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Quote:It’s official: Google and eBay are at war over online payments. This week, Mountain View, California-based Google upped the ante by offering a link on its homepage to its online payment service, Google Checkout, which included a special offer for a $10 rebate on merchandise.

This is just one of many such promotions, said Benjamin Ling, product lead for Google Checkout, who said that Google is “very happy” with the progress it has gained in the marketplace.

Yet, after six months on the market Google Checkout—hyped by some as a PayPal killer—isn’t close to toppling that dominant player in the online payment arena. PayPal, which is part of San Jose, California-based eBay, commands a 42 percent adoption rate among online shoppers, compared with Google Checkout’s 6 percent, according to A J.P. Morgan survey of 1,100 consumers released Wednesday. “Could it be possible that Google is starting to panic a little bit?” asks Tim Boyd, analyst at Caris & Co...

Quote:Checkout's share of payments on some big sites, such as Toys “R” Us and Sports Authority, has been falling since the holiday season ended, despite inducements to retailers (estimated at over $20m) to make its “badge” more prominent. It may have to increase its bribes in order to gain traction.

Furthermore, Checkout may itself face threats as it grows. At this year's Davos pow-wow, Bill Gates said Microsoft was thinking about a move into online micropayments. And then there are the established card consortiums. To the extent that PayPal and Checkout help to move cash and cheque purchases online, where they are subject to transaction fees, Visa and MasterCard welcome them. But they also worry about being cut out of the process as the payments upstarts become the “interface” with which more online shoppers deal directly. With combined annual volumes of over $6 trillion, the card companies could put up quite a fight.

The outcome of all this manoeuvring is hard to predict. What is certain, however, is that it is good for both merchants and consumers...