In the months leading up to the launch of Google Checkout, there was a great deal of speculation that it was going to be a direct competitor to PayPal. We didn’t think so, and when the service launched last week, our suspicions were confirmed. Despite that, eBay has decided to bar the use of Google Checkout from its auctions, adding it to the list of payment services not permitted on eBay.
Unlike PayPal, Google Checkout is not primarily a consumer-to-consumer (C2C) payments service. Google’s new service appears to be focused primarily at small businesses while aiming at larger sites down the line. As it is currently situated, it’s not going to turn into a C2C service anytime soon. There is no provision for sending payments to those without merchant accounts and no way to send money to an e-mail address, as is the case with PayPal.
So why the hate from eBay? In perusing eBay’s Accepted Payments Policy, Google Checkout would appear to meet criteria such as financial, privacy, and antifraud protection; not involving precious metals or other noncash services; and regulatory concerns. However, a couple of bullets point from eBay’s list of criteria for who makes the cut stand out: "the identity, background and other business interests of the payment service sponsor" along with "whether the payment service has a substantial historical track record of providing safe and reliable financial and/or banking related services."
Although Google Checkout is a new product, the company is hardly a newcomer to the payments scene. In addition to accepting and processing payments through Google Video, the company has also been handling billing and payments for AdWords for years. That leaves the first item, business interests.
PayPal’s big attraction for many buyers and sellers on eBay is that it’s an easy-to-use C2C payments service. Just about every Power Seller at eBay accepts PayPal. Those high-volume sellers, many of whom also accept credit card payments processed via means other than PayPal might find Google Checkout a compelling alternative to PayPal. It carries the Google brand, which seems to be well-trusted by a number of consumers. Most importantly, it’s cheaper: 20¢ and 2.0 percent of the total payment, versus the 30¢ and 2.9 percent of the total charged by PayPal. When a Power Seller is running hundreds of auctions per month, that seemingly small difference can add up.
By choosing to bar the use of Google Checkout, eBay runs the risk of alienating some of its highest-profile and most prolific sellers. Some high-volume sellers may resent being forced to use PayPal instead of the cheaper Google Checkout alternative, which has even been folded into a couple of eBay auction management services used by the auction house. At best, eBay comes off looking petty and frightened of potential competition from Google. At worst, the online auction house could lose large customers.