Yahoo Finance MercadoLibre Kicks Off Talks to Apply for Mexico Banking License
(Bloomberg) -- Latin American e-commerce and fintech giant MercadoLibre Inc. is beginning conversations with Mexico’s authorities to apply for a banking license that will allow it to expand the breadth of products it offers in the country.
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The company is in talks with the central bank, the banking regulator and the Finance Ministry as it seeks the license, said Osvaldo Gimenez, president of Mercado Pago, the company’s fintech unit. The formal process will begin in the coming months.
“The opportunity is phenomenal. We see in Mexico what happened in Brazil over the last decade, where there was a huge increase in access to banking, electronic payments and credit,” Gimenez said in an interview. “We want to be protagonists on this, and this will allow us to launch more products.”
The process is expected to take 12 to 24 months, he added. The company weighed purchasing a banking license but ultimately decided against it.
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Mexico has emerged as a key battleground for financial services startups given that less than 50% of the population has a bank account. A growing number of the fintech firms are seeking banking licenses to offer a full menu of options.
Argentina’s Ualá acquired a license by buying ABC Capital, UK fintech giant Revolut received a license in April while Brazil’s Nubank has formally applied for one. Four other local companies are in the process, according to local newspaper El Financiero.
MercadoLibre has been operating in Mexico under a fintech license known as IFPE, which allows it to provide a series of services including the company’s wallet app. A banking license would open the door to receive payroll deposits and remove a cap on the amounts held. The process to approve and issue credit cards would also be faster.
“The banking license will make a lot of things easier, from how we offer credit to users to how we can offer investment products,” Gimenez said. “With the scale we already have and the ambition we have to be the largest digital bank in Latin America, this move is going in the right direction.”
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Gimenez declined to name specific products they will seek to roll out.
Within a year of starting to issue credit cards in Mexico, Mercado Pago has issued 1 million in the country. It’s also given more than 1 million loans to small businesses and has offered 12 million credit lines to users. The biggest demand is in credit, Gimenez said.
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The company doesn’t have a bank license in the other countries where it operates and isn’t seeking to do so because it can provide the desired services under the current frameworks, Gimenez added.
MercadoLibre plans to add 8,200 new jobs to Mexico over the course of the year as well as to invest $2.5 billion in its operations in the country. In the region, the company has lending agreements with Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co. for about half of credit origination.
“We’re very enthusiastic with what we’re seeing in Mexico,” he said. “We’ve seen a lot of growth on our products, the marketplace, the payment options, and credit. That’s why we’re making such an investment, recently moved our office to a bigger space, and are hiring.”
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