Payments

MercadoLibre and PayPal join forces to grow in Latin America

The agreement will allow online shopping between stores and customers of both platforms in Brazil and Mexico

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  • With the agreement, Mercado Pago, MercadoLibre’s fintech, will be offered as a payment method by merchants using PayPal worldwide, allowing its 48 million users in Brazil and Mexico to pay for online purchases using the method they already know;
  • In return, Paypal will also be accepted on the MercadoLibre’s marketplace for international purchases.

On December 30, the executives of the American PayPal and the e-commerce conglomerate MercadoLibre announced an agreement to expand their financial services and gain scale in Latin America.

In a LinkedIN post, MercadoLibre’s COO, Stelleo Tolda, explained that, with the agreement, Mercado Pago, MercadoLibre’s fintech, will be offered as a payment method by merchants using PayPal worldwide, allowing its 48 million users in Brazil and Mexico to pay for online purchases using the method they already know. In return, Paypal will also be accepted on the MercadoLibre’s marketplace for international purchases.

Additionally, Xoom, PayPal’s international transfer service, will allow Mercado Pago users in Brazil and Mexico to receive remittances directly to their digital wallet.

ALSO READ: After Mexico, PayPal wants to enter Brazil’s credit market

PayPal’s CEO Dan Schulman explained in a LinkedIN article that this is just the beginning of a long partnership between the two companies. “By working closely together, we can jointly leverage our scale and platform resources to help drive inclusion and access to the global digital economy,” he said.

This new deal is part of PayPal’s strategic investment in MercadoLibre. In March last year, the Latin American company raised $1.85 billion in a secondary common stock offering on the Nasdaq, where it is listed. Of this total, $750 million came from PayPal, and $100 million from an affiliate of the Dragoneer Investment Group.

In fact, it is the success of Mercado Pago, the financial services arm of Mercado Livre, that has made investors look to the Latin American company beyond its original activity, e-commerce.

Although the company as a whole registered a loss of $146,082 million in the third quarter of last year, mainly due to investments and deferred taxes in Mexico and Colombia, the company’s revenues continue to grow.

In the third quarter, net revenue rose 69.7% to $603 million. In the same period, the volume of payments (TPV) in the Mercado Pago soared 66.2% to $7.56 billion–which can be seen as a sign that the company is on the right track in expanding its business looking to financial services and the population still without access to them in Latin America.

No wonder MercadoLibre reached a market value of $34 billion in August, surpassing eBay, and has seen its actions being recommended by financial analysts alongside giants like Alibaba.