Mercado Pago does not want to be another bank, but rather a unique platform that combines financial services with tangible benefits for users who are currently customers of institutions that offer inferior benefits. This was the message that André Chaves, senior vice president of Mercado Pago in Brazil, and Pethra Ferraz, vice president of Marketing at Mercado Pago América Latina, shared in an exclusive interview with InfoMoney.
Chaves explains that the focus is to offer a more advantageous option than traditional banks – and in a more agile way than competitors.
“Our goal is to be faster than other fintechs to get people out of non-yielding accounts, from investing in savings, from cards with an annual fee. There is a very large chunk of the market – 60% to 70%, depending on the vertical. We are talking about trillions of reais, literally, that are in institutions and products with a much lower value proposition than ours”, he states.
It is known that Mercado Pago aims to be the largest digital bank in Latin America, which forces the bank to pursue the majority of customers in the Mercado Livre ecosystem and beyond.
And, in Pethra Ferraz’s assessment, efforts in this direction are already being harvested. “We have the best satisfaction indicator (NPS) among Brazilian fintechs and this is reflected in the indicators. Mercado Pago’s main index grew 11 percentage points in the last year.” The company declined to reveal any further details about the data.
Wellborn
For Ferraz, Mercado Pago’s biggest difference is the unique ecosystem that combines retail and financial services within the same company. “By having a retailer and a bank within the same company, we are able, in partnership, to offer commercial conditions that no other player can, such as installments of up to 24 installments and discounts of up to 60% when paying with an account balance”, he explains.
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In addition to digital banking, fintech operates on three fronts of online payment processing and acquiring, which increases its complexity and differentiation in the market.
The institution, which was founded in 2004 for payments within Mercado Livre, but only started operating as a bank in 2009, has more than 72 million users and a credit portfolio of more than US$11 billion in Latin America.
Reasons for high default
Regarding default, which in Mercado Pago is higher than the market average – (15 to 90 days) compared to 2% or 3% in traditional banks – André explains that the phenomenon is related to the nature of short-term loans in the business, generally for 3 to 4 months. “While traditional banks have long-term loans, such as 30-year real estate loans, our indicator tends to be higher due to this nature of concentrating delays”, he explains.
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Still, the executive defends the precision of Mercado Pago’s credit models, which allow deciding who to lend to and at what price, guaranteeing a healthy spread and return on capital. “We are comfortable with current levels and focus on the total portfolio spread, which is the main KPI for us,” he says.
Furthermore, integration with the Mercado Livre ecosystem helps with default management, as customers value exclusive benefits and tend to avoid delays to maintain access to advantages such as long installments and cashback.
This Friday (28), the report followed the Black Friday operation of Mercado Livre, controller of Mercado Pago, directly from its distribution center in Cajamar, São Paulo.
