Google Unveils Payment Service

(CBS/AP)  Google Inc. is unveiling a much-anticipated payment service that aims to make online shopping more convenient and give advertisers another reason to pour more money into the Internet search leader.

Google's service is designed to serve as an electronic wallet that will enable consumers to buy products and services from a bazaar of merchants without repeatedly entering the same personal and financial information at each store.

Google tested the payment service, which is called "Checkout," for nearly a year, spurring widespread speculation among Internet analysts and investors.

As Google attempts to boost its already lofty profits and become an even more prominent player in e-commerce, the company risks alienating one of its biggest advertisers - online auctioneer eBay Inc., which runs the Internet's leading payment service, PayPal.

Although Google doesn't bill its service as a PayPal competitor, there is no question it poses a long-term threat to eBay, said Internet market analyst Greg Sterling.

"Any time Google does something like this, it has the potential of turning into a big deal," Sterling said.

Why get involved with yet another third party while shopping online?

"For many people, shopping online is still too cumbersome, which is why the majority of transactions that are started are actually never completed," says CBS News Technology Analyst Larry Magid. "You have to have to fill out long forms with your name, address, and credit card numbers, which is time-consuming and, in some cases, a security risk. This new Google service could cut out some of those steps."

The new service, says Magid, would make Google a payment broker between consumers and merchants, with customers giving Google their credit card number and having Google process their online purchases, making it possible for sellers to collect their money without also receiving their customers' credit card information.

That's a timesaver and a security plus, says Magid, who notes another bonus for small businesses: the payment system ties in with Google's advertising program for small businesses. Merchants who buy ads get a discount on fees Google charges for processing transactions.

At least two merchants, Starbucks Corp. and Buy.com, who have signed up for Google's new service also accept PayPal, which eBay bought for $1.3 billion in 2002.

EBay spokeswoman Amanda Pires declined to comment on Google's entrance into online payments, but the company signaled its concerns about the search engine's expansion last month when it formed an alliance with Yahoo Inc. that will make PayPal the preferred payment provider on the Internet's most trafficked Web site.

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