E-Commerce Growth Depends on Payment Digitalization

For e-commerce to work as it is meant to, one element is crucial. “Payments are the heart of e-commerce,” says Omar Galicia, Commercial Director of Mercado Libre. The company has developed several solutions to foster the burgeoning e-commerce ecosystem, including a fintech subsidiary named Mercado Pago. “We are giving our clients the capability to receive credit and debit card and convenience store payments within a single platform,” says Galicia. “We want companies to worry about attracting traffic to their websites and managing their product portfolio while we handle the payments.”
Companies of all sizes are embracing e-commerce to widen sales but many lack the necessary infrastructure or financial ties to go at it alone. “We realized that Mercado Libre was not the only player in the region that needed to tackle the payments issue and that there were many companies that wanted to participate in e-commerce but did not have the necessary connections with financial institutions or the engine to set up their own e-commerce ecosystem,” says Galicia.
Mercado Pago, which specializes in adapting to the payment methods available in each Latin American country and has 50 methods available for its 170 million clients, works to solve the specific needs of companies, regardless of their size. “We process payments from major players, such as Best Buy, Coppel Mexico and Samsung, but we also have very simple solutions for SMEs. An SME can send a WhatsApp or Facebook link and make a payment.” Galicia says Mercado Pago’s flexibility is about being part of the client’s evolution. “We want to help SMEs to evolve from very simple solutions. The idea is to provide support every step of the way.”
In addition to its online solution, companies can tap into Mercado Pago’s real-world offering called Point Blue, a device that allows card transactions in the physical world and immediately reflects them in Mercado Pago’s platform. “Point Blue is an omnichannel solution for businesses. It allows SMEs to have both the e-commerce solution and the physical-world solution all in one platform,” says Galicia.
In recent years, the number of companies that offer e-commerce payment solutions has increased but Galicia says the Mexican market still offers many opportunities. “Around 60 percent of the population does not have access to financial instruments, which means that if we want e-commerce to continue growing, we have to include people that do not have these financial instruments.”
Mercado Pago’s products allow users to make e-commerce transactions without a card. “We have set up alliances with convenience stores and banks, which helped us create a network of almost 26,000 physical points at which users can pay for their online purchases,” says Galicia. The company also offers a prepaid card developed with MasterCard that users can request online. “Almost 80 percent of the transactions that are made with this card are online transactions, which adds to the e-commerce ecosystem,” Galicia says.
In addition to payment solutions, finding ways to help SMEs boost their performance is another priority for the company, which is why it now offers credit solutions. “The goal of Mercado Crédito is to support SMEs by providing them with loans they can use for whatever they need. To approve the loan, we use an in-house scoring system that considers factors such as platform sales,” says Galicia.
Galicia says Mercado Pago, which has been operating since 2004, continues to report significant growth. “In 2017, Mercado Pago processed US$13.7 billion in Latin America, which makes it the most relevant fintech company in the region.” There is room for further gains, he adds. “In Mexico, there are around 5 million SMEs that need to perform transactions, which makes it a very interesting market for us.”