Digital Transactions Authoritative, insightful and timely information for payments professionals
Evidence that the battle for supremacy among alternative-payments providers remains intense arrived on Wednesday with Google Inc.'s announcement that its Checkout service will continue to process transactions for free through January. “Considering how busy this time of year is for you,” says Checkout product marketing manager Gavin Chan in a Google blog posting directed at merchants, “we're extending our free transaction processing for an extra month?to Feb. 1, 2008.” Come February, Checkout's ordinary merchant pricing?2% plus 20 cents per transaction?will apply. Merchants that use Google's AdWords service will be able to process $10 of sales free in the current month for each $1 they spent on the service in the previous month. AdWords places small hyperlinked messages from related advertisers next to users' search results. The 31-day extension of free processing represents the second such move by Google, which launched its online payment service 18 months ago. Late last year, it offered to process transactions at no charge in a promotion that started Nov. 8 and was originally scheduled to expire Dec. 31. In December, the Mountain View, Calif.-based Internet search giant said it would forgo its processing fee for all of 2007 (Digital Transactions News, Dec. 6, 2006). The months Google has gone without merchant income have been costly. Checkout's electronic wallet accepts credit cards only, with Checkout standing in as merchant on each transaction and paying the bank card networks' premium card-not-present rates. But Checkout is not a core product for Google, which derives most of its revenue from search and advertising. At the same time, Checkout is under increasing pressure to differentiate itself as the rivalry among online payment providers grows more fierce. Web-based sales are rising fast, and will more than double, to $355.2 billion, between this year and 2012, predicts Javelin Strategy & Research, Pleasanton, Calif. Alternatives to bank-issued credit and debit cards will grab 30% of that volume, up from 14% today, Javelin says. While Google did not immediately respond to inquiries from Digital Transactions News, Javelin researcher Bruce Cundiff says the company's latest extension of free processing, though far less dramatic than the 12-month deal announced a year ago, may attract merchants looking for ways to prop up sales in the doldrums of a post-holiday month. “The ability to generate January sales could be linked to payment type or promotions or anything else I can do to bring customers through the virtual door,” says Cundiff. Google will not reveal how many merchants it has recruited to accept Checkout. Spokespeople have recently said the service has signed “tens of thousands” of merchants, including more than one-third of the 500 largest Web retailers.
