KBW Takes a Look at PayPal’s Expanded MercadoLibre Mobile Payments Connection

January 14, 2020         By: Steven Anderson

Not long ago, we first found out about PayPal’s planned expansion of its connection to MercadoLibre, a move that was likely to not only give PayPal a hand up in the Latin American mobile payments market, but also help give MercadoLibre itself a shot in the arm thanks to better access to PayPal’s own market. Now, our friends out at Keefe, Bruyette & Woods (KBW) have tipped us off about what they think of PayPal’s market move, and as it turns out, they share a lot of our sentiment on this.

KBW’s assessment of the MercadoLibre deal is fairly positive. It expands operations in Mexico and Brazil, and gives PayPal new access to a range of merchants therein. It also gives MercadoLibre access to PayPal customers via the Mercado Pago system.

Given that MercadoLibre processed around $3.6 billion in gross market value in the third quarter of 2019, that’s potentially a hefty slug of revenue for PayPal, KBW discovered. What’s more, KBW identifies “several other moving factors,” including how long it will take for PayPal to really take off in the MercadoLibre space, as potentially impacting the deal one way or another. However, KBW doesn’t believe that this move will have an immediate impact to PayPal’s bottom line. It does believe, though, that this could be the start of something great, and could ultimately “help to plug the hole from eBay.”

That last has been a significant concern for some time now. PayPal’s disconnect from eBay has already been delayed, but when that day comes—and it’s likely to—it’s going to be a serious loss of cash incoming for PayPal. However, PayPal has also demonstrated an avid desire to diversify, and in recent months, has done so to staggering effect. The notion of a post-eBay hole is real, but thanks to that diversification, will likely have little effect on PayPal going forward. It will merely lose some of the ground already gained, not be forced to consider cutbacks or the like.

PayPal has made some excellent moves in the mobile payments arena, and now, KBW has chimed in backing up many of our own earlier assertions.