Mercado Pago Expands Brazil Credit Cards Amid Debt Warnings

The fintech division of MercadoLibre, Mercado Pago, is aggressively expanding its credit card operations in Brazil despite warnings from the Central Bank of Brazil regarding rising household indebtedness. The company issued 2.6 million credit cards in the second quarter, a significant increase from the 1.6 million issued during the same period the previous year.

Vice President Ignacio Estivariz defended the company's strategy, stating that its underwriting models utilize artificial intelligence and e-commerce data to maintain a healthy loan portfolio. However, the company is facing financial headwinds, including rising funding costs and a nearly 85% year-on-year increase in provisions for doubtful accounts, which has impacted net profits.

In response to the broader credit environment, Ailton de Aquino, the supervision director of the Central Bank of Brazil, announced that the regulator will soon unveil a relevant measure to curb indebtedness within high-cost credit segments.