When it comes to investing in e-commerce, investors may not be familiar with the Latin American e-commerce Mercado Libre. But for Latin Americans, MercadoLibre is the largest e-commerce company in Latin America and it is using the opportunities that the entity has turned to e-commerce.

MercadoLibre is uniquely positioned in this business opportunity. This year's MercadoLibre's performance in the e-commerce field is also amazing.

Some investors may not understand the customs and habits of Latin America. Two of the most noticeable habits involve financial transactions. First, many countries in Latin America are still based on cash payments, and 70% of Latin Americans do not have bank accounts. Second, 20%-50% of Latin American consumers do not have a credit card.

MercadoLibre sees opportunities from consumer habits and adopts a series of measures to cater to local consumers. Early MercadoLibre launched a MercadoPago payment service to give consumers the choice, similar to the third-party payment service provider PayPal. In some Latin American countries, MercadoLibre allows consumers to use cash to pay for e-commerce shopping orders at convenience stores.

Payment transaction rises

The key factor for the amazing growth of MercadoLibre is to cater to the sellers and buyers' consumption habits in Latin America. In the past 12 quarters, the payment transaction volume has increased by an average of 70%. The reason why MercadoLibre was so successful was that MercadoLibre began to provide payment services for sellers who do not sell products on its platform, thereby accelerating payment transactions. According to data from Mercado Libre's third-quarter report in 2017, payment transaction volume increased by 84% year-on-year, and total transaction volume reached US$3.15 billion, an increase of 73% over the same period of last year and an increase of 76% in local currencies.

The growth of payment transactions is closely related to the growth of user base and sales. MercadoLibre has more than 200 million registered users and has grown by more than 19% every quarter since 2011. The increase in the number of users has led to more sales. In the past two years, the average annual sales volume of products has increased by 31%.

In the third quarter of 2017, Mercado Libre realized a net income of US$371 million, an increase of 61% over the same period of the previous year, and converted into local currency, an increase of 79%, a record high.

As the company expanded its free shipping and customer loyalty programs to combat competitive threats from Amazon, MercadoLibre's operating revenue fell by 16.7% to $30 million.

MercadoLibre is also expanding its small business loans to suppliers. The traditional banking penetration rate in the region is low and it is difficult for most sellers to obtain working capital loans. With more than a decade of data and artificial intelligence algorithms, the company has more detailed information than most banks and can accurately predict the sellers who are most likely to repay the loan.

So far, Mercado Libre has performed its own plan almost perfectly. In 2017, Mercado Libre's share price doubled. The platform’s base of sellers and buyers is also growing. MercadoLibre is a trusted brand in Latin America and MercadoLibre is gaining momentum.