Google introduced its Checkout service earlier this year with benefits like free ad credits for merchants. Google Checkout offered $ 10 off purchases along with other incentives. PayPal soon matched the offer. The competition moves further with Google dropping merchant fees until the end of 2007. With this move Google hopes to position Checkout as more universally accepted alternative to PayPal.

USA Today reported: "Google ratchets up the pressure by dropping merchant fees through 2007.

"I'm thrilled," says Lanny Morton, whose Sportscloseouts.com uses both Google Checkout and PayPal. "The online business is really competitive, and every little percentage helps."

Merchants pay a variety of fees to use the services. PayPal charges 2.9% plus 30 cents per transaction on sales up to $3,000 a month. Google's fee is 2% of the sale plus 20 cents, less if the merchant is a Google advertiser.

Google's consumer rebate can be used many times. The PayPal rebate expired in November, but the company is offering a one-time-use discount to selected customers via e-mail. Some stores may offer extra incentives through either service."

Google also announced implementing new features into the Checkout service:

Easy coupon creation: Create coupons from the Google Checkout Merchant Center. You can specify $-off discounts and %-off discounts, and add restrictions such as "one per customer," "new customers only," and so on.

Simple website integration: With the HTML API, integrating Google Checkout with your shopping cart is easier than ever. Simply add an HTML form to your website and use it to send us your shopping carts.

Google's move would surely put pressure on PayPal. As of now eBay had no comments on Google's plans.

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