Here's Why Scale Matters in Digital Payments

There's little question that digital payments is a business that benefits from scale. Yet with a multitude of competitors of varying sizes across a host of countries, it also helps to have products that compete across the financial spectrum. Building out a suite of fintech solutions for both consumers and merchants provides an unmatched level of scale and leverage.

On this episode of Fool Live that aired on Nov. 23, Motley Fool co-founder David Gardner and Fool.com contributor Danny Vena are joined by Federico Sandler, MercadoLibre's (MELI -1.79%) head of investor relations, who lays out the competitive landscape and how the company is positioned for success.

Danny Vena: You mentioned a couple of your competitors in the digital payments space. Just looking at those for a minute, who do you see as your biggest competitor in digital payments, and how do you think that will break out in the future?

Federico Sandler: First I'll give you, because I think where we differentiate ourselves from most of this e-payments players is that we're multi-country, and multi-product, and we have a marketplace where to fish users, which many of these fintech businesses aren't able to because they're more mono-product or mono-country.

But if we break it down by wallet, I would say it's PicPay in Brazil; it's Ame, which is from B2W, Brazil's largest online retailer; it's RecargaPay, which is another wallet. Also, the food delivery companies in Brazil, I would say ifood, and Rappi, which is a SoftBank (SFTBF 1.41%)-funded company. There's also Banco Inter there, which is a SoftBank-backed neobank. I would say on the wallet side, that's it.

Then when we shift over into a more MPOS, or mobile point-of-sale devices, because of the segment of merchants that we serve, we overlap with PagSeguro (PAGS -1.35%), not so much with StoneCo (STNE 0.32%) or the acquirers which are much better geared to serve larger merchants that need more sophisticated ERPs, but rather, as we're serving more loan payoffs, I would call out PagSeguro for the most part getting it, and SumUp in Brazil. There is also a GA [General Atlantic]-backed and SoftBank-backed company in Mexico called Clip for MPOS devices, and then also wallet in Argentina, we compete with a Tencent-funded start-up that is doing interesting things, called Uala.

Then finally, in online payments, basically, for those that are more familiar with PayPal (PYPL 0.64%) is the business of processing payments off eBay but online with PayPal the Merchant Services business. We compete for the most part with PagSeguro, with PayPal, PayU in Colombia for the most part, and then in part those of the acquirers like CLO and Regy.

As you see, because we are in so many verticals, we compete with many of them because we overlap, but none of them offer all these suite of solutions that I just called you out, which we think is one of the advantages that we have. On top of the fact that we have a marketplace where we acquire users that many of these don't.

David Gardner: Wow, what an information-rich answer, Federico, I love that. I've interviewed many financial executives over the years, and sometimes we'll ask them the competition question, and I get back an answer something like this: "Really our greatest competition is ourselves, and how we will overcome our own expectations of ourselves." You just gave us a breakdown of the payments businesses across the continent just about, and thank you very much for your specificity.