Argentine banks in a row 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 longstanding 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 nation’s e-commerce and fintech behemoth. The move comes as digital wallet firm Modo, owned by over 30 Argentine banks, files a complaint alleging anticompetitive practices to the Argentine competition watchdog, the National Commission for the Defense of Competition.

Modo emerged as a bank-led response to Mercado Libre’s meteoric growth in Argentina’s digital payment sector, particularly with its Mercado Pago digital banking service. The accusation sparked a counterargument from the e-commerce giant, alleging cartelization by the banks. This marks a new chapter in a longstanding dispute that has escalated in recent weeks, focusing on QR code interoperability.

Mercado Pago beating banks in Argentina

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

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

Over the past few years, the e-commerce giant has rolled out an extensive network of QR codes that have become ubiquitous from Buenos Aires to the interior of Argentina. This marks a phenomenal advance in terms of financial inclusion and a boom in digital payments.

Eventually, the central bank, seeking to mirror perhaps the growth of Pix in Brazil, mandated that these codes should be interoperable. Mercado Pago initially expressed dissatisfaction, citing its significant investment in its platform, yet it 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, banks claim there are delays in Mercado Pago’s compliance with these regulations. Both parties worked on the specific details of the negotiation in previous instances, and the final deadline was last April 30. In particular, they claim that operations through QR codes sometimes take longer when paid with different financial providers. They also want a piece of the e-commerce pie, arguing their payment services should be allowed into the online marketplace as well.

A fierce rivalry

Around the world, competition between banks and fintechs typically eases over time as regulations adapt to the evolving sector. Yet, analysts observe a particularly intense rivalry in Argentina, surpassing 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 since ceased,” says Ignacio Carballo, Head of Alternative Finance at Americas Market Intelligence. “Mercado Libre is a giant that, due to its sheer size, becomes a perfect target in financial system disputes. In the rest of Latin America, there are no fintech actors as concentrated.”

The Amazon of Latin America has grown aggressively into fintech in recent years, challenging banks at their own game and swiftly taking the lead in digital payments across the country. While its credit offering remains limited compared to traditional institutions, its dominance in the electronic payment 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 extensive financial and commercial ecosystem—and certain banking institutions,” Carballo added.

Mercado Libre to become a bank.. in Mexico

Mercado Libre is directly seeking to become a bank in other parts of Latin America. Recently, it was revealed that the Buenos Aires-based firm 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 been operating in Mexico with 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 it needs a banking license, such as receiving payroll deposits.

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