MercadoLibre´s Paypal wannabe needs a speed boost

LATIN AMERICAN auctions and ecommerce site MercadoLibre has been making headlines lately as a success story, specially after its highly successful IPO and grand entrance at Nasdaq. However, there's plenty of work for them to do to make it for real in the e-payments sector.

As eBay is to on-line auctions in the USA and most countries where it operates, MercadoLibre is synonymous with Internet auctions and on-line purchases in South America. The company was started back in 1989 by former JP Morgan boffin Marcos Galperin and is by all accounts a success story. I have repeatedly mentioned it in the past as I'm a regular user of the firm's services both as a buyer and a seller. But this time a repeated, worrisome experience prompts me to write this piece. I hope the company's execs read this in the hope weak areas are improved.

Let me make this clear: if my two last e-payments are any indication, MercadoLibre's "MercadoPago" e-payments service has a long, long way to go to even achieve what Paypal is today for North American buyers. Some of you might remember I wrote four years ago about my bad experience with Paypal as a receiver of wonga, compared to innovative alternatives like Ikobo.

Mercadolibre has a great brand and overall a good reputation locally, with the Clarin Group's own auctions and e-selling site, MasOportunidades.com as its only agressive competition on a regional scale, after ML bought the overseas operations of its first and main competitor: auctions site DeRemate.com.

Last month, MercadoLibre confirmed the closing of its $19M purchase process of CMG Classified Media Group, a Central America firm which operates classified ads sites for cars, real estate, boats and airplanes, among others. For high-value items and the "trust" factor, no local competitor currently beats ML, in my opinion. Yet Clarin's MO has one big advantage for cost-concious sellers: it charges no fee over the sale price: operating on Clarin's site is totally free.

The Pony Express
Back to the point, MercadoLibre's payments site, and my poor experience with it. It goes like this: you buy something cool on the Net through MercadoLibre's listings or auctions. You decide to pay for it. The site nicely integrates the company's own payment service "MercadoPago". So after a few clicks you decide to pay with your credit card and you are entering your credit card data.

That's the point where the good experience ended. In my last two purchases, I was informed that processing of the credit card transaction was pending, and that the charge could take up to "72 business hours". What?. Yes. In the age of electronic funds transfers, MercadoLibre seemed to choose to do manual credit card validation, or send paper stacks through the Pony Express. I don't know what goes on behind closed doors at its ivory tower.

After sending my CC data, site said it can take up to 72 business hours for the card charge to be authorised.

This is odd, since when you operate as a seller on the site and you owe MercadoLibre some sales comissions, MercadoLibre is more than happy to do online credit card validation, and bills you immediately, by redirecting your payment to NPS, a web site operated by Network Payment Services S.A. I used this system to pay MercadoLibre several times and it's flawless and convenient. However, when I wanted to pay a third party seller, that's when a combination of the Pony Express, carrier pigeons and smoke signals seemed to kick in, taking the web surfer back to the early 20th or maybe 19th century.

For the record, on the second troublesome and awfully slow payment incident, I entered my credit card data on Mercolibre's MercadoPago site on Sunday, February the 17th at 6:13PM. I have the screenshots to prove it. The help system says getting the money from the credit card and into the on-line system is done within 48 business hours. So even if we consider two full business days, the transaction should have been cleared by Wednesday morning. But that is not the case and as I'm writing this piece, Friday morning, February the 22th, the payment still shows "awaiting for credit card authorization".

Help Page says Credit Card payments are processed within 48 business hours

In an interesting conflicting statement, the firm's help system says credit card payments are processed within 48 business hours, yet the confirmation screen after I sent my credit card payment changed the tune and said it takes "from 24 to 72 business hours". An extra business day added out of the blue. In the age of on-line credit card authorisations, this level of bureaucracy and delays is not something one expects from a supposed leader in local e-commerce.

Of course, some might say this is an isolated incident. It wasn't. This is the second time a credit card payment I attempt to do through MercadoPago takes a whole week to be processed. The first time, a week ago, I contacted MercadoLibre's press contact, whom kindly pointed me towards the customer support page. When I told her it would be nice to have -in the age of Skype- a phone number (even if VOIP) for punctual troublesome cases, she told me that " users are used to usine the system on-line on the web, and so is the Help Desk" . Pressed further on the issue, the MercadoLibre representative blamed it on Visa: "VISA still has not sent us the authorisation so we're doing a further inquiry on the subject". The transaction was finally approved the next business day. To have a credit card charge take a whole business week, in this day and age, is simply ridiculous.

Asked about why doesn't MercadoLibre offer on-line processing of credit cards, ML's Lopez Quijano told the INQUIRER: "Given available tools and payment solutions currently available in Latin America, the service which we choose and which we offer through MercadoPago is the one which guarantees a better quality on the processing and security to our whole community of users."

This scribbler suspects, but cannot confirm, that perhaps manual processing is simply less expensive and more profitable for the company than doing it on-line, after all, the buyers and sellers can wait. I arrive at this suspicion because on-line processing is certainly available in the country. As you will see below, MercadoLibre itself even uses it when it needs to vacuum money from your credit card to charge sellers its sales commision fees.

Another case in point: I recently learned about a small cooperative firm, RCC Pagos, which provides on-line credit card authorizations and an e-commerce gateway to small business, for a small monthly fee, accepting not only the "big three" cards -Visa, Mastercard, Amex- but also adding other local ones like Cabal, which is owned by the small yet popular local cooperative bank Credicoop. This is a big plus middle class buyers, who are more likely to have those cards as well in addition to the mainstream ones.

Of course someone could blame this on financial sector regulations and the like, but that doesn't seem to prevent MercadoLibre from using on-line credit card processor NPS for its own money-receiving needs. A seller which operates using MercadoPago but which preferred to remain anonymous told the INQUIRER "yes, we know about the delays, unfortunately we suffer every day the problem of credit card authorizations, we're tired of complaining to the web site".

MercadoLibre has launched this week a reworked MercadoPago service, which promises direct person-to-person payments, even for purchases not related to its site. In other words, MercadoPago wants to become the Latin American Paypal. Visually, it bears an uncanny resemblance to Paypal's site, yet the credit card validations are not done on-line. The "New Marcadopago"'s help page states, once again that credit card payments are processed in "48 business hours".

Since ML once showed a catchy "in affiliation with eBay" statement below its logo a couple years ago and the statement has been gone for some time, I asked ML's press contact about when the partnership ended and why, and this was the response: "back in September 2001, ML entered an exclusive, 5 year partnership with eBay for all Latin America (...) eBay because one of our biggest stockholders and brought us some of its tecnical knowledge and experience (...) This alliance ended in September 2006". eBay's financial spokesperson confirmed this relationship to the INQ: "We remain MercadoLibre's largest outside investor."

Ironically, in a country where tax avoidance is high - in the last weeks two brick and mortar shops operating through ML failed to give me a proper invoice for instance - and where the government is giving tax incentives in the form of five percent VAT tax reimbursements on each payment done by debit cards to encourage legit, tax-paying operations, these failed and frustrating experiences with MercadoPago will surely turn people to cash payments, as not everyone can afford to wait a whole week for the payment to be credited to the seller, which is often only across town in the same city. µ