Google to make online shoppers pay

Google is today set to unveil its much anticipated online payment processing system designed to offer shoppers with a Google account a quick way to pay for things.

Websites and merchants can integrate Google Checkout into their sites as an alternative payment processing method to existing checkout and credit card processing systems, said Salar Kamangar, vice president of product management at Google.

Consumers with a Google account can type their credit card and billing information into Google Checkout once and then pay for purchases thereafter with practically one click on any website that features the system, Kamangar said. As things now stand, he said: "If I buy five things from five different merchants I have to fill out five different forms. This process can take three, four, five minutes [for each form]." Google Checkout is meant to change that.

Once a consumer has purchased something through Google Checkout, they can track their orders through the system, which will be live starting today at Checkout.google.com.

Merchants using the system will be charged a processing fee of 20 cents per transaction, plus 2.2 per cent of the relevant purchase price. Customers who pay for search-related keyword ads through Google AdWords will be able to process, free of charge, transactions that add up to 10 times the dollar amount of their AdWords spending, Kamangar said. Beyond that, they pay the 20 cents plus 2.2 per cent. Kamangar said the regular transaction fees are less than those charged by credit card companies, which can be about one per cent higher.

AdWords customers who use the payment system will have shopping cart icons displayed in their ads so customers will know that they can use their Google Checkout account to pay for purchases.

The back-end system is the same as what Google has been using for at least a year to allow customers to pay for premium services on its Google Earth, Google Video and Picasa web services, Kamangar said. Now the system is being expanded to allow any merchant to use it as an alternative payment processing system.

Though Google Checkout is being integrated into AdWords, Google will not track data about which keywords lead to purchases; use such information to modify AdWords auctions or bid prices; or combine such data with its new cost-per-action test ad system, under which advertisers pay only when the ad leads to a sales lead or a purchase, Kamangar said. For now anyway.

He said: "We wouldn't rule that out entirely. There may be opportunities [in the future]."

The Google Checkout service could also be extended for use on mobile devices but Google is not working on that right now either, Kamangar said.

Any website can add Google Checkout as a payment processing method by either cutting and pasting HTML, or web code, into the site. Large companies and ecommerce and shopping integration providers can also integrate it as an option within new or existing shopping cart systems, as retailers Levi's and Timberland are doing, he said.

Google is also partnering with financial services companies. For example, Google and Citibank will offer customers a co-branded Checkout option that will provide users $5 and 1,000 "thank-you" points for signing up, Kamangar said.

Like other payment processing services, Google Checkout hides credit card numbers and reimburses consumers for unauthorised transactions. It also lets users choose whether to keep their email addresses confidential, and users can opt out of unwanted email from merchants.

Greg Sterling, of consultancy and research company Sterling Market Intelligence, said: "The system takes some of the friction out of making a transaction. But the question is, will consumers feel this is secure and trustworthy?"

Charlene Li, an analyst at Forrester Research, said the system bolsters Google's search marketing service by making it easier for shoppers to find things and purchase them. "A lot of people abandon [their shopping] during the shopping cart process," she said. "Anything [merchants] can do to increase the conversion rate will lead to a better return on their [advertising] investment."

The service will initially be offered in the US only and, unlike most new Google products, it is not a beta test version.

Kamangar said: "No. For once, we are not releasing a beta product. It will be ready to go as of Thursday. We've been testing it extensively with a small set of customers."

Google Checkout will handle only payments of one cent or more - not micropayments for things costing a fraction of a cent, Kamangar said.

Analysts had been expecting the announcement for more than a year, and some speculated that it would be the first piece in a larger infrastructure to enable payments across the web.

Though analysts were dubbing the product a "PayPal killer" before launch, Google executives have dismissed that notion. Kamangar said: "We think this is a very different type of product.

"This is about the checkout process, not the payment method. We're trying to make the checkout experience linked from an ad, and make it so you can buy things as quickly online as [you can] offline."

Elinor Mills writes for CNET News.com