FinTech: FinTech Powers LatAm E-commerce Giant MercadoLibre Inc To Quarterly Profit

February 24, 2023 | FinTech, News

MELI’s fintech unit showed significant revenue growth, up nearly 74% in U.S. dollar terms, to reach $1.3 billion, helped by the consolidation of financial services across Latin America.

Mercadolibre (NASDAQ: MELI), a leading e-commerce company in Latin America, reported better-than-expected profits in Q4, leading to a surge in its stock price by over 6% during Thursday’s extended session. The company’s earnings per share for the quarter were $3.25, exceeding consensus estimates by $0.93. The 40.8% increase in revenue from the previous year was also slightly higher than analysts’ expectations. (Seeking Alpha)

Significantly, the company’s Total Payment Volume rose by 80% from Q4 2021 to $36B, while Gross Merchandise Volume increased by 34.7% YoY.

The company attributed its growth to building a larger GMV base, ramping up its logistics network, and strengthening the key pillars of its Commerce value proposition. The shareholder letter stated that the company’s position as the e-commerce leader in Latin America was solidified by the scale gained in the past three years. The commerce segment saw rapid acceleration in Mexico and Brazil, offsetting some weaker volume trends in Argentina.

The fintech business at Mercadolibre was also a significant contributor to top and bottom-line growth since 2019. Some extracts from the letter to shareholders:

  • “Our unique active fintech users reached almost 44mn in Q4’22, rising 27% year-on-year, whilst TPV grew at 45% in US dollars and 80% on an FX-neutral basis.
  • A strong off-platform performance in Q4’22, with growth of 58% in US dollars and 121% on an FX-neutral basis, took our quarterly off-platform TPV over $25bn for the first time. This is a big accomplishment, placing us on an annualized run rate of over $100bn.
  • One of the keys to unlocking ‘principality’ is being able to offer the products and services that satisfy our users’ day-to-day needs. After 12 to 18 months of product development and deployment, we now have the tools in place to shift Mercado Pago from being mainly a payments wallet to a full-service digital account for our users.
  • Through the second half of 2022, we have seen a significant improvement in the performance of our Credit Card business after the slowdown of new card issuance in the first half.
  • Our underwriting has improved, although the latest cohorts remain small, so we have further to go before being comfortable to re-accelerate.
  • Our POS business has played an important role in our achievement of surpassing $25bn in quarterly off-platform TPV, with growth of 61% in US dollars and 78% on an FX-neutral basis in Q4’22.
  • Our Online Payments business also delivered consistent levels of growth in 2022, and in the fourth quarter, FX neutral TPV growth was stable in Brazil and accelerated in Mexico and Argentina. Within our Online Payments business, the Big Company category showed the fastest rate of growth, highlighting our ability to serve merchants of all sizes with our variety of services.

Mercadolibre plans to continue its growth trajectory by doubling its technology investments since 2021 to accelerate growth. The company remains confident in its growth potential and will develop competitive advantages through technology to capitalize on growth opportunities in commerce and fintech across Latin America.

Following the earnings report, Mercadolibre’s shares rose by 6.14% in after-hours trading on Thursday.

Related Story:  Deal-Making In The LatAm Payments Space

Image Credit: Mercado Libre

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