MercadoLibre implications for SQ/SHOP/WIX etc

Investment Analysis Clubs Saul’s Investing Discussions
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These results have significant considerations for how you could think about the opportunities for Square (both within US and globally) as well as the internal revenue contracts within Shopify and potentially for WIX the potential missing opportunity as well as what the fintech and logistics valuation elements mean for Ali Baba.

Essentially leaving aside currency fluctuations and changes in product listing policies on the platform, whilst the constant currency GMV and item sales continued to grow well, in the space of a few quarters, MercadoLibre has gone from being an ecommerce market place operator with some shipping and payments solutions to practically becoming an off platform fintech player outright (think POS systems, wallets, asset management) and off platform logistics provider outright. Whilst ecommerce is growing in double digits (and their in house logistics taking an increasing share of fulfilment), their offline fintech solutions are growing at triple digits.

Interesting point, Anthonyms.

Outside of the United States fully 80% of all financial transactions are made with cash. This includes things like car payments, water and electric bills, internet, and the things we would usually make online. The problem with this, from the government’s view, is that all of this takes place in what is called “the grey economy” and thus if flies under the radar of the taxing authorities. Some countries use high excise taxes to make up the difference. But if the taxes are too high, the black market thrives. It’s a delicate balancing act.

India recently took a stab at going cashless by outlawing the 500 and 1,000 rupee notes. https://www.verdict.co.uk/electronic-payments-international/…

I think at some point fintech in developing societies is likely to benefit from some sort of governmental tailwind. I don’t know if that means it will be that MELI will be the beneficiary, but I think they might be the best positioned at this point.

Just my view from here (in Ecuador).

Jeb
Long MELI, SQ, MA, SHOP
Explorer Supernaut
You can see all my holdings here: https://discussion.fool.com/profile/TMFJebbo/info.aspx

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Great links, Ant. Thanks. This is a fast-moving space and its getting really hard to keep up!

Matt

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The India project is very interesting and ambitious. Lots of money to bring about a technological revolution in India. Very cool project, hopefully it turns out well.

Apart from governmental tailwinds, ease of use, I believe, will be the number one driver. When most people in the world have access to smartphones and internet on tap, all the pieces will be in place for these fintech companies to explode.

Example: recently a small town in Wales had their last bank close. This created a nightmare for all the small business’ in town when in came to cash. Not only did they have to count and cash out everyday, but they had to drive a long way to be able to cash it in at the bank. Think of cost of travel, security, time wasted, wages required for this mundane job…hassle!
So the town went cashless. Instead of the costs of having and handling cash, why not just use a POS system and pay the, what, 2.25% transaction fees, instead. More secure, safe, and efficient.

Just looked up the story and it was actually Square giving the small shops free square card readers.

I always pictured technology coming to the big cities first. But as rural communities become less served by brick and mortar banks due to the costs of running, it becomes more and more attractive to use technology to solve problems.

Liken this to the Tesla and electric car thesis. As the % of cars on the road increasingly become electric, the business of petrol/gas stations becomes less and less attractive, and eventually untenable, resulting in the acceleration of electric car uptake.
As the cost of holding and using real hard cash increases (due to high street banks closing), the barriers to entry (i.e. cost) of using POS fintech solutions, becomes negligible.

Of course, all this relies on your government not screwing you over and bumping up taxes as then there’ll be no escape! Except for cryptos I suppose.

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