(September 15, 2009) Google Inc. has apparently fixed a weeks-old problem with its Google Checkout online-payments system that prevented merchants from processing recurring transactions, such as subscription fees. While Google says the little-publicized glitch affected only a small number of merchants, other observers say this and outages experienced by other alternative payment services—such as PayPal Inc.—raise questions about their reliability in comparison to traditional card processors.

The fix for Google Checkout apparently went live Tuesday morning, according to an online forum hosted by the payment service. The forum displays posts from merchants reporting the issue dating back to Aug. 17. In response to questions from Digital Transactions News, a Google spokesperson would not disclose how many merchants were affected by the outage. “I can say it’s a small number,” she says in an e-mail message.

The problem affected what the spokesperson calls “Google-handled” recurring payments, or those that have been set up by the merchant to be processed automatically, for example, on a monthly basis. So-called merchant-handled payments, or those the merchant manually enters each time they recur, were not affected, the spokesperson says. She did not address questions regarding the cause of the glitch or why it took so long for Google engineers to fix it. Nor, apparently, can affected merchants get answers from Google’s automated service feature. “I’ve heard nothing from Google,” Katie Braband, sales director at Datto Inc., a Wilton, Conn.-based company that markets data-backup services through resellers, tells Digital Transactions News. Her travails, along with the first account of the problem with Google Checkout’s recurring-payments service, came to light last week in a story posted by Cnet, a high-tech information service.

This is the second time in as many months that a service outage has caused problems for merchants using online payments services offered by so-called alternative players. Early in August, the failure of an unidentified piece of network hardware at PayPal interfered for several hours with the ability to send or receive payments worldwide (Digital Transactions News, Aug. 4). The glitch at Google Checkout also comes as the payments service is looking to extend itself into promising new markets, such as micropayments (Digital Transactions News, Sept. 10).

“This obviously hurts Google’s credibility as a payment provider, and strengthens the claim of established companies like CyberSource, RBS WorldPay, Chase Paymentech, First Data, and others that small merchants should pay the extra money to go with them, because part of what you are buying with that money is reliability and customer service,” says Aaron McPherson, practice director for financial services at IDC Financial Insights, a Framingham, Mass.-based consulting firm, in an e-mail message. Google Checkout’s rates for payment processing were notably lower than for services like PayPal’s until this spring, when the service increased its pricing and did away with a long-standing policy of offering free processing to users of Google’s Adwords service.

Braband, who says Datto first noticed on Sept. 2 that its subscription fees weren’t processing, would not say how much these amounts come to on average. “We’re talking about substantial payments each month,” she says. She says a reserve requirement Google Checkout had imposed on the company had already spurred it to develop an in-house payments gateway, which it plans to begin using by the end of the month. The recurring-payments glitch, she says, was “icing on the cake” for Datto in making up its mind to move away from Google Checkout.

Recurring payments are a relatively new service for 3-year-old Checkout, which introduced the feature only in March as a “beta” product, says the Google spokesperson. But the service may not have received the same engineering resources as other Google products. “Payments is not a core business for Google, and does not appear to get the same level of attention as some of the other services,” McPherson notes.