(Bloomberg) -- MercadoLibre Inc. accused Argentine banks Monday of “illegally concentrating” under one payments platform as an anti-competitive tactic against the company’s fintech arm.
Latin America’s largest company by market valuation filed a legal complaint before Argentina’s National Commission in Defense of Competition after banks — under their shared platform MODO — filed their own legal complaint in May alleging similar anti-competitive strategies by the firm’s Mercado Pago unit.
While Mercado Pago claims 80% of all deposits in Argentina’s financial system are held by the 36 banks backing MODO, the banks says Mercado Pago is home to 80% of all e-commerce retail sales in South America’s second-largest country.
“The 36 banks that are part of the MODO wallet make up a cartel to avoid competing between its own digital wallets,” MercadoLibre said in a statement Monday, accusing banks of “coordinated practices destined to hurt the fintech industry and its users.”
It’s the latest sign of tensions between burgeoning fintech platforms and the traditional banks as the once cash-heavy economy is quickly converting to more digital transactions.
A similar legal battle played out in 2018 over a bank-supported platform called Prisma, which was eventually bought entirely by Boston-based private equity firm Advent International. More recently, the banks have accused Mercado Pago of excluding competition by not letting QR codes at retail stores operate freely between apps.
MODO, founded in 2020, responded later Monday to MercadoLibre’s complaint, dismissing the company’s accusations that the banks unfairly collude to lure users with discounts and other promotions.
“Instead of improving its promotion offers, MercadoLibre wants to block ours with complaints, avoiding competition that provides better benefits to users,” Santiago Eraso Lomaquiz, MODO’s director for legal, compliance and public affairs, said in a statement. MercadoLibre “intends with this complaint to close the market so it can continue abusing its dominant position.”
Founded in 1999, MercadoLibre is now Latin America’s most valuable publicly listed company with a market capitalization of $101.4 billion. While it initially started solely as an e-commerce platform, its payments and financial services arm has grown to represent more than 40% of revenue.
MercadoLibre said its battle with the Argentine banks’ platform MODO is different from the competition between US fintech platforms and Zelle, the money transfer platform backed by Wall Street banks. The distinction is that Zelle is meant for person to person transfers, a service each individual banking app already offers.
“MODO isn’t doing the same, it’s not necessary to have MODO to transfer money in Argentina,” MercadoLibre added in its statement. “MODO has a different objective: Coordinate a commercial distribution channel to evade the competition.”
--With assistance from Ignacio Olivera Doll.
(Updates with MODO response in 7th paragraph.)
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