Google Folds Its Checkout Service into Google Wallet

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Google Inc. this week said it will merge its Google Checkout online-payments service into its new Google Wallet. The change comes five-and-a-half years after Google Checkout debuted, years the service spent mostly in the shadows of PayPal Inc. and Amazon.com Inc.’s Amazon Payments.

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Google unveiled Google Wallet last May, a payment service that works with smart phones using near-field communication (NFC) technology and is tied to a loyalty and rewards service called Google Offers. A spokesperson for Mountain View, Calif.-based Google says having one payment service now makes the most sense for Google’s merchants and customers. “A single solution provides a more streamlined way to pay,” the spokesperson says.

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Any online merchant currently accepting Google Checkout will have its “pay” button changed to Google Wallet. Google won’t do the switchover until early next year because it doesn’t want to disrupt merchants now, when they’re fully occupied with the holiday selling season. “We understand it’s a very busy time for merchants,” says the spokesperson.

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Consumer users of Google Checkout will not have to re-enter key information, Google says. They simply need to agree to a new terms-of-service form in order for their personal information and registered payment card and bank-account data to be switched.

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Google never publicly revealed Checkout’s exact number of users or merchants. The spokesperson says “hundreds of thousands” of merchants and consumers worldwide use it. The search-engine giant launched Checkout mainly to support its AdWords advertising service.

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While many observers regarded Google Checkout as an also-ran behind PayPal and Amazon, the merger into Google Wallet comes just as the service was likely picking up new business thanks to the booming popularity of Google’s Android operating system for smart phones, according to technology analyst Rick Oglesby, a senior analyst at Boston-based Aite Group LLC. Still, he says, Google is making the right move given the difficulty of convincing consumers to enroll in digital wallets and new payment services.

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“It makes a lot of sense; it needs to happen,” says Oglesby, who recently estimated that Google Checkout is generating about $8 billion in annualized payment volume.

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Until recently, Google Checkout lacked a platform similar to those its rivals used as launch pads, Oglesby says. PayPal, with more than 100 million users, owes its early success to its links to eBay Inc.’s users, and Amazon Payments benefited from the success of Amazon’s massive online market. Then there is Apple Inc.’s closed-loop iTunes world with more than 200 million users. Google Checkout didn’t have a similar launch pad until Android came along, an operating system that now has hundreds of thousands of apps in its Android Market, many of which sell goods.

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“If one of the keys to success in driving consumer enrollment in a digital wallet is association with a viable marketplace, Google has that, Android is that,” says Oglesby.

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Android is now the mobile operating system leader, with 44.8% of U.S. smart-phone subscribers in September carrying a device that uses it, according to estimates from comScore Inc. That’s up more than four percentage points in just three months and compares with 27.4% for Apple’s iOS and 18.9% for Research in Motion Ltd.’s BlackBerry.

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The Google spokesperson says there will be no changes to Checkout’s merchant-acceptance fees after the merger with Google Wallet. They are, based on monthly sales: under $3,000, 2.9% of the sale plus 30 cents; $3,000 to $9,999.99, 2.5% plus 30 cents; $10,000-$99,999.99, 2.2% plus 30 cents; and $100,000 or more, 1.9% plus 30 cents.

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To help boost Google Wallet, Google on Wednesday introduced new integration capabilities that it says will help reduce consumer abandonment of online shopping carts, the bane of e-commerce merchants. Google is making the service available first on the mobile Web, in particular on the mobile sites of Fandango and MovieTickets.com. When consumers visit those sites from an Android phone, BlackBerry, or Apple iPhone, they will have the option to buy using Google Wallet without the need to fill out multiple forms or leave the merchant’s site.

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Google also said Google Wallet is now accepted at 65 Gap Inc. stores in the San Francisco Bay area.