Argentine banks in conflict with Mercado Libre over fintech business

A consortium of Argentine banks has formally accused Mercado Libre, often dubbed the Amazon of Latin America, of abusing its dominant market position in the fintech sector. This marks a significant escalation in a long-standing dispute between the financial sector and the Buenos Aires-based fintech giant, which remains unresolved and could affect Mercado Libre’s neobanking business in the medium term.

In an anti-competition case, local banks are challenging Mercado Libre, the national e-commerce and fintech giant. The move comes as digital wallet company Modo, owned by more than 30 Argentine banks, files a complaint over alleged anticompetitive practices with Argentina’s competition watchdog, the National Commission for the Defense of Competition.

Modo has emerged as a bank-led response to Mercado Libre’s meteoric growth in Argentina’s digital payments sector, particularly with its digital banking service Mercado Pago. The accusation sparked a counterargument from the e-commerce giant, which accused the banks of a cartel. This marks a new chapter in a long-running dispute that has intensified in recent weeks, focusing on the interoperability of QR codes.

Mercado Pago beats banks in Argentina

The traditional banking sector aims to curb the rapid growth of fintech companies over the past decade, which have grown from a small e-commerce venue in the early 2000s to the largest e-commerce site in Latin America and a very large fintech player. relevant worldwide. the region.

But while its dominance in fintech remains more or less controversial in other markets such as Brazil or Mexico, in Argentina it holds clear leadership over many of the fintech and e-commerce verticals.

In recent years, the e-commerce giant has developed a vast network of QR codes that have become ubiquitous from Buenos Aires to the interior of Argentina. This marks phenomenal progress in terms of financial inclusion and a boom in digital payments.

Ultimately, the central bank, perhaps seeking to mirror Pix’s growth in Brazil, mandated that these codes be interoperable. Mercado Pago initially expressed dissatisfaction, citing its significant investment in its platform, but had to comply with new regulations, which mandate that QR codes in Argentina must allow credit card payments from any wallet, regardless of the QR code provider.

However, the banks claim that there are delays in Mercado Pago complying with these regulations. Both sides have worked on the specific details of the deal on previous occasions, and the final deadline was April 30th. In particular, they argue that transactions via QR codes sometimes take longer when paid with different financial providers. They also want a slice of the e-commerce pie, arguing that their payment services should also be allowed into the online market.

A fierce rivalry

Ignacio Carballo, head of alternative finance at Americas Market Intelligence.

Around the world, competition between banks and fintechs generally eases over time as regulations adapt to the evolution of the industry. However, analysts observe a particularly intense rivalry in Argentina, which exceeds that of other countries in the region. “The dispute between Mercado Libre and Argentine banks is paradigmatic because, globally, such disputes between fintechs and banks have long ceased,” says Ignacio Carballo, head of alternative finance at Americas Market Intelligence. “Mercado Libre is a giant which, due to its size, becomes a perfect target in disputes over the financial system. In the rest of Latin America there are no such concentrated fintech players.”

Latin America’s Amazon has grown aggressively in fintech in recent years, challenging banks at their own game and quickly taking the lead in digital payments across the country. Although its credit offering remains limited compared to traditional institutions, its dominant position in the electronic payments ecosystem is indisputable.

“The dispute appears to be less between the fintech sector and banks in general, and more specifically between Mercado Libre – with its vast financial and commercial ecosystem – and some banking institutions,” Carballo added.

Mercado Libre will become a bank… in Mexico

Mercado Libre is directly trying to become a bank in other parts of Latin America. It was recently revealed that the Buenos Aires-based company is applying for a banking license in Mexico, the region’s second largest economy and a market of growing interest for various neobanks.

Until now, Mercado Libre has operated in Mexico under a fintech license known as IFPE, which allows it to offer a range of services, including the company’s wallet app. However, there are services for which you need a banking license, such as receiving payroll deposits.

Argentine banks complain that Mercado Libre operates in its home country as if it were a bank, without being subject to the same regulation.

• David is a Latin American journalist. He regularly reports on the region for global news organizations such as The Washington Post, The New York Times, The Financial Times and Americas Quarterly.

  He worked for S&P Global Market Intelligence as a Latin America financial reporter and gained experience on fintech and market trends in the region.

  He lives in Buenos Aires.

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