(August 21, 2006) When online auction giant eBay Inc. barred Google Checkout from its marketplace, the move led to widespread industry speculation that eBay, which owns rival online payment processor PayPal, was discriminating against the weeks-old Google Inc. payment product. But a PayPal executive tells Digital Transactions News eBay’s action had nothing to do with Checkout’s competitive position with respect to PayPal. “That’s been overplayed,” says Todd Pearson, who as senior director for merchant services oversees sales of PayPal acceptance to online retailers. “I would expect that as Google proves their track record [in online payment processing], they’ll be treated like any other payment method [on eBay].”

Just days after Mountain View, Calif.-based Google launched Checkout in late June, eBay added the fledgling payment type to a list of payment methods its sellers may not accept (Digital Transactions News, July 10), leading to widespread speculation that the move reflected an effort to protect PayPal. The list of prohibited payment services includes some 36 names, most of them relatively obscure. San Jose, Calif.-based eBay also lists 11 services, besides PayPal, that it does permit, including Bidpay, CertaPay, Checkfree.com, and Xoom, but also less well-known brands such as Allpay.net and Ozpay.biz.

In its official payments policy statement, eBay says it “strongly encourages sellers to offer payments through PayPal.” It says when evaluating a new service, it looks for, among other things, whether it has a track record of “providing safe and reliable financial and/or banking related services,” and adds that “new services without such a track record generally cannot be promoted on eBay.” But the policy also says eBay looks at the “identity, background, and business interests” of the service’s sponsor.

Checkout offers payment processing based on credit and signature debit card accounts users store with Google. It charges merchants a straight 2% plus 20 cents per transaction, a fee that undercuts PayPal’s sliding rate scale for all but the largest merchants. Merchants that spend heavily with Google’s AdWords online marketing service can get processing for free (Digital Transactions News, June 29).

But Pearson says eBay’s policy is nothing new and is aimed at barring new payment techniques until they can prove they control fraud and otherwise protect users. “It’s not a competitive thing,” he says. “It’s about protecting the consumer.” He points to the woes of any number of online processors over the years in managing fraud losses and transaction disputes. “Payments is a tough business,” Pearson says. “There’s a lot of folks who have tried to get into the payments business over the years who have failed.”

He says PayPal doesn’t fear competition. “Competition is good,” he says. “It keeps everybody on their toes.”