained that MercadoLibre is going after a different segment of the market. “The biggest difference is that we have become the primary bank account for a large percentage of our customers. That's not the case for Mercado Pago,” Velez said in an e-mailed comment. “They are a payment wallet where you leave some cash and get a credit, not invest your life savings. There is value to that, but it's a fundamentally different strategy.” Nubank has long touted its data on financial transactions as its secret sauce, a way to determine who's worthy of a higher credit limit or a new product like a mobile phone plan. MercadoLibre has its retail platform, which the company has used to generate an analysis of 3,000 data points, insights that are valuable in places where credit histories aren't easy to obtain. For instance, the company has found that mobile-phone users who keep their devices fully charged are better at paying their debts than those who let their status bars turn red. Mercado Pago's Gimenez theorizes that it's because people who are more diligent with their phone tend to be the same careful sorts who are responsible with their finances. “We're looking at lots of information,” he said. “And that's how we come up with models that are different from the traditional industry.” While MercadoLibre operates in 18 countries and Nubank just three so far, Mercado Pago is still in early days as a digital bank. It had $8 billion of assets under management in the third quarter and 56 million active clients. Its lending book surged 77% to $6 billion in the third quarter, with the credit-card portion almost tripling from a year earlier to $2.3 billion. By comparison, Nubank had nearly 92 million active customers, and $28.3 billion of deposits, up 60% from the same quarter in 2023. Its credit portfolio jumped about 50% in the period to $21 billion. In Brazil, where Mercado Pago gets more than 50% of its revenue, it's competing more and more with Nubank. Looking at the credit card book size there, Mercado Pago is today where Nu was in 2020, according to analysts at Banco Itau BBA. “Credit cards are the crown jewel of Brazil's banking landscape,” the analysts said in a report, adding that without a strong foothold in this segment, becoming a client's preferred banking partner is virtually impossible. In Brazil's acquiring business, which allows merchants to charge customers using card machines, Mercado Pago is battling established lenders such as Itau's Redecard unit, as well as smaller fintechs such as StoneCo Ltd. and PagSeguro Digital Ltd. It has increased its market share to 7% from 1.5% in 2018, according to analysts at Itau BBA, and that growth is fueling profitability rates almost double those of its rivals. “The numbers show Mercado Pago is growing the volume of payment transactions at a quicker pace with higher profitability that doesn't fall over time,” Pedro Leduc, an Itau BBA analyst, said. “That means they don't need to pay to get market share, and that's very powerful.” In Mexico, Nubank and Mercado Pago are battling head-to-head. Mercado Pago is offering higher yields to individuals or companies that leave their money in their accounts, which gives the firm access to cheap funding that Nubank and other lenders already have in the region. While Mercado Pago got a late start in Brazil, it may hold an edge over Nubank in Mexico, home to some 130 million people, given its data on millions of customers and firms from its retail business. Mexico is an attractive market for fintechs at the moment given its potential, since the population remains addicted to cash and only about 10% of people have a credit card from a bank. In Argentina, Mercado Pago is already the biggest firm in online payment processing, with more than 50% of the market. The firm was founded there, and it built out a QR payments system over several years that has become an essential piece of financial infrastructure. Mercado Pago's total payment volume in Latin America reached $51 billion in the third quarter, a year-on-year increase of 73% in foreign-exchange neutral terms. Gimenez, who studied at Stanford University with co-founder and CEO Marcos Galperin, started Mercado Pago in late 2003 as a payment platform for MercadoLibre, which was founded in 1999. It later offered payment-processing services for clients, credit for merchants and loans for individuals. MercadoLibre and Nubank have become the top Latin American tech plays for global investors, and the booming valuations of the firms have made some of their founders very wealthy. Velez and Galperin rank in the top 10 from the region in the Bloomberg Billionaires Index and even reside close to each other in Uruguay. Gimenez said he is thinking five or 10 years ahead. “That's why we've been expanding our portfolio so aggressively over the last year, and we believe there continues to be many, many opportunities throughout the region.” Most Read from Bloomberg Businessweek Grand Theft Auto VI Will Rule the Video Game Industry in 2025 Dubai's Alleged Crypto Scams Are Raking in Billions Trump Agenda Won't Hurt Global Economy as Much Next Year as in 2026 Trump's Manufacturing Revival Doesn't Add Up for These Businesses The Quest to Turn Human Waste Into Medicine ©2024 Bloomberg L.P.
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  Publisher URL	https://www.yahoo.com
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