In the two months since unveiling its Checkout payment service, Google Inc. has worked hard to attract large merchants, but it has said little about its long-term strategy.
But in an interview this month with American Banker, Benjamin Ling, Google’s product manager for Checkout, said he wants to land more banking companies as partners and may even consider working with PayPal Inc. And in response to merchant feedback, this month the company said it was beefing up risk management by streamlining its process for identifying and reviewing risky transactions.
Citigroup Inc. offers its credit-card holders points for signing up for Checkout and using their Citi card to make Checkout purchases. The New York banking company is the first and only one with such an arrangement. However, Mr. Ling said his Mountain View, Calif., online search company wants to “partner with a variety of financial institutions,” and that it is particularly interested in expanding the number of payment methods Google accepts.
Consumers can use Checkout to authorize credit or debit payments with Visa U.S.A., MasterCard Inc., American Express Co., and Discover Financial Services LLC cards. It does not permit people to initiate automated clearing house debits to their bank accounts.
Nor does it accept PayPal transactions, but Mr. Ling said that Google is not opposed to the idea. “We could take PayPal as a form of payment, as long as there’s user value and users are interested. We are certainly open to considering it.”
Many industry watchers see Checkout as a direct competitor to PayPal, which is also trying to win a place on the checkout pages of large online merchants.
But Mr. Ling said his company views Checkout not as a payment mechanism, but as a service that facilitates payments from other providers, like credit card companies, or even PayPal. “I wouldn’t say that Checkout is necessarily competitive with a form of payment.”
PayPal does not feel the same way. Less than a week after Google started offering Checkout, PayPal’s parent, eBay Inc. of San Jose, listed Checkout among the payment methods that customers were prohibited from mentioning in the company’s online auctions. At that time eBay said the service was too new to be considered established and trustworthy.
But Mr. Ling said Google has long trusted the technology to take payments on its own site. “It’s a product that has been well tested.” For example, Google uses the technology for its online store, where it sells T-shirts, hats, and computer hardware, among other things. Advertisers also use the system to send Google their payments.
Though Checkout could work with eBay auctions, Mr. Ling said that it is not the best fit for his service, and that Google does not view its service as a PayPal clone. “At Google, we’re focused on enabling all sellers.”
In response to merchant feedback, Google has made some tweaks to the Checkout since it was unveiled June 29. This month the company said it was working to streamline its process for identifying and reviewing risky transactions.
Some of Google’s other services might benefit from a payments component — for instance, a Checkout-like service for funding new accounts at banks that advertise on the site — but Mr. Ling refused to discuss any specific plans.
Instead, he repeatedly stressed that its sole focus is on the process of paying for online purchases. “Checkout is focused on checkout.”
Google has signed up some major merchants, including Starbucks Corp., Timberland Co., and Zale Corp. The search company and its partners have announced several promotions to attract shoppers. About a dozen merchants, including Starbucks and the online outdoor equipment store Sierra Trading Post Inc., are offering discounts to Checkout users for back-to-school items, and until Aug. 10, Google was sending T-shirts to some Checkout users.
At Starbucks’ Web site, people can initiate purchases through Google or through the site’s original payment service, but the Checkout button is more prominent.
It is cheaper for merchants to route transactions through Checkout, which charges a base fee of 20 cents a transaction plus 2% of the price of the purchase, than through PayPal or most merchant acquirers. Merchants that advertise on Google through AdWords qualify for discounts from the base rate; the fee can even be waived for heavy advertisers. “There is increased value to those who advertise,” Mr. Ling said. “Our hope is that all Google Checkout merchants will be Google advertisers.”
Scot Wingo, the chief executive of ChannelAdvisor Corp., a Morrisville, N.C., company that helps online merchants manage their advertising and sales processes, said merchants can benefit from signing up with Checkout, even if none of their customers use it.
Google puts a shopping-cart icon in the ads of merchants that advertise through its search engine and use Checkout. For popular search terms, the icon can drive traffic to a site, Mr. Wingo said, in some cases improving the number of clicks an ad receives by 10%.
“Consumers are starting their purchasing decision through sites like Google,” he said.
“The benefit of Google Checkout is enough for a small or a large business.”
