Google Wallet to rival PayPal

Google is developing an online payment system designed to go toe to toe with PayPal, the New York Times reports, quoting an online retailer who was approached by Google to aid efforts. The new service is rumoured to be called Google Wallet.

The move is seen as positive by many, as the Californian giant is often seen to be representing the needs of the average geek: having conquered the Search Engine market with their simple, no nonsense approach, they introduced the one gigabyte GMail webmail service when Microsoft's Hotmail offered a paltry 2MB; following the one-year anniversary of the service, Gmail storage has since doubled to two gigabytes.

Now it seems their sights have been set on PayPal's 72 million account holders, who generated US$233 million of profit for owners eBay, based on handling some US$6.2 billion of online transactions in the first three months of this year.

The numbers would seem to support this venture: Google generated US$3.2 billion in revenue last year, 99% of which came from online advertising ie GoogleAds. Meanwhile, if their Q1 performance is anything to go by, PayPal will handle nearly US$25 billion in payments during 2005, earning over US$930 million in commissions in the process.

Google's exact plans for Google Wallet aren't yet known: Microsoft, Yahoo and others already offer "wallet" services, though these are merely a secure method of storing your credit card details for shopping, in case you don't trust the security of the merchant you are buying from. Google might choose to offer this service, but they are expected to tackle PayPal head-on in the online auction and private selling market: buy something in our For Sale forums and send the cash to the seller PayPal stylee using your Google Wallet.

Without a doubt, eBay Inc. have the most to lose from this move: nearly a quarter of their Q1 revenue was generated by PayPal, which it aquired in 2002 for US$1.5 billion. The big winners are likely to be us, the consumer: competition normally improves services and drives down prices, and being a new entrant to the market, the cash-rich Google will undoubtedly adopt an agressive plan to gain share quickly.

Is Google Wallet welcome, or are you happy with Paypal? Share your experiences of electronic payment systems.