Google service could become PayPal rival

Google Inc. is expected to unveil an online payment system today called GBuy, which could allow merchants to accept payment for services and could become a broad-based alternative to eBay's PayPal, the dominant system.

Danny Sullivan, editor of SearchEngineWatch.com, said he expects Google's announcement to target online merchants rather than consumer-to-consumer payments, which is PayPal's traditional strength.

Google is targeting sites that may not be able to take credit cards, which is a common problem in international markets, he said.

Shares of eBay fell almost 5 percent to $28.25 yesterday on media and analyst reports of GBuy and lingering worries that growth at eBay is slowing. Google's shares fell $1.90 to $402.32.

RBC Capital analyst Jordan Rohan had predicted that Google would introduce the system -- formerly code-named Google Wallet -- as early as this week.

``GBuy is focused on consumer-to-merchant transactions, but there is no reason why it eventually could not be expanded to consumer-to-consumer," he wrote in a note June 9 to clients.

Google executives confirmed they are developing an online payment system but say it is not meant to compete directly with PayPal, which gives consumers ways instantly to wire money from bank accounts or credit cards via e-mail to merchants or other consumers.

GBuy may become part of a plan to create a single user identification/password system to simplify how Google authenticates users as they move from service to service, he said.

The system will appear on Google search results pages by designating a merchant accepting payments as a ``trusted GBuy merchant."

Beyond the basic utility of a click-to-pay system, GBuy promises to help Google monitor the transaction data flowing through the system, which Rohan said could allow the Web search leader to track which search results turn into paid sales.

Roughly 12 percent of e-commerce transactions in the United States last year were paid for using PayPal.