Mountain View (CA) -The organic growth of the world's largest Internet content provider bore fruit once again today, as Google unveiled its new Checkout payment facilitation service. Bypassing the usual public beta route - perhaps because consumers would be unwilling to trust their bank accounts and credit cards to a "beta" service - Google rolled out a completely tested and functional service this morning. It will serve as a centralized authorization service for customer purchases, promising the transaction security that many online retailers lack on their own.
Like everything else Google has rolled out thus far, Checkout's service features are all tied into the bigger plan. Participating online merchants can let their customers make selections as usual, and then give them the option of completing their transaction through Google Checkout. A little blue shopping cart icon will serve to represent the Google Checkout option (we'll see how soon that becomes a trademark issue). The icon will take the customer to the Google Checkout site, where the customer's billing information and credit card info will already be on file. All four major credit and payment card services are participating, with Citi Card offering exclusive Checkout incentives to its cardholders.
As usual, there's a compelling value proposition for everyone involved. For customers, Google won't share the payment authorization data with retailers, in effect reducing the number of opportunities for that data to get pilfered by malicious users. This is what security engineers call "shrinking the attack surface." And since Google can handle the e-mailing of the receipt, the customer can opt not to share even Checkout's personal data with the retailer, further reducing the chances of identity theft.
As part of what the company is now calling the Google Account (which is based on GMail), Checkout will retain as many payment options as the account holder wishes to divulge, on the customer's behalf. What isn't yet clear is how that account data will be secured. While theoretically, having one's credit card information distributed to fewer points reduces chances of identity theft, it will also make Google an even more enticing target for online incursion.
For retailers, the incentive is tied into Google's AdWords service - the nerve center from which everything organically grows in the Google system. While Google will charge all retailers at an equivalent rate per transaction (2% plus 20¢), they'll be given a $10 credit on transaction fees for every $1 they spend on AdWords. In an interview with The New York Times published this morning, Google CEO Eric Schmidt said he's willing to take the hit in transaction fees in order to boost advertising sales volume, which is apparently where the real payoff lies.
Google's "sacrifice," if it can be called that, appears designed to give retailers a significant incentive to participate in what could be called the "full Google cycle," which would essentially be capable of tracking the entire online retailing process from the point at which the customer clicked on the ad, to the point of sale, and then on past the delivery of goods. Conceivably, there could be extra value in the aggregate data accumulated from several months of online retail transactions, the mere indexing of which could have substantive economic impact. Imagine if retailers were capable of seeing what millions of customers were buying in real time.
"We're especially excited about combining Google Checkout with AdWords," wrote Checkout product lead Benjamin Ling on Google's corporate blog this morning, "because it gives our advertisers a more complete solution for attracting customers through Google and processing the sales that result."
A number of noteworthy retailers have signed on for the initial run, most of them specialty services such as Dick's Sporting Goods, Ritz Camera, Ace Hardware, and the Starbucks Store. But among that pack you'll also find Buy.com, which some analysts have estimated to be the Internet's #2 retailer behind Amazon.
What's just as intriguing about Checkout as the possibility of completing the "full Google cycle" is one particularly unusual aspect, at least from the perspective of Google: Unlike other Google rollouts whose services can be completely automated, there will be people behind the Checkout, so to speak, at least in the capacities of oversight and management. Google is promising retailers that it will help them fight against chargebacks - situations where, for one reason or another, funds were not available and the retailer is held responsible for the purchase by the card service. This is being described as the "Chargeback Resolution" policy, and it's difficult to imagine how any fighting can take place without people to do it.
The people who will be involved in transaction processing will apparently work for an entity called Google Payment Corporation (GPC), which is identified in Checkout's Terms of Service document. As the Terms indicate, there will at least be enough people involved with GPC to mediate disputes. "If Customers are unable to resolve a dispute," the Terms read, "we can mediate disputes between buyers and sellers if either party requests assistance. If this occurs, we will review the dispute and propose a non-binding solution, if appropriate."
The Terms of Service do not spell out Google's obligation to secure the credit card and other personal information it receives from customers - only that "the Service will store information from Buyers...and will process Payment Transactions on behalf of Sellers through the appropriate credit card or debit card network."
What Checkout also won't provide, as Eric Schmidt indicated in interviews since last February, is a payment service to compete with PayPal, which is owned by eBay. Customers will not be building credit with Google, and thus, it won't be used like a bank - only a transaction service. However, although the capability for using PayPal as one of Checkout's payment options is apparently there, thus far, there is no indication of any tie-up between the two services. Nonetheless, despite all indications from analysts that Schmidt's denial that Checkout would compete with PayPal was an indication that it clearly would, Checkout will not be the "PayPal Killer" that press headlines in recent months have made it out to be.