(March 25, 2009) The merchants have spoken, and they’re none too happy with the new pricing plans Google Inc. disclosed earlier this month for its nearly 3-year-old Google Checkout online-payment service. Merchants are registering their ire on Google Checkout’s Web site, where many of the 90-plus recent postings in a section reserved for merchants’ commentary about fees contain threats to move their business to online payments leader PayPal Inc.

The postings were triggered when Google announced it would change Checkout’s basic price of 2.2% plus 20 cents, which has been in effect since the service launched in June 2006, into a four-tier pricing plan beginning May 5 (Digital Transactions News, March 16). All but the highest-volume merchants, those submitting 100,000-plus Google Checkout transactions per month, are likely to be paying more under the new plan. The volume-based tiers, each of which adds 30 cents to rates of 2.9%, 2.5%, 2.2% or 1.9%, are identical to PayPal’s pricing. In addition, Google will drop its longstanding perk of $10 in free Checkout processing for every $1 the merchant spends on Google’s AdWords keyword service.

A question posted about two weeks ago—“The whole reason to switch to Google Checkout was that they had lower processing fees and now they’re basically the same as PayPal! What gives, Google?!”—had generated 94 responses on the merchant site as of Monday. The comments can’t be taken as a statistically representative poll of Checkout’s merchant base. A few samples, edited for spelling and grammar:

--“We were all set to use Google Checkout exclusively,” says a correspondent in a March 20 posting. “Now we will be going to PayPal, and I am also looking into adding the Amazon service [Amazon.com Inc.’s Amazon Payments]. We are dropping Google Checkout entirely, and it will happen before May 5.”

--“Google will lose us to PayPal as PayPal offers far better features and I don’t like tactics like this,” says an earlier posting.

--“The little man always loses out!! So by the end of April, Google Checkout will probably be removed from my Web site …”

--“I am extremely disappointed with this announcement. With rates exactly the same as PayPal, why should we stay with this service? It’s not like Google Checkout has way more options then PayPal.”

A Google spokesperson would not make an executive available for an interview. In a posting on the Checkout merchant site, a Google employee called “Juniper” acknowledged the news “was disappointing” to merchants. “Looking ahead, we believe that we can provide more value to you and your business by enhancing the features and functionality of Google Checkout, and the fee change is a necessary step for us to get there,” Juniper said. “We’re looking forward to launching many new features over the coming months …” The posting asked merchants to provide their feedback about what would be useful to them. Juniper’s posting essentially matches what a Google spokesperson and an executive said when the new pricing was disclosed: that Google Checkout was moving to a “more mature” pricing model and that more features would be forthcoming.

Some observers interpreted the new pricing plan as possibly Google’s first step out of the online payments business, where some say Checkout has not fared as well as the company had hoped. But payments researcher George Peabody of Mercator Advisory Group Inc., while critical of what he calls “Google’s decision to turn Checkout into an ‘also-ran’ payment-processing offer,” believes Google still has payments ambitions. “It may be Google Checkout just isn’t the answer,” Peabody, director of Mercator’s Emerging Technologies Advisory Service, tells Digital Transactions News in an e-mail. “Google’s mobile play with Android offers plenty of ways to monetize mobile applications and mobile commerce.”

Android is Google’s new operating platform for mobile phones. The platform is generating payments-industry interest, with players such as Visa Inc. and JPMorgan Chase & Co. working together on downloadable services (Digital Transactions News, Sept. 25, 2008).

Perhaps Google will not tie future Android payments services so tightly with AdWords as it did with Checkout. “For Google, the AdWords line of business is the main act,” says Peabody. “Checkout is a sideshow. With advertising soft and Google looking harder at each of its businesses, the AdWords team is clearly tired of subsidizing the Checkout team’s performance or lack thereof.”