Gentlemen, thank you for standing by, and welcome to MercadoLibre's First Quarter 2021 Earnings Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. It is now my pleasure introduce Investor Relations Officer, Lisa Schreers.
Hello, everyone, and welcome to the MercadoLibre earnings conference call for the quarter ended March 31, 2021. I am Lisa Schurz, Investor Relations Officer for MercadoLibre. Our Chief Financial Officer, Pedro Arndt, will be leading today's prepared Joining him on the line is Chief Executive Officer of Mercado Fago, Osvaldo Jimenez, who will be available during today's Q and A I remind you that management may make forward looking statements relating to such matters as continued growth prospects the company, industry trends and product and technology initiatives. These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable Our actual results may differ materially from those included in this conference call for a variety of reasons, Including those described in the forward looking statements and risk factors sections of our Form 10 ks for the year ended December 31, 2020, Item 1A Risk Factors in Part 2 of our Form 10 Q for the quarter ended March 31, 2021, and any of MercadoLibre Inc.
Other applicable filings with the Securities and Exchange Commission, which are available on our Investor Relations website. Now let me turn the call over to Pedro.
Hi, everyone, and welcome to our Q1 2021 earnings call, our financial results were once again marked by accelerating growth due to strong demand for e commerce and FinTech Services within an improving, but still challenging environment. While some key markets
the end of the quarter,
online consumption throughout remains strong and we experienced favorable consumer trends as digital services Our solid quarterly performance illustrates our commitment to executing our long term the recognizing the important economic role we play in the countries where we operate. Let me start us off With the results from our Commerce business in Q1, we generated triple digit growth In items sold and maintained record levels of transactions per buyer quarter on quarter. This constituted the formidable level of engagement given seasonal differences between Q4 and Q1. Volume the consolidated gross merchandise volume grew 114% year over year on an a tax neutral basis. Across our geographies, all countries either maintained or posted higher growth rates Compared to the Q4 of 2020.
In Brazil, our largest market, we doubled Items sold and nearly doubled GMV versus the prior year. In Mexico, We continue to accelerate our sequential growth in items sold and GMV. All other geographies showed positive trends this time, we will be conducting a
the end
of the quarter, we are focused on delivering To achieve this, we are focusing on both category and merchant type expansion. For example, during Q1, we made significant strides in amplifying our the same time, we established initial partnerships with traditional large the retailers in Mexico and Brazil and reached new record levels of inventory depth across categories. User experience in CPG is also benefiting from our logistics footprint. In Brazil, the end of the quarter, we are pleased to announce that our CPG items are already being shipped from our own fulfillment centers, helping us this time, we will continue to improve user experience and deliver consumer expectations. On the merchant front, as you know, our marketplace is composed of a mix the small sellers and big brands, we have been attracting more global and local household name brands across multiple verticals as we continue to time, we are pleased with Panasonic, ASUS and Intelbras, while our CPG portfolio now includes stores As a result, approximately 20% of our market the sales are already coming from official stores, an increase of 7 percentage points over the same quarter the end of the quarter last year.
Overall product depth also continues to improve as live listings have reached almost 300,000,000 listings this quarter, increasing versus the 4th quarter in all major geographies. Part of this increase was driven by the growth the end of the quarter,
we have a number of unique sellers
in our marketplace with almost 1,000,000 total sellers with successful sales during the quarter. We will continue to grow our already ample seller base, adding almost 200,000 new sellers to our marketplace this quarter. Before moving on to logistics, let me briefly address our growing loyalty program. We continue to expand our content offering, while delivering great value in terms of new subscribers For our initial content partners, Disney Plus, Deezer and HBO. More importantly, we are seeing strong signs of incremental engagement From user cohorts that purchase content through our loyalty program.
Building on this initial success will be a growing focus for Let's now move on to developments relating to MercadoEnvios, a primary contributor to our core business. During Q1, our logistics capabilities were a focal point of our operating strategy, reaching new company the expiration of 80% on a consolidated basis, with Argentina, Brazil and Mexico at the And we are also pleased with our progress in Colombia and Chile, which demonstrate our speed in execution. We have now reached 63% and 53% penetration of items the ship through our managed network in those markets respectively. We view this as a remarkable progress considering We began implementing our managed network operation in Colombia and Chile only a little over a year ago at the height of the COVID-nineteen pandemic outbreak. Regarding our fulfillment operations, on a consolidated basis, This is driven mainly by expansions in Brazil, Argentina and other countries in the Andean region.
While the end of the quarter. During Q1, we shipped over 208 the end of the quarter, we generated a year over year growth above 130% Our lead times per shipment set a new record for speed. We significantly improved the share of same day and next day delivery in every single country, even while sustaining high levels of growth in total items Overall, 74% of all volume was delivered in less than 40 the end of the quarter, a notable 21 percentage point improvement versus a year ago. These results were driven by the sustained expansion of our logistics network. We recently started operating 2 new fulfillment centers, 1 in Santa Catarina, Brazil and another near Monterrey in Mexico.
New service centers were also added to our work in Brazil. Simultaneously, our same day logistics solution gained greater participation in Brazil, Columbia and Chile. This advances our objective of increasing fast deliveries within major the Urban Centers and we are now operating deliveries during weekends as well. As you can see, the MercadoEnvios team is operating at an outstanding pace, while unlocking greater levels of efficiency within our network. Additionally, This delivers several benefits.
First, we now have an even more comprehensive free shipping program for buyers in the region, the end of the call for free. We strongly believe that these developments within our logistics services will be drivers of sustained improvements in customer this time. Finally, on a related matter, we are also proud of our ecological the Coca Cola Conservation Initiative, Regenera America, following the issuance of our sustainability bond earlier this the end
of the
year. Integrating sustainable practices that complement our logistics operations and get us closer to carbon With that, I'll now address the FinTech side of the business, a critical lever within our the system to democratize money and access to financial services. For the Q1, MercadoPago the end of the quarter, total payment volume reached $14,700,000,000 on a consolidated basis, growing almost 130% year over year on an FX neutral basis. This represented a total of $630,000,000 transactions for Q1 at a growth rate of 117% compared to the same quarter last year. On platform payments this volume grew by 119% on a consolidated basis, largely driven by the strong the same time, we are pleased to announce the performance of the Commerce business in Brazil.
For our off platform payments, TPV grew by 136 this time, we are continuing to successfully build our network of active collectors and payers. On the collector side, we have over 11,000,000 off platform merchants on a consolidated basis, with almost $7,000,000 in Brazil alone. Additionally, during Q1, we reached almost this time, we closed 35,000,000 off platform unique payers during the quarter. I'll end of the call, we will now detail the various segments of our off platform payments business, starting with Point, our point of sale offering. Point was resilient throughout the lockdown.
Despite reduced physical retail volume, Point payment volume end of the quarter, we grew 90% on an FX neutral basis, setting new volume records in Brazil, Mexico and Argentina. Neo device sales Reached almost 1,000,000 units with strong growth in Mexico. POS sales in Mexico benefited from the launch of our top of the line device the end of the quarter, we expect to be in the range of $0.01 per share. This quarter, a very solid number, but down from previous quarters despite the record high volume processed the an FX neutral basis. Underlying this growth are 2 opposing trends.
On one hand, we continue expanding our services to online merchants this time, during the quarter, we maintained our small, mid- and larger sized merchant acquisition productivity with no indication of volatility in seller churn. On the other hand, long tail sellers that boosted activity during the peak of lockdowns in the region have decreased in volume as economies open and also driven by seasonality. To complete a review of our portfolio of financial services, let me address the growing number of financial solutions for payers offered through our digital wallet. Total payment volume associated with the wallet on a consolidated basis was 2,900,000,000 This represents a deceleration to 192% year over year on an FX the quarter, negatively impacted growth in total payers on the wallet, while less marketing spend As a percentage of wallet TPV, reduced user growth, but improved profitability. Although we are pleased the end of the call, we will be conducting a few more questions.
We will be conducting a few more questions on the call. We will be conducting a few more questions on the call. The end of the call. Our strategy is to transition from being primarily a digital PACE platform to a principal financial services provider. To accomplish this, we are beginning to better balance the investment required for growing the number of payers in our ecosystem with investments in driving higher levels of adoption of our multiple financial services, thus setting the foundation the credit, insurance and savings tech offerings.
To advance this objective of broadening our service offerings the end of the quarter, we made important product development steps during Q1. On the insurance front, we saw consistent the acceleration in our extended warranty product in Brazil, Argentina and Mexico with solid multi quarter sequential improvements in sales the attach rates. We also expanded the rollout of theft and damage insurance in Brazil For cell phones, a service that we can cross sell within our marketplace. Regarding our proprietary cards, this time, we issued 3,800,000 more cards this quarter, 2,600,000 of those in Brazil. The advantage of these To grow our revolving credit product in the coming months, our asset management services within the wallet Our another example of growth in added financial services, having added over 770,000 the end of the quarter.
Finally, incoming deposits into our digital account have increased such Payers with account money have doubled compared to Q1 of last year, potentially confirming the increased intention to engage with the financial services provided in our wallet beyond mainly payments.
The end of the
call, we reached 14,000,000 active wallet users during Q1, similar in number to Q4, the the end of the quarter, we expect to be in the range of $1,000,000,000 the
end of the quarter, we
are still in the early days of our journey becoming a principal provider of financial services through the wallet, and the initial results are very Finally, I'll provide a performance update from In Q1, our portfolio surpassed $575,000,000 more than doubling our volume versus the same quarter the previous year. During the quarter, we originated over 582 the same time, our consumer credit portfolio continues to drive growth in all geographies. This growth has come with increases in NPLs. Specifically, we've seen NPLs increase among a particular segment of users who have found it difficult to service small loans once government financial aid subsidies were removed. Upon observing this at the beginning of the year, we incorporated these new conditions into our credit scoring models in a timely manner, Thus exiting the quarter with improving performance on NPLs.
Consequently, the end of the quarter. Let me now move on to a review end of our financial progress for the Q1. I'll begin with consolidated net revenues. We began 2021 booking the highest net revenue growth rate over the last five quarters. Having reached almost $1,400,000,000 in revenue, the end of the call, we grew 111% in U.
S. Dollars and 158% on an FX neutral basis. At the country level, on an FX neutral basis, Argentina once again grew above the 200% the end of the quarter, Mexico nearly grew 150%. We were encouraged by our Q1 net the same time, we generated revenue growth in Brazil of 139%, surpassing the growth rates of previous quarters. Gross profit in Q1 was $591,000,000 at a margin of 43%, the end of the quarter, decreasing from the 48% recorded in Q1 of 2020, but increasing 6 percentage the the end of the call, we will discuss our financial results in our COGS line.
In addition, as we continue to roll out our own shipping network and have built more fulfillment centers, shipping At the same time, operating costs have increased as a proportion of cost over net revenues. For greater detail and as we do every quarter, We've included a detailed breakdown of these margin effects in the slides accompanying this presentation, along with the OpEx margin evolution as well. We see efficiencies and scale reflected in our operating At this time, we are pleased to report that we are pleased to report that we are pleased to report that we are pleased to report that we are pleased to report that we are pleased to report that we have made in the quarter. Operating expenses were $500,000,000 in Q1 and we have sustained improved operating leverage. OpEx as a percentage of revenues improved 17 percentage points year over year, decreasing the this time, we have reached Q1 of 2021 with positive EBIT dollars compared to a loss in Q1 of last year.
Moving down the P and L, the company incurred $91,000,000 in financial expenses this quarter, turning a very strong EBIT quarter into the red. However, The main driver of this is non recurring. We recorded a $49,000,000 charge related to our convertible debt repurchase transaction. We also increased year over year tax payments from increased earnings the end of the quarter, we also have a foreign exchange loss of a little over $15,000,000 the end of the quarter, we recorded a $25,000,000 a 32% decrease year over year resulting from lower interest rates on investments versus the Q1 of 2020. Ultimately, Q1 closed with a net loss the same time, we expect to be approximately $34,000,000 after tax, yet with an improved net income margin of almost 1 percentage this point compared to last year and more importantly, a return to profitability if excluding one off charges.
To wrap up, I'll note that we've gotten off to a great start 2021. Our top line growth is very solid and we have successfully executed our plans to drive incremental EBIT this time, we are still facing trying times in Latin America as the COVID-nineteen pandemic remains present. We remain immensely grateful to our almost 19,000 employees and collaborators for their continuous commitment to provide financial inclusion and democratization of commerce, while keeping us safe and As has been the case over the past 12 months, we will keep building towards our goals, elbow to elbow the end of the call with our community of users throughout Latin America. Thanks everyone for joining this quarterly conference call And we look forward to keeping you updated on our progress in a few months. With that, we can now take your questions.
Our first question comes from the line of Andrew Rubin with Morgan Stanley.
Hi, thanks very much for taking the question and congratulations on the results. So my question
is on wallet. So the color is very
helpful The strategy is clear and it seems like some less focus on TPV and active payers as the markers of progress. So My question is what metrics are you looking at internally and what would you suggest investors look at to judge the success and traction of the wallet initiatives more broadly?
Hi, Andrew. How are you? Thanks for the question. We continue to look at TPV and active payers. It's a metric we take a close look at.
What has happened, I would say, in the last two quarters is, on the one hand, warrantees, which have Last year, a step function in growth slowed down or disappeared mostly in both Brazil and Argentina. And on the one hand and then on the other hand, we also saw that since there were lockdowns in total of the Cantu where we operate, we decided to These countries will be open. On the other hand, I would say more and more we are looking beyond Just Wallet And towards becoming a more comprehensive financial services platform. And so we have been Also focusing more on, for example, debit cards in Brazil and now we have just launched credit cards in Brazil so that to have a More significant share in total marketing total financial spend of our users and that has been the focus recently.
And our next question comes from the line of Bob Forward with Bank of America.
Hey, thank you. And again, congratulations on the quarter. Just a couple of questions. How are you thinking about your dual app structure these days? And would combining the 2 help drive greater wallet activation, frequency and more efficient wallet funding?
Or is the cost and speed and size this time, I'm going to turn the call back to the operator for the Q1 of 2019. And then I recall you beginning to accept Bitcoin some time ago in the marketplace and now the treasury move and facilitating real estate transactions in Bitcoin, can you buy Bitcoin with ARS? And how are you thinking about the use of Bitcoin both in general terms and as possibly a store of value for your wallet users?
Thanks. So first of all, on the app structure, I think going back to the previous question and to the increased focus on widespread financial services distribution, If you think about that as the ultimate goal and how do we move towards Principality in Financial Services for our users, Implied in that is that a lot of the payments functionality should expand. I think there's a lot in the pipeline in terms of incremental financial services, features in products. So trying to cram all that into a single UX is not the direction we're going. Having said that, if you look at the numbers, we have around 60,000,000 users on the commerce side that we increasingly cross sell and try to get them to also download the Financial Services Pago app.
So there are barebone payments functionalities in the yellow commerce app And increasingly, we will try to drive those users over to the financial services app through cross linkages, through promotions. And that's where we are aggressively focused on expanding the amount of financial services that they use from us. At the end of the day, if you look at long term, the real potential in FinTech goes way beyond payments the same are not usage of ours. This is U. S.
Dollars that we are purchasing crypto with. I think this has multiple objectives. One of them is we've always been long term thinkers and we believe this is a good use long term store value for our treasury at the right amounts and at the prudent amounts, but it's also us making sure that we are quickly moving up the learning curve in terms of understanding crypto and making sure that Opportunities that we are sure will arise, we are able to move into them and have good understanding of what's going on. But this is not And I think as a company, we are excited with opportunities that probably will emerge in the fintech world around crypto, And we want to make sure that we are learning and well versed or as much as we can. And that's, I think, one of the reasons we're doing this from treasury and also other parts of the
company. Great. Thank you very much.
Thank you. End, our next question comes from the line of Irma Skars with Goldman Sachs.
Yes, hi, good evening. In your marketing expense line, you had an increase after a couple of quarters of sort of having a relatively flat lined expense Given the environment, what campaigns, channels and geographies would you just call out? And was it more commerce So then FinTech, it sounded like it from your prepared remarks, but just wanted to follow-up and get a little bit more detail. And connected to that, in the product and developed technology expense line, Obviously, altogether, we're seeing a lot of leverage in expenses, but that expense line was also up Quite strongly in the Q4 and to a lesser extent now, when you think about the breakdown of your product and technology development expenses now for 2021 compared to, let's say, 2018, 2019,
Great Irma. So on sales and marketing, if you look at the sequential evolution, It was actually seasonally up Q4 to Q3 and then it's up Q1 to Q4 again. That increase is not driven by the customer acquisition, brand programmatic couponing, but it's driven by 2 other elements within that. One of them is the buyer protection program. So as TPV grows and also as we have more and more fulfillment blueprint Items fulfilled by us, we have a larger coverage and guarantee promise.
And those numbers are up about That's the biggest driver of the sequential increase. And then the other one as is disclosed in the financial statements in greater detail incremental bad debt on the credit book, but that's also because revenues and originations are growing extremely well. So there's a matching revenue growth from that increase in bad debt, which are the loan loss provisions on the credit book. The actual underlying branding and customer acquisition costs are down sequentially as one would expect from seasonality. Product development, I think, continues to be an area of strong investment for us in absolute dollars.
It continues to scale year over year from a margin perspective. And The single biggest line item there obviously is headcount. We have a lot of the development and a lot of product features on our roadmap. And so we're aggressively trying to ramp up our engineering team. We're looking to almost more than double actually our engineering teams over last year.
We're convinced that that's the right place to be investing long term. And so I think the combination of significant growth in absolute terms, but the same time, we're still scaling from a margin perspective is a good combination for a tech company. We can continue to invest aggressively in growing the engineering talent pool,
Thank you. And our next question comes from the line of Ravi Jain with HSBC.
Just quick two questions. First, I think on e commerce. Could you give maybe some color Around purchase frequency and retention rates, particularly about the cohort that came on to your platform in the last 2, 3 quarters. I mean, I'm trying to figure out how do we look at normalization of growth, once we start comping the tougher ones next few quarters. And the second one, probably a little bit more on the FinTech, just following up on a couple of previous questions, You mentioned that you have lowered the marketing spend and the incremental financial services is what it's going to drive.
So maybe some color on what are the important features that you think will drive incremental adoption from here, what will take it from 14,000,000 users to a number like a couple of We've seen recent salary portability. Is it debt? Is it credit? Some color on what you think would drive
Okay, great. So let me start with the first one. I I think on the cohort number, I don't have it off the top of my head. Obviously, there's a seasonal Adaptation, if we look at Q4 to Q1 cohorts, but nothing worrying in the cohort analysis. I think if anything, when we look at the growth of our businesses, once we started comping with the headline growth rate, but sequential evolution continues to be pretty solid across most markets.
And so we need to continue to closely monitor this. I think as we rolled into May June, In some markets, the comps get progressively more difficult. But so far, when we look at the sequential evolution of growth, week on week and month on month, There certainly seems to be a good amount of purchases that have moved online throughout the pandemic and that are staying online. Now bear in mind also that a lot of our geographies have gone back into lockdown. And so that also, I think, affects demand patterns, so we might have to look at this over a longer period into Q2 and Q3.
But so far, I would say encouraging results in terms of how much online purchasing has remained online.
Going to the FinTech question, Ravi, I'd say that there are several features that we have been building or We are building to increase engagement with our wallet. Some of them are users can Use MarketoPal to pay in new ways. For example, we launched a couple of quarters ago our debit card and the interesting thing about the debit card is that Any Mercado Paulo user in Brazil has a virtual debit card. So whenever they have funds Mercado Paulo, they are able to generate a Number and use that to pay online anywhere and if they want they can ask for a plastic, but they cannot pay it online. Also, we will continue to increase the amount of credit lines we offer those users for them to have an extra reason to choose us to And combine those two things, we just launched our credit card in Brazil.
So the cards we had launched previously, debit ones, our hybrid card, and we can add credit functionality on top of those. And we have started to do that in April. So whenever we get a nuisance who has both a debit card already with them and also a good score with us, we will be able to offer them Savings and investment products, so far the only product we offer is a money market in Brazil, Argentina and Mexico And the plan for this year is to expand the investment offerings that we have in Brazil. Then we will continue to grow our insurance products. So far extended guarantee and theft and damage are the 2 products we have available, the second one only in Brazil.
And we We are finding new ways to increase adoption of both products. So there are a few other things that are coming that we have not yet disclosed, Basically, the idea here is to increase the cross sell among products and to increase the engagement. You mentioned Salary portability and what type of integration, those are two things that we have rolled out recently. Still too early to have results of those, But what we want to achieve is to gain principalities in the use of the MercadoLibre account.
Thank you
so much.
It's helpful.
Thank you. And our next question comes from the line of Marcelo Santos with JPMorgan.
Hi, hello. Thanks for taking my questions. I have 2. The first is on margins. I want to touch a bit on the question that Irma did.
I wanted to understand a little bit better. You saw a big improvement in margin year over year because of lower marketing. And you also mentioned that you saved a bit on marketing dollars in the Syntech because there was a lockdown, so we didn't want to spend the money now. So we saw this very high margin. Is this margin that is kind of a little bit boosted because you've invested less in marketing and we should see a normalization of this marketing or this Could be seen as a normal level that you were having?
That's the first question. And the second question, my perception was that the revenue was very strong, like The monetization was very strong. Could you please comment if there was anything positively impacting monetization either on FinTech or on the e commerce? Thank you.
Great. So Look, I think the margin improvement sequentially are driven by More factors than only marketing, but marketing is a significant one. Marketing tends to have somewhat of a seasonal outlay. So obviously, towards the end of the year shopping season, the margin compresses somewhat. In Q1, I think this year, as we said, was one of marketing pullback.
So I don't think you should expect this kind of margin leverage, but I don't think you should assume the same time, we have a number similar to Q4 of last year either. I think we do look to drive year on year leverage off of the marketing expenses and given how fast our revenue base is growing, we can do that while at the same time being extremely competitive in the absolute number of dollars that we're deploying versus the prior year. There were also improvements and this is bleeding over to your second question. There were a lot of operational efficiencies on shipping costs. Some of those are COGS, but also Some of those are more efficient contra revenues.
I remind you that we some of our transportation costs are contra revs. And as that got more efficient into Q1, that's helped revenue growth. When we look at cost the shipment, those have been coming down sequentially across the board in almost all geographies. And that's also, I think a consequence of good operational efficiency from the logistics team and also the benefits of scale. And then we've also seen A return to more mix shift on payments of credit card over debit.
Debit was very prevalent Throughout a lot of the government aid usage and credit has better monetization than debit. And so that's reverted back to levels closer to where we are prior to Q3, and that's also helped improve take rate.
Perfect. Thank you. Thanks a lot.
Thank you. Our next question comes from the line of Stephen Ju with Credit Suisse.
All right. Thank you. So Pedro, I think you've been looking to add CPG as a more full part of the consumer offering for some time now. So is there anything you can add there in terms of what the increase in this percentage has done for Hopefully, greater velocity of purchase and hence as an output maybe customer lifetime value. And second,
Great. So CPG, there is some initial data that points to better engagement and performance across non CPG categories from users that purchased CPG, so we are beginning to see data that proves out, I think the thesis of getting involved in high frequency CPG categories that it does help lifetime values across other categories. Now bear in mind that and especially in the early years of the rollout of the CPG product, that obviously does come at a cost, Right. So even though lifetime values are improving, the incremental CPG sales are done at a much lower margin than other categories until that business that, and you will see a lot of innovation on our CPG and supermarket front like you have over the past few quarters. We've already announced a couple of high profile deals with very large retailers across the region to help them move more sales through our CPG channels, Supermarkets and so this is obviously a very large TAM category with very high frequency and one that the data we are seeing, I
Solid
growth, very consistent. We continue to Build out more and more sourcing capabilities in Asia. We now have feet in the ground there. We're seeing very strong impact of that in Mexico, for example, where it's relevant. We're also beginning to now focus on sourcing more and more North American merchants, because we're seeing good results as we improve products and features And users are better able to find cross border listings and offerings on our site.
So again, I think that's another part of our long term vision is to turn global supply local Our consumers across Latin America, and we will do that by continuing to expand our sourcing efforts, both in Asia, but also in North America. Thank you.
Thank you. And our next question comes from the line of Thiago Marc Cruz with ITAU.
Hi, guys. Well, we continue to see a mass Back to the year to growth year over year, even above competition, even though you're the market leader by a mile. So I was wondering if you had to list In order of importance, the top three important factors that are supporting this growth, what would you lift? What would you say?
Sorry, we just want to make sure we got your question. It cut off a little bit. Can you repeat the back end of the question, please?
Absolutely. Joe, I was just wondering if you had to list the most important factors that are supporting your active user growth in Brazil, In the business months, what would it be?
Sure. So first of all, I think Clearly, on the commerce side, there has been significant uplift in consumers purchasing online And engaging with our platform initially driven by the pandemic. I think for Melli, the fact that So many users were driven to our platform in the early days of the pandemic and realized that the logistics capabilities we had built out Over the previous years, really were incredibly efficient, both in terms of the expensiveness of free shipping, but also service levels, We're fantastic for us. I think had this happened 2 or 3 years earlier, where our logistics build out had not been where it was, the end of the call, we would have had a very different capability to retain a lot of these new cohorts of users. So I think clearly pandemic driven initial trial or users who had lapsed and then returned to the platform and realize The overall user experience was dramatically different from either what they anticipated or what they had experienced in the past has been a very, very important driver of growth.
And we see that also with the evolution of net promoter scores We lowered the threshold for free shipping in Brazil to BRL79. So really, MELI has by far the most expensive free shipping program, I think of online retailers in Brazil.
I think on the FinTech side of the business, I would say that drivers have been a little bit different in each of the verticals. Basically, if you want, online payments have been sort of in sync the marketplace where the shift towards e commerce has benefited the merchant services business, Then somehow countercyclical has been MPOS, where we saw a little bit of a slowdown when there was less traffic to stores. Nonetheless, I would say that Our shift upmarket enabled us to reaccelerate growth in the last couple of quarters and that has been significant in terms of And I think we have already discussed the volatility.
Thanks guys. Thank you very much.
Thank you. And our next question comes from the line of Sumit Datta with New Street Research.
Hi, guys. Two quick questions, please. 1 on commerce and 1 on FinTech. Just on the commerce side, Do you mind giving us please an update on what you're seeing, specifically on the competitive side from Shopee, there's been quite a bit of noise about their presence in the Brazilian market, potential to expand into Mexico. And I just wondered, I mean, that kind of seemed to coincide with the drop in free shipping to BRL 79.
So I wonder was that A response to the competition or was that just part of the ongoing business kind of thinking? And then next please just on FinTech, sorry to go back to the wallet again. I just want To double check, my sort of sense was always get usability on the wallet and use the wallet the end of the year, we'll be thinking actually that's the model shifted slightly And actually, yes, we'll look to sell financial services, but maybe it will be more focused outside of the wallet going forward. Thank you.
Great. So we don't comment on specific competitors. I think as a whole, given the size of the opportunity of commerce and FinTech in Latin America, the fastest growing e commerce region in the world Right now, obviously, there will be competitors. We've always tried to observe and learn From our competitors and if things that they are doing better we can replicate, we will replicate. But no, we didn't lower free shipping as a response to a specific a competitor, we've done that across the board in different geographies.
We've been doing that consistently over time. And the vision has always been that as we gain efficiencies from scale and from operational efficiency, we will allow some of those improvements to drop to the bottom line And we will return some of those to our consumers in the form of more free shipping, which generates a tremendous flywheel. And I think the combination of logistics efficiency and free shipping that we have today across the region is really unrivaled at the regional level. Continuing to add wallet users is a very important part of the strategy. We're not trying to say that that's not the case.
And the wallet continues to be a fundamental the distribution channel as our payments to attract users to then cross sell other financial services. I think what we're trying to say here is that massively acquiring wallet users, If then you are not also investing and focusing in cross selling other financial services is not really the long term strategic blueprint that we've set for ourselves. So we need to increasingly find the balance between, yes, acquiring as many users as we can as fast as we can, but also making sure that those users we are acquiring The way we're managing the business, which is number of payers as a KPI is probably still very important If we can also deliver on number of users of asset management, number of users of credit, number of users of InsurTech and the other products that are obviously the higher margin products and the more interesting from the long run. So wallet users is the core to our strategy, but increasingly more balanced with also consistent cross selling into that user base of the other better margin financial products.
That's very clear. Thank you.
Thank you. And our next question comes from the line of Deepak Mathivanan with Wolfe Research.
Hey guys, thanks for taking the questions. Just a couple of quick ones. Sorry, they were asked already, been jumping around a couple of calls. So Pedro, Can you talk about how big the first party business was on e commerce during 1Q? And then where do you expect it to reach for the rest of the year?
Is the margin profile of 1P kind of at a place where you want it to be? Or is there opportunities to improve that as well? And then the second question, can you provide some color on April trends on e commerce? Obviously, the COVID situation in LatAm is Very volatile, but what are you seeing in terms of kind of relative consumer behavior, maybe in countries where vaccination rates are over indexing respect to the average. Thank you.
Hi, Deepak. Thanks. Look, so we've improved disclosure on 1P and you now have 1P revenues broken out in the P and L As a revenue line, it was slightly below $150,000,000 but you'll have that now consistently, as the rule requires. Margin wise, there is ample room for margin improvement in the 1P business going forward. This is still a relatively small business where there are improvements in pure product margins as we drive more purchasing scale And also significant improvements as we become more efficient in the operation overall.
So I would say that we are investing in this business now And that the margin structure, the way it looks today, is not at all where we envision and are confident we can get it to look into next year and beyond. Very quickly, I touched upon this already. But I think in general, We still need to be cautious and wait. The comps get progressively more difficult in some markets into May June. But so far in general, I think the trends we've seen for most markets are encouraging.
We continue to see sequential growth in our business in line with what we had the beginning of the year, so even if the year on year growth rates decline, the sequential increases, which is really what you should be looking at, Have not indicated in any way that consumers are massively moving back offline as soon as they can. I think we've offered enough of a compelling value proposition That a lot of that demand seems to be sticking. And like I said before, also bear in mind that lockdowns have been extended or reinstated In many of our markets, so that also is still impacting demand patterns.
Got it. That's very helpful. Thanks, Pedro.
Thank you. And our next question comes from the line of Jamie Friedman with Susquehanna.
Hi, Pedro Suwado. Pedro, in your prepared remarks, the I thought you had said something to the effect that you had seen a slowdown in some volumes in the long tail sellers as economies reopened. I may have misheard you, but if that's the case, could you elaborate on that one? And then I'll just ask the other one upfront. In a previous answer, Pedro, you mentioned sourcing more North American merchants.
And I'm just wondering, is that
Hi, Jamie. With regards to the long tail, what we have seen last year was that as many there were many lockdowns, Many small retailers, they were using payment link mostly related to deliveries. And as There was a greater opening of the economy in Latin America. Some of that volume slowed down. But beyond that, We continue to see very strong growth in long tailing in POS.
So it was mostly in the online payment business related to payment links
My remarks on sourcing North American merchants the development and user experience in our cross border efforts, those efforts so far had primarily focused on sourcing product From Asian merchants, we believe that there is significant inventory in North America that's attractive to users throughout Latin America and not necessarily available. And so we're moving into that second pocket of global inventory that we think is interesting for our user base throughout Latin America by sourcing directly ourselves and having feet on the street in the U. S. And Canada. But no, this doesn't refer to any specific initiative with PayPal.
Got it. Thank you. I'll jump back in the
Thank you. Your next question comes from the line of Marvin Fong with BTIG.
Yes. Hi. Thanks for taking my questions. Just two quick ones on FinTech. I just wanted to follow-up on the 11,000,000 the collector number, you also have been in the notes from last quarter and I think you guys said it was 6,000,000 In the Q4, so just want to check to see if that was correct.
And if so, what explains the pretty dramatic increase And collectors, but just potentially in general, could you just comment on how your trends are going in terms of adding collectors to the ecosystem? And then my next question just on the credit portfolio, the amount outstanding didn't seem to increase as much At quarter end, as we saw last quarter, even though originations was actually greater, it's still above $500,000,000 So The question is, are we seeing any change in sort of the dynamics with borrowers paying back? Anything to call out there?
Great. So on collectors, let me just briefly recap the sequencing for you. 11,000,000 is the number of collectors off the MELI marketplace, right. So we exclude MELI merchants To give you a number of users that are merchants receiving payments through us, or P2P people receiving payments, That number is up about 77% year on year. But if we look at Q4, which is seasonally very the strong, it was actually higher than $11,000,000 It was closer slightly below $12,000,000 So again, nearly 80% growth year on year, but sequentially as expected due to seasonality down.
So I'm not sure what the $6,000,000 number could be, maybe it's another data point.
Then with regard to the credit portfolio, I got the question right. It was the relation between the growth in terms of originations and in terms of growth in our credit portfolio. Originations grew In the quarter, 10% sequentially quarter on quarter, there were $127,000,000 in the last quarter $582,000,000 this quarter and then the overall credit portfolio grew 16% from $452,000,000 to $526,000,000 In general, the duration of our portfolio is pretty short, mostly because a big part of that is Consumer loans typically are for 4 months. So the growth of Quarter on quarter origination is pretty much in line with the growth in the overall credit performance.
Great. Thank you for clarifying that, Wolfie. Appreciate it.
Thank you. This concludes today's earnings call. Thank you for participating and you may now disconnect.