MercadoLibre (NASDAQ:MELI) originally made its mark as the leader in Latin American e-commerce, but over the past several years, its move into financial technology (fintech) has become an increasingly important part of its growth story. The Mercado Pago payment system was originally modeled after PayPal (NASDAQ:PYPL) to solve a simple problem: Many people in Latin America don't have bank accounts or credit cards, making e-commerce a tough sell.

Mercado Pago offers an entire ecosystem of digital payment tools, including a mobile wallet, prepaid cards, and even consumer loans. Other online sellers began taking payments through it, and eventually, even some brick-and-mortar stores. Mercado Pago has become so successful that it's now the company's fastest-growing business. And after posting triple-digit percentage payments growth last quarter, MercadoLibre did it again.

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Image source: Getty Images.

Strong growth through the pandemic

While there was an initial slowdown in business in mid-March, MercadoLibre has rebounded strongly in the weeks since. Management laid out compelling data on a number of metrics that highlight the continued stellar growth of its payments business.

Total payment volume (TPV) -- the value of all payments processed for customers -- soared to $8.1 billion, up 44% year over year when translated to U.S. dollars, but up an even more impressive 82% in local currencies. At the same time, the number of payment transactions grew to nearly 291 million, up 102% year over year.

Mobile wallet transactions were a big winner, growing to $1.3 billion, up 299% year over year in local currencies, while its customer base grew 155% to more than 8 million. TPV from mobile wallets continued to generate triple-digit-percentage growth during the quarter in Argentina, Brazil, and Mexico.

Not just on MercadoLibre's platform

The payments business continues to surge on MercadoLibre's platform, growing to $3.4 billion, up 36% year over year in local currencies. As impressive as that is, it's the off-platform business -- which includes other digital retailers and brick-and-mortar stores -- that accounts for the majority of its growth.

The company's off-platform TPV continued its triple-digit-percentage growth, increasing 140% year over year to $4.7 billion, while the number of transactions surged 146% to 217 million. Those gains were widespread across the region -- 102% in Brazil, 115% in Mexico, and 221% in Argentina.  

Growth was led by the mobile point-of-sale business (mPOS), which increased 103% year over year in local currencies. The mPOS segment was strong across the company's largest markets, as Brazil, Argentina, and Mexico grew 83%, 174%, and 235%, respectively.

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Image source: Getty Images.

It could have been even better

On the conference call to discuss the quarter's results, management detailed the short-term headwinds it has been facing due to the COVID-19 pandemic. As a result of the government-imposed lock-downs that began in March, MercadoLibre experienced "a deceleration in the number and volume of payments processed; primarily the result of lower foot traffic in brick-and-mortar retail stores that use our mPOS and QR [code] solutions."

As impressive as Mercado Pago's fintech growth was during the quarter, it appears the results would have been even stronger had it not been for the impact of the region's various stay-at-home orders.

Management provided some context that illustrated how much better payments growth might have been without a pandemic. Off-platform TPV slowed to 95% year over year growth in late March, while the number of payments was up just 87%. During the rebound in April, those numbers surged to 156% and 120%, respectively.

Now that's impressive.