PayPal vs. Checkout: Who will cash in?

Items for sale on eBay range from the sublime to the ridiculous, but the manner in which you pay for them is no laughing matter for the auction giant.

Among the options are: Bidpay, Propay, Interac Email Money Transfer (a Canadian service formerly known as Certapay), and, of course, its own service PayPal. What it won’t accept is Google Checkout and more than three dozen other online payment services.

According to a FAQ page on eBay’s Web site: “This policy is designed to promote safe online shopping, and to encourage online payment methods that are safe, easy to use, reliable, and offer high levels of protection for users.”

Barry Campbell, director of business development for Interac Online, said the e-mail money transfer service offered by his company was given the OK by eBay following an evaluation. “I can’t tell you exactly what happened, but I can tell you that we had discussions and they were satisfied with our model – who we are, how long we’ve been in business, our fraud prevention methods,” he said.

Amanda Pires, a spokesperson for PayPal, deferred questions about why eBay is not willing to endorse the Checkout service to eBay, but said that PayPal isn’t afraid of a little competition.

“We’ve always had formidable competitors with deep pockets, product expertise and experience in consumer marketing,” she said, citing examples such as AOL, Citibank, Yahoo! and even eBay itself, which set up its own payment service before it bought PayPal in 2002 and began to use it as its preferred payment method.

What Google is doing “is very different from what we do. What you can do with Google Checkout is simply save credit card details, which is very different than the full functionality of an online wallet,” added Pires.

A Google spokesperson was unavailable for comment at press time, but e-mailed the following statement: “Google Checkout is a checkout process.  It is not a form of payment.  We’re focused on improving the checkout process and increasing online transactions by integrating checkout with search and advertising.”

Despite the two companies’ efforts to differentiate themselves, they should be considered rivals, said Scott Lake, CEO of Ottawa-based Shopify.com. His firm offers an online payment integration service, taking advantage of various options, including PayPal and various credit card processors.

When Google announced its Checkout service, customers were instantly clamouring for it, he said.

“The day that it launched, I probably got 10 e-mails from Shopify users asking when they’d be able to use Google Checkout,” he said. “We’re integrating it right now.”

Google’s ability to commit resources to a payment service may begin to marginalize smaller firms that offer a rival service. For the time being, eBay has the wherewithal to defend its market, but smaller e-commerce payment engines may find themselves gobbled up by the bigger players, said Jim Okamura, an analyst with retail consulting firm the J.C. Williams Group. There is a glut of services in the market right now and not all of them can survive.

“It’s kind of early to tell, but if I were running a small payment company, I would certainly be concerned,” he said. “I’ve seen several, especially in the last couple of years, that are good products . . . but whether they’ll make it is another thing.”

The market is ripe for consolidation, he said, and small firms with interesting payment technology could easily become an acquisition target.

The Google advantage is that it is able to integrate Checkout with various other services it offers, particularly Google Adwords. According to a promotional video put together by Google, for every dollar a user spends on Adwords they receive $10 worth of Checkout payment processing for free.

Google’s ability to tie Checkout to Adwords has stirred interest in the online shopping community, said Lake. As a result, eBay may find itself scrambling to catch up and eventually be forced to allow Checkout on its own pages. “What they should be doing is embracing all new technology and allowing people to do whatever they want. In this day it’s about integration, it’s not about hoarding services,” he said.

According to Lake, the online shopping market will grow to US$230 billion south of the border in the next two years. For now the e-commerce pie is big enough to feed practically all comers, he said, noting that even the payment services that don’t measure up to eBay’s exacting standards are still able to eke out a living online.

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