Shopping Spree: Pay with eBay or Google?

A more universal payment platform hasn’t been successfully developed yet.

Enter Google

Google has evolved from being a search-only company to becoming a firm that seeks the ability process all available data online. Last week it set its sights on capturing the Internet payment market, offering a ‘Checkout’ product that can work even across multiple websites.

Google Checkout was introduced in January. It is designed as a shopping cart checkout system. In contrast, PayPal is primarily a payment system for individual transactions. Another of Checkout’s features is that it can easily be integrated into other websites.

Despite PayPal’s near ubiquity on eBay, the competition could be heating up. EBay retailers are not anchored to PayPal.

“Google Checkout is a potentially significant competitor to PayPal,” Citigroup analyst Mark Mahaney wrote in a July 5 note.

Checkout Checked out

In a study, Citigroup determined that Checkout could be easier to use. While the Google product typically uses a two-step process, using Paypal usually involves three to six steps.’

It is an entirely separate checkout process which requires that consumers with Google accounts enter their shipment and billing information once, and then pay on sites who also accept the Checkout platform. In addition Checkout also provides users with the ability to track all their orders from one central location even if the original order were place across various sites.

Mahaney adds that biggest competitive advantage could be the smaller fees Checkout charges merchants. He estimates it would offer an annual savings of 4 percent. Google even has plans to give Google customers using adwords a further discount “potentially bringing the savings up to 25 percent higher, under certain scenarios.”

On the flipside, he notes that PayPal offers various advantages, including more funding options, “almost certainly” greater trust and safety, broader acceptance by consumers and merchants, international payment processing and cross-selling opportunities that Checkout does not. He estimates that at least for 2006, eBay’s revenues will not be affected by Checkout.