Let's set the scene. It's 2004, and you have a small but fledgling e-commerce site in Latin America -- Mercadolibre (NASDAQ:MELI). It's doing OK, but there's a major obstacle: Over half of your potential customers are under-banked, meaning they have no way to pay for your goods online.

So you do what any good entrepreneur does: You create your own payment system, Mercado Pago. Remember, the goal is simple: Make it possible for people to buy stuff on your website.

Fast forward 15 years and something remarkable has happened: While your e-commerce platform is still paramount, the payment solution you created to help the platform has equaled it in significance. 

But here's the kicker: Most of that growth has nothing to do with paying for things on Mercadolibre. We can put that growth in perspective by looking at a single number: 140%.

Rio de Janeiro at night

Rio de Janeiro at night. Image source: Getty Images

The payment solution of choice for everyday life

This is a vast simplification of how Mercado Pago came to be. But for the individual investor, it sets the stage, and helps you understand how Mercadolibre became such a favored growth stock. We'll get to what that "140%" means in a minute, but first a few important details.

As Mercadolibre was building out Mercado Pago, executives began to realize they might have a much bigger solution on their hands than they thought. They tested that theory in 2015 when they started selling mobile point of sale (mPOS) machines to merchants.

These machines are similar to the plug-ins many small merchants in the United States have to take credit card payments. In essence, Latin Americans were able to start using their Mercado Pago accounts to pay for gas at the station, groceries at the store, and clothes at the mall. 

Off-platform payments have almost doubled every year

In 2012 the company started breaking out how much money was being spent via Mercado Pago "on-platform" (on Mercadolibre's e-commerce site) and "off-platform" (for everyday, face-to-face purchases). Here's what that growth has looked like.

Chart showing off-platform and on-platform payment volume via MercadoPago

Chart by author. Data source: SEC filings 

As you can see, once those mPOS devices were distributed, the yellow section -- off-platform payments -- starting growing like a weed. Since the end of 2016, the amount of money changing hands with Mercado Pago off-platform has roughly doubled every year.

From last quarter's release: "For the first time ever, quarterly off-platform [payments] surpassed on-platform [payments], reaching almost $4.0 billion."

If you think that's impressive, consider this: That growth is accelerating. That's where this 140% figure comes into play. The amount of off-platform payments grew 140% last quarter. That was almost entirely because of the fact that mPOS use is on fire, growing 141% year-over-year in the third quarter.

Think about it: Latin Americans are adopting this payment strategy en masse. And for many, it's the first banking solution they've ever had. It's not a stretch to believe they're likely to stick with it for the rest of their lives.

What this means for investors

The payments space can be brutal. As long as a company builds a tool that allows for the transfer of cash from one party to another, it's competition. Mercadolibre's key advantage comes from the fact that it doesn't have to charge as much for the mPOS devices -- in fact, it wants them in as many stores as possible. Cash from its e-commerce site can cover the bills while the payment option takes off.

The competition can't rely on that. In fact, PagSeguro Digital hit a speed bump of its own when it had to reduce the prices for its mPOS devices. The likely culprit: Vendors were choosing Mercado Pago en masse. While it's likely that there's enough room for many companies to grow in the space, Mercadolibre is cementing its position.

While it might only take a very small cut of every Mercado Pago transaction, the opportunity is vast. Over the next decade, I wouldn't be surprised to see Mercado Pago become a de-facto payment option in the region. If that happens, shareholders -- myself included -- will be rewarded accordingly.