One of the recurring questions among MercadoLibre (NASDAQ:MELI) investors is how Mercado Pago, the company's payments system, fits into the digital and physical payments space in Latin America. The common misconception among U.S. investors is that the company competes directly with rivals like StoneCo (NASDAQ:STNE) and PagSeguro (NYSE:PAGS). That's not necessarily the case.

On this episode of Fool Live that aired on Nov. 23, Motley Fool co-founder David Gardner and contributor Danny Vena were joined by Federico Sandler, MercadoLibre's head of investor relations, who explained how the company fits into the payments ecosystem.

David Gardner: Let me just keep hogging the ball one more time and then I'll pass it back to Danny. But I wanted to ask you about another company in the area, StoneCo. What is your perception of StoneCo, as a competitor or a peer?

Federico Sandler: Yeah. Another company that we admire very much. They are a neo-merchant acquirer that I would say for the most part, is eating the acquirer's lunch. They are much faster, better technology, their salesforces are very capable.

But when you look at the payment's spectrum, we are actually customers of Stone, by the way. Our multiple points-of-sale volume goes to them.

But when you look at the merchant base and where we play, Stone and the acquirers are in the top. Then you have PagSeguro, which is somewhere in the middle, and then you have MELI [MercadoLibre] in the end with the micro-merchants and nano-merchants.

So PagSeguro has moved up market to compete a little bit more with Stone. Stone has said that they will move down-market, although we've don't run up to them too much. Then we overlap a little bit with PagSeguro more on the basic devices.

So we are a customer of them, we could be a potential competitor, but I think they are still, for the most part, more of a merchant acquirer that is geared for a merchant that is very sophisticated, has thousands of stores.

That's not the merchant base that we serve on mPOS [mobile point-of-sale] business. Our mPOS business we are either serving literally a guy that is selling corn in the beach and wants to offer the ability to pay by credit card and offer installments or more of a SME [small- medium-sized enterprise], which might have a store in those streets, sells on MercadoLibre, might need a basic ERP [enterprise resource planning], but definitely not a Stone-type of merchant. I hope that clarifies...

David Gardner: Thank you.

Federico Sandler: In stack where we fall.

David Gardner: Very helpful.

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