Google Checkout: Will lose money to brutalize PayPal

Google has finally launched its own online payment service, and will stomach losing money on processing your credit cards — in an aggressive move to go after competitor PayPal.

It is called Google Checkout, and our colleague Elise Ackerman has a good story in the Merc that talks about other benefits this will bring Google, including the ability to inspect user buying habits for the first time. That’s one more step toward knocking away an advantage held by eBay in the marketplace.

Google will charge merchants two percent of each transaction, plus a 20-cent fee. That’s less than PayPal’s 2.9 percent standard rate, plus a 30-cent fee. And like PayPal, Google offers discounts to certain people. Google will waive fees on $10 of worth of purchases for every $1 a company spends on search advertising. Meanwhile, MasterCard and Visa typically charge 1.95 percent and a 30-cent fee, meaning Google will lose money while processing transactions for those cards.

However, we should note that Google doesn’t have everything PayPal does. Checkout isn’t a person-to-person, “stored-value” system like PayPal, which is why Google chief executive Schmidt can still contends Google Checkout isn’t designed to be a competitor. Right!