Google Wallet set to challenge PayPal outside auction space

Whenever a company is either the market leader or extremely well known, it's human nature to knock them incessantly. Sometimes, that criticism is justified, at other times it's merely fashionable. However when online payment service PayPal, bought out by eBay two years ago for US$1.3billion, became a dominant method of payment for both the auction site and in general, the criticisms ranged from resentment at their 25p general transaction fee in the UK to nightmarish tales of hacking and money loss for those who trusted debit card details to the service.

Enter another market leader in its field around which as many question marks as dollars have been floating...Search engine kings Google. Newly awash with a few more billion of anyone's currency from the stock market, the firm now plans to offer an online payment service similar to PayPal. Currently known as the Google Wallet, it is currently seen as a business threat to PayPal. Although the tie-up with Paypal has brought a US$233million contribution to parent company eBay's more than US$1billion dollar profit in the first quarter of this year alone, many people also use online payments to pay for game servers and contribute to shareware development, to name but two non-auction-related examples. It's the web users without any interest in auctions which will become next heavily targeted market for both Google and eBay.

In spite of Paypal's natural head start thanks to eBay, online transactions are still seen as there for the taking since all those micropayments, multiplied across the world, equal hundreds of millions for the company which makes the easiest and most secure website for the purpose of transferring money. Some auctioneers may just add the payment facility to their auctions as an alternative to PayPal, others, fed up with the Paypal's charges, may switch entirely but Google Wallet should not be viewed as a saviour for anti-eBay doomsayers everywhere. This is the company which demands an unprecendented level of filtering for their gmail email service, and it remains to be seen if there will be charges and whether they can be competitive outside of America.

Nevertheless, the jitters were enough to lower eBay's shareprice by 61cents to US$37.44, showing the downside of floatation - sneeze and the shares will drop, in this case, for the sake of unproven competition. The real battle begins if Google takes the Wallet out of its pocket in time for Christmas 2005.

Figures: BusinessWeek