After many months of speculation, skepticism, and salesmanship Google has launched a payment provider service that will compete with eBay’s Paypal. The rumor mill has been generating a nearly uncontrolled amount of speculation regarding the new service. Sources had identified the new service alternately as Gbuy, Google Wallet, and Google Buy, the sources were wrong. Google has named its payment service Google Checkout and it went live June 29th.

It has been a long time coming and the test version has been reworked repeatedly. Internet insiders have been watching the development of the service for over a year.

At present the service is only available to customers and businesses in the United States. Although I would imagine it will be available internationally soon. Rumors suggest that the United Kingdom may not have to wait long.

Google’s new payment provider is carefully integrated with their search advertising programs and registered user programs. The goal appears not to be so much creating a direct competitor to PayPal as an additional manner to generate targeted advertising search revenue and improve targeted search results. I would imagine that Paypal doesn’t see it that way however, and I would expect some kind of additional moves from them soon to try and counter Google’s offensive.

It will be interesting to see how the two companies cope with the new developments. EBay is one of Google’s largest advertisers and the companies have managed to smooth over various acquisitions and partnerships by the pair that increased the areas where their businesses overlap. Apparently investors worry about what this will do to eBay since their stock dropped 7% following Google’s announcement of the new program.

Ebay’s recent arrangement with search engine giant Yahoo was obviously intended to shore up their defenses. Under the deal, Yahoo, will be the exclusive provider of branded advertising on eBay’s site while Yahoo will use PayPal to let its customers pay for Yahoo services. I would imagine they will not accept Google Checkout anytime soon.

If a merchant already uses Google Adsense as part of their marketing campaign Google Checkout is something they will certainly want to look into. Every dollar spent as part of the pay for click program provides discounts to the fees charged to process payments.

For merchants without an Adsense account Google will charge 2% of the total transaction plus $.20. Paypal’s fees average about 2.3% and have an additional fee of $.30. So Google Checkout will save any merchant a little compared to eBay’s provider in any case.

However, merchants with Adsense accounts will be able to process $10 worth of transaction for free for every dollar they spend on Adsense. This will make payment processing essentially free for a great many online retailers and wholesalers. A small shopping cart icon will be included in a Google Adsense customer’s ads that Google claims will attract more potential buyers.

There are several distinct differences between Google Checkout and Paypal. For example, Google Checkout works with credit cards only. Paypal allows buyers to deposit money in their buyer’s account by check or money order as well using their credit card. With Google’s program buyers cannot keep money in their account but simply charge their credit card at the time of purchase.

There are also concerns that big retailers maybe reluctant to get onboard because the data collected from a sell will be kept by Google and not by the retailer. Data collection is at the heart of Google’s business model and is an invaluable commodity to online marketers of all kinds. Big retailers might not be willing to let that part of the transaction pass them by.

Google believes that their system will reduce the amount of time and steps required to complete a purchase. Shoppers at brick and mortar stores don’t like to wait in line wasting time before they pay and get on with their lives. Google’s aim is to bring the same thinking to online sells. Eric E. Schmidt, Google’s chief executive, told the New York Times that Google Checkout will make it easier and faster for people to buy products advertised on Google.

“The goal here is to make it be one nanosecond from the time the customer decides to buy to the time the transaction is complete and the product is on the way,” Mr. Schmidt said. He went on to say that Google is willing to loose money on the process fees because they believe that the system will increase Adsense spending by increasing the amount of traffic each advertiser attracts and that will encourage them to spend more on Adsense.

Art Micklewraith is a freelance writer and regular contributor to Top Ten Wholesale. He can be reached at Content and Solutions or by email at artmicklewraith@gmail.com.