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Mercado Libre shakes the board of common funds' industry: companies can also invest

Mercado Libre shakes the board of common funds' industry: companies can also invest
Mercado Pago will extend this service already used by thousands of people in Argentina to obtain returns of 40% on average
10.06.2019 18.50hs Mundo Fintech

Almost ten months after disembarking in the world of the Mutual Funds of Investment (FCI), Mercado Libre, through Mercado Pago, its financial arm, prepares a move that will shake the industry's board.

The company of Marcos Galperín, who until now had been offering individuals the possibility of investing the balance of their accounts in funds, will open the game so that all companies can also do so, through the platform.

In September 2018 he launched Mercado Pago Fondos, whereby he gave users the option of simply investing their money, with the promise of an annual average of 40%.

The system revolutionized the market, since many who were not even banked began to pour their capital into an FCI, a tool not so sophisticated but little used by small savers.

In fact, it is very likely that a large part of those who made their money through this instrument have not heard of a "comitente account", which is what you have to have so much to bet on a common fund made up of shares, bonuses and other contributing assets.

"The investments in Mercado Pago already exceeded 50% of the total money of the accounts available in Argentina," explains Paula Arregui, senior vice president of the company. "Between our country and Brazil," he added, "we reached 1.5 million accounts invested just eight months after the launch."

"For now, this solution is available for individuals, but companies will soon be able to invest," the executive advances to iProUP.

The industry numbers
According to Diego Cetani, commercial manager of BIND Inversiones, the entity that administers the funds of Mercado Pago, the service has already incorporated "more than $ 2,500 million to its assets with more than 374,000 users" since its launch in September.

One piece of information serves to measure the weight of Mercado Pago Fondos within the industry: the number of clients that have already invested from the platform practically equals all the individuals that today have participation (through quota shares) in some common fund in place .

Strictly speaking, according to the latest data from the Argentine Chamber of Common Investment Funds (CAFCI):

- At the end of April, there were 395,215 individuals with open accounts, barely 5% more than the number of investors who spent eight months in Mercado Pago funds

- Those accounts, which at the end of that month were open, added an equity of $ 116,629 million. That is, 15.8% of everything that moves the industry ($ 737,495 million)

"Today, most of it is concentrated in large investors, when Mercado Pago starts offering its funds to the different companies, it will take an exponential leap in its assets," they anticipate from one of the most active management companies in the City, giving an idea of ​​the impact of the next step that Galperín will take.

Anyway, analysts still do not see it as a direct competition. "Mercado Pago is making known an instrument that in the country never finished exploiting among the retail public, for now we see it as a way to massify the FCI," they explain from a stock exchange company that has been operating for years with different mutual funds. 

"Our goal is to ensure that more and more people have access to products and services that allow a real inclusion in Argentina," says Arregui, who provides a figure that shows the scarce financial culture that exists in the country: only 28% of the population has a means of electronic payment.

"This poses a great challenge and, in that sense, our bet is for a market that involves more and more people, with greater opportunities for all those who today do not access traditional payment instruments," he adds.

So far, as revealed by BIND Inversiones, the return of the last 30 days of the Fund was 46% (TNA). "Beyond profitability, what the fund is looking for is to balance performance against risk in a conservative investment strategy," Cetani tells iProUP.

The strategy to reach everyone
The scale in which Mercado Libre moves also serves to have an idea of ​​the impact that will generate the possibility of investing in funds to all its users.

By the first quarter, the platform had 38 million buyers and 11 million sellers; while the volume of transactions processed by Mercado Pago exceeded 5,639 million dollars.

"The strategy is based on achieving that financial inclusion becomes effective, and for that we focus on the benefits for the user, which are many," says Arregui, while listing the main strengths to massify this instrument:

- It is not necessary to have a bank account

- The returns generated are reflected daily and the minimum amount to start investing is only 2 pesos

- The process is very simple: there are 3 steps that can be done 100% digitally from the cell phone

- The money invested is available to be used at any time, whether to buy, pay or withdraw to a bank account

- There is no minimum time of permanence and when you stop investing you do not lose the earned income

- The digital balance is inverted automatically, as well as all new funds that enter the account

- For those who want to use this service and do not have money in their accounts, the platform gives the option to deposit money through debit card or collection networks such as Rapipago and Pago Fácil

All these benefits that provide agility to enter and exit the funds at any time and the small amount required for an outlay make the behavior of the users of the platform different from the classic investors of FCI. The latter, in fact, usually leave the money immobilized for a certain time and make the rescue at the moment they require cash, which generally coincides with the expiration of taxes or other liquidity needs.

"We do not see in the dynamics of redemptions and subscriptions a similarity with investors who operate outside Mercado Fondo, where perhaps, especially individuals, have a similar behavior," Cetani, from BIND Inversiones, reports.

"Mercado Fondo users operate in pursuit of their behavior within Mercado Libre, whether buying or selling," he adds. That is, they redeem their capital at the time they need to make a purchase or, conversely, they sign FCI when they made a sale.

"The experience for the client is so agile that it becomes almost invisible, therefore, remaining invested or not 100% associated with its transactional profile", Cetani emphasizes.

Regarding the most frequent doubts of users, Arregui points out that they are mostly linked to the characteristics of the Common Investment Funds. The concerns, in fact, are focused on "how to manage your Mercado Pago account to generate profits, how to boost your money if you have a company account, what you need to know if you have never had returns before," says the firm's senior vice president.

All at another scale
Mercado Pago not only processes the transactions carried out in Mercado Libre but also daily operations, both online and in the physical world, through commercial services, mobile point of sale (MPOS) devices and virtual wallet (QR) businesses. , with which the potential of growth of the patrimony of its funds is even greater.

Strictly speaking, the total volume recorded outside the platform grew almost 120% year-on-year in dollars and exceeded U $ S2,500 million.

The numbers of the last balance presented by the company show that the active users of the virtual wallet quadrupled with respect to the same quarter of the previous year.

"We had 3 million payers in the last quarter and the total volume of mobile wallet payments is growing by three digits year-on-year, both in Argentina and in Brazil and Mexico," argues Arregui. "The Mercado Pago app is the largest virtual wallet in the region and offers the most functions," he adds.

In addition, payment transactions from MPOS devices already account for almost half of the off-platform payment transactions, surpassing the 1,000 million mark for the first time during the first quarter, an annual increase of 260% in dollars.

In just eight months, Mercado Pago brought the common funds to more than 374,000 people and until now only focused its strategy on individuals. Undoubtedly, as soon as Galperín starts offering the possibility of investing its pesos to companies, it can revolutionize the industry.

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