Financial technology platform Mercado Pago remains optimistic about expanding its credit card business in Brazil despite growing concerns from the Central Bank of Brazil regarding rising household debt.
Speaking to Reuters on the sidelines of an industry event hosted by financial association Zetta, Mercado Pago Vice President Ignacio Estivariz stated that the company credit analysis models remain robust and its loan portfolio is healthy.
Estivariz explained that Mercado Pago has no hesitation in slowing growth down at the appropriate moment. He noted that the company continuously monitors the health and metrics of its credit card portfolio to calibrate its rate of expansion according to performance.
During the second quarter, Mercado Pago issued 2.6 million credit cards, representing a substantial increase from the 1.6 million cards issued during the same period in 2025.
Credit Card Issuance and Portfolio Performance
The company disclosed detailed figures on portfolio default rates. Defaults between 15 and 90 days stood at 4.6% for the credit card portfolio and 7.0% across the broader loan portfolio. However, non-performing loans with payments overdue by more than 90 days climbed to 18.7%.
In Brazilian banking supervision, default rates are tracked across distinct time frames. Short-term delinquencies between 15 and 90 days signal initial repayment delays, whereas delinquencies exceeding 90 days represent non-performing debt that requires formal financial provisions.
Alongside rising default rates in longer-dated loans, the business is encountering higher funding costs and increased provisions for credit losses.
Rising Provisions and Financial Impact
Parent company Mercado Libre reported that provisions for bad debt surged by nearly 85% in the second quarter compared to the same period a year earlier. This sharp rise in credit loss provisions contributed to a decline in net profit, even as the enterprise achieved record revenue growth.
Credit loss provisions represent capital set aside by financial institutions on their balance sheets to absorb anticipated defaults. When loan volumes expand rapidly or repayment risks increase, accounting standards mandate higher provision reserves, which directly reduce quarterly earnings.
Despite these financial pressures, Estivariz dismissed concerns regarding asset quality. He reiterated that Mercado Pago maintains a very healthy portfolio and expressed confidence that its risk evaluation models support continued business growth.
Artificial Intelligence and Risk Evaluation
Estivariz emphasized that Mercado Pago operates a robust system to evaluate which customers receive credit lines. The platform assesses borrower risk by utilizing artificial intelligence algorithms and analyzing thousands of individual customer data points.
These data inputs include user behavior and transaction records gathered directly from Mercado Libre e-commerce platform. Using marketplace data allows the fintech to evaluate consumer creditworthiness beyond conventional credit bureau scoring.
Mercado Pago functions as the financial technology division of Mercado Libre, the largest e-commerce and payments ecosystem in Latin America. Founded in Argentina and listed on the Nasdaq exchange, Mercado Libre operates online marketplaces and digital financial services across Latin America, with Brazil representing its primary operating market.
Zetta, the financial sector association hosting the event where Estivariz spoke, represents fintech companies and digital financial institutions operating in Brazil, advocating for competition and technology-driven financial inclusion.
Central Bank Warnings and Regulatory Measures
The Central Bank of Brazil has focused attention on the rapid increase in household indebtedness, particularly within credit cards and unsecured consumer loans, two segments where Mercado Pago has expanded quickly.
Banco Central do Brasil oversees monetary policy and financial system supervision in Latin America largest economy. Non-earmarked credit refers to credit lines where financial institutions set lending terms at market rates without government subsidies or statutory quotas, including credit cards and personal loans.
In July, default rates across Brazil non-earmarked credit segment reached 6.4%. That figure represents the highest default level recorded since the central bank began tracking the series in March 2011, accompanied by elevated household debt and high levels of income commitment.
Estivariz stated that Mercado Pago maintains an ongoing dialogue with regulatory bodies and will comply with any new measures adopted by the central bank.
Regulatory intervention appears imminent. Central Bank Director of Supervision Ailton de Aquino stated on Tuesday that authorities will soon release a significant measure designed to curb debt expansion within higher-cost credit segments.
