Mercado Pago Rapidly Gains Ground in Chile‘s Digital Payment Landscape
Mercado Pago is experiencing meaningful growth in Chile’s financial sector, quickly becoming a major player in digital payments. Recent data reveals a ample increase in the company’s card operations, reaching 4,092,016 cards in use as of August – a figure that surpasses all Chilean banks except for industry leader BancoEstado.
A key factor driving this growth is the ”Make your money grow” product, which facilitates transfers between mercado Pago accounts and Banco Bice. A significant portion of the cash withdrawals consolidated by Mercado Pago actually represent these internal movements, highlighting the product’s popularity among users.
Agostina Colaizzo, Senior Manager of Credits and Cards at Mercado Pago, attributes the company’s success to its comprehensive and free digital account offering. “We’ve positioned ourselves as a primary financial tool for millions of Chileans by solving a real need with technology: democratizing access to financial services that were previously complex, expensive, or inaccessible,” she explains.Mercado Pago’s strategy centers around a digital account ecosystem, with its card serving as a crucial link to customary, physical transactions.
While Mercado Pago is closing the gap, BancoEstado remains the dominant force with 14,072,200 current debit cards and 11,809,870 active cards as of August. The state bank also processed a massive 217,999,764 debit card transactions totaling $3,807,728 million in the same month.
Experts suggest a valid comparison can be made between Mercado Pago’s prepaid cards and traditional debit cards, as both serve the fundamental purpose of enabling payments with existing funds. Mauricio Larraín, a former CMF commissioner and current professor at the University of Los Andes, predicts a natural consolidation within the market, with a few key players – including Mercado Pago, BancoEstado, and Tenpo – emerging as leaders.
Larraín points to two primary reasons for this trend: economies of scale and economies of scope. Mercado Pago benefits from high fixed costs in areas like technology and security, but extremely low marginal costs per user, making growth increasingly beneficial. More importantly, the company leverages economies of scope through its integrated ecosystem.
“Mercado Pago’s strength lies in the synergies between its various services – e-commerce integration with Mercado Libre, a diversified range of financial products, shared data utilization, and customer loyalty within the ecosystem,” Larraín explains. This interconnectedness creates a valuable network effect, making it increasingly tough for competitors to challenge Mercado Pago’s position in the rapidly evolving Chilean digital payment landscape.
