Investors like it if the company can succeed in the second act. This is another business that allows us to grow further beyond the core. Mercado libre (((NASDAQ: MELI). Is one such company that has built a tremendous “second act” in the fintech business.To Hulu live episode Recorded on June 24, Fool contributors Brian Feroldi, Matthew Frankel, and Brian Withers discuss other business segments of this Latin American e-commerce leader and why investors are excited about it.
Brian Wizards: I’m talking about a Latin American e-commerce company. Surprise, surprise. I’m talking about Mercado Libre. again. Meri. Share your screen. Here are some slides. When I chose it on Monday, it was 25% down from its height. However, it has risen a bit in the last few days, so it’s not a 25% cutoff, but it’s definitely on sale. It was over $ 2,000, but now it’s $ 1,500, as you can see from where we returned in early January.
One of the really exciting things about Mercado Libre is that we won’t talk about the e-commerce business at all for the next few minutes. I will talk about fintech business. In the last four quarters, the last 12 months, TTM is following 12 months. FinTech’s revenue is $ 1.6 billion. Look at these growth rates. This is a currency-neutral growth rate. [The] The last three quarters have been three digits. [laughs] The previous two quarters were 83 and 86. The business is firing on every cylinder to generate 117% growth in addition to 83% growth. Let’s talk about the reason.
MercadoLibre is the first proponent and leader in the Latin American market. They serve 18 countries, with Brazil, Argentina and Mexico accounting for the majority of their revenue. But look at these demographics. 638 million and 362 million Internet users. Latin America has more Internet users than Americans. In addition, the number of online shoppers is now about 200 million, about the same as in the United States. Again, there is a gap between those who use the Internet and those who shop, and there is also this big gap between the population and Internet users. This e-commerce and payments company has numerous opportunities in the future.
Let’s take a look at the status of payments and banks in Latin America. This is a busy slide, but first do the left side. Bankerized, I don’t know if it’s a word, [laughs] Basically the share of adults who have a bank account. In the United States, it’s pretty high, 99%. Canada and the United Kingdom are 99 percent. Brazil, 70. Argentina, 49. Colombia, 46. Mexico, 37. Brazil, Argentina and Mexico. Tons of that population don’t even have a bank account.
Ownership of the debit card on the right here is even lower. The United States is about 80%. Brazil is 59 years old. Mexico is down in 25% of adults who only have a debit card. So [a] Fintech solutions that are easily available to Latin American people.
How does MercadoLibre pay? This is amazing, a 10x increase. In 2015, this total payment will be in the millions, resulting in a payment of approximately $ 5.2 billion. Last year in 2020, it reached nearly $ 50 billion, a 10-fold increase over the last five years. This is the number of transactions from 80 million to 1.9 billion, both of which have increased at a triple digit rate in the last quarter.
The other thing they do is not just pay. They pay on the platform, which is why they originally started paying, which supports the e-commerce business that makes it easier for people to buy things, but the off-platform payment business is getting bigger. I will. It allows cross-border payments, it allows payments between individuals, and they have mobile wallets.
This is really exciting for me. The term SDK here means a software development kit. This means that other software developers can incorporate MercadoLibre’s payment system or mobile wallet into other people’s apps, which will lead to a surge in MercadoLibre, Mercado Pago is their payment service, and Mercado Pago is even more popular. I will. They do cashing, credit, extend credit for merchants and consumers, and do prepaid cards.
There’s something on the platform that’s not what they talked about last quarter, and they’re currently offering warranty for electronics, a huge business in the United States. It’s really cool because it’s something that can be easily branched because they’re crazy about fintech.
Another exciting piece for me, which has been in the annual report for several years now. They envision “end-to-end financial technology solutions business aimed at including Mercado Pago in the entire Latin American population,” not just as a payment service. This is a high goal and you can go back to everything else. The pieces of fintech they are assembling are absolutely in their wheelhouse. I’m excited about the dreams of Mercado Libre and its fintech. You shouldn’t be surprised to see this business grow significantly over the next few years.
Matthew Frankel: If I remember correctly, is this both correct for your top holdings?
Wither: That was my number one holding.
Brian Ferroldi: It depends on the day, but yes. [laughs]
Wither: Okay, Shopify And Mercado Libre are fooling it for me.
Frankel: Okay. I like what you said about the bank shortage population in Brazil. In Brazil, until very recently, the financial ecosystem has been managed by just a few major banks. As long as the government here is actually trying to help some of these little fintechs, it could be an even bigger tailwind.
Wither: Yeah, I think their reputation precedes them. The fact that they have been in the area since the early 2000s. They are a local company run by a local owner, which is highly valued by the government throughout the region.
Ferrordi: I love how you basically market them as a fintech company [laughs] Just wash eBay, Shipping.
Wither: Yeah, they have this other e-commerce business [laughs]..
Ferrordi: I love it.
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This fintech is still in its infancy
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