PayPal is secure in its domination over the electronic payment industry, at least for now.

Following reports that Google planned to launch a new Internet payment service (nicknamed Google Wallet), Eric Schmidt, CEO of Google, denied that Google would be directly competing with PayPal. He did, however, acknowledge that Google has plans for some type of electronic payment service.

Without revealing any details, Schmidt emphasized that the Google payment service will not offer the same sort of “person to person, store-valued payments system” as PayPal provides.

The Internet commerce industry was rampant with rumours of the new Google service following an e-commerce conference hosted by securities firm Piper Jaffray. Speculation that Google Wallet would encroach on PayPal territory was reinforced by the appearance of a June 20th article in the Wall Street Journal which stated that Google was planning an online payment service to compete with PayPal.

PayPal is a unit of eBay and generates almost 25% of total eBay revenue. It is used by consumers for making a wide variety of Internet purchases. It allows purchasers to use their credit cards without divulging their credit card numbers to merchants. PayPal takes a percentage of each transaction and had revenues of $233.1 million in the first quarter of this year.

Most of Google’s revenue comes from online advertising and this expansion into online payments was seen by many in the industry as yet another example of the rivalry between the two companies.

Google is a giant in Internet commerce with revenues of $3.2 billion last year. A payment service that competed directly with PayPal would be a serious blow to both PayPal and eBay.

Google maintained silence about the rumours until Schmidt’s comments last Tuesday. Without elaborating, he stated that Google’s payment service would be an extension of its existing advertising programs.



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Copyright 2005 by Ross MacIver

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