Google Could Be Weeks Away from Launching a PayPal-Like Service

Google Inc., whose recent moves to create an online-payments service for use on some of its own platforms have stirred considerable speculation about its ambitions in electronic transactions, will launch a service soon that will compete with existing e-commerce payment marks like PayPal, says a source familiar with the matter. According to this source, Google may well introduce the service as a generally available payment product for Internet sellers and merchants by late spring or early summer. “They're trying to be a PayPal,” the source says. “They believe they can do payments better.” At the same time, however, the Mountain View, Calif.-based online search giant is struggling with myriad details that have hampered its progress and could delay the launch, this source says. The problems apparently stem from the company's decision to build out its own back-office processing systems to handle transactions before delivery to gateways. “Instead of buying stuff off-the-shelf they've decided to build everything,” the source says. “We're talking about a lot of infrastructure in a short amount of time. They're finding out how hard this [payments] business is.” As a result, the product when finally unveiled could be flawed, the source says. “There's a need in the marketplace for companies to offer what PayPal offers and what Google purports to offer,” the source notes. “But the execution has to be impeccable. That's where I'm concerned they'll stumble badly.” Google did not return calls from Digital Transactions News seeking comment. For the record, the company has said it has no ambitions to compete in the market for online transactions. It first issued these denials last summer, when rumors began surfacing that it was building a payments service that would rival eBay Inc.'s PayPal network (Digital Transactions News, June 20, 2005). Since then, it has introduced an electronic wallet, called Google Accounts, that allow users to buy items on certain of the search engine's platforms, including Google Base, its recently introduced online marketplace for content ranging from recipes to classified listings, as well as Google Earth and Google Video. These moves have renewed speculation, reflected in numerous online postings and blogs, that Google was preparing an assault on PayPal, which itself has been pursuing an aggressive strategy to extend its payments business to both large online merchants and sole proprietors lacking traditional merchant accounts. Some experts, while discounting the possibility of head-on competition between Google and PayPal, have said such rivalry could come indirectly as Google's marketplace expands and begins to compete seriously with eBay's auction business (Digital Transactions News, Feb. 28). Such competition could hurt PayPal, since San Jose, Calif.-based eBay still accounts for 70% of the processor's transactions.