May 18, 2007, 12:00 AM

PayPal Express looks for more pals as it battles Google Checkout

PayPal has launched a new program aimed at encouraging the banks and technology providers for online retailers to promote the PayPal Express Checkout payment service.

As it battles Google Checkout for online payment share, PayPal has announced a new program that offers incentives to banks and technology providers for signing up Internet retailers for the PayPal Express Checkout payment service.

PayPal is offering technical support, marketing materials, listing on a PayPal directory of business partners and a bonus of $2,500 for joining the program and up to $1,000 for each merchant who joins the Express Checkout program, which lets consumers pay with preregistered payment cards or with their PayPal account.

Gene Alston, business development director at PayPal, says there has been an informal partners program for some time. “We wanted to formalize all the things we were doing, to make sure more partners are aware of it,” he says. “We wanted to expand our presence with all the partners that are out there.”

PayPal says the partner program is designed for providers of shopping carts for online retail sites, e-commerce platform providers, payment processors, merchant banks and other providers to Internet retailers. The shopping cart providers are particularly crucial because once they integrate PayPal Express Checkout into their service they can offer it to their retailer clients, says Matthew Pace, senior associate at Compete Inc., which measures traffic to Internet sites.

He notes that Yahoo, Google’s arch-rival, is promoting PayPal Express Checkout to its Yahoo Stores merchants, “but unless these merchants’ shopping cart vendors are on board with PayPal Express the merchant is stuck. If PayPal is able to secure, through this program, relationships with a lot of these vendors they will be much less likely to pick up the phone when Google calls.”

PayPal created Express Checkout two years ago as one of several online payment offerings. With Express Checkout a consumer can register payment cards as well as a PayPal account along with billing and shipping information, then click on the Express Checkout icon at a participating online merchant to make a purchase without reentering personal information or divulging card data to the retailer.

PayPal stepped up its promotion of Express Checkout last year after Google introduced its Google Checkout service, which is similar to PayPal Express Checkout but without the PayPal option.

How well each service is doing is hard to tell, because neither Google nor PayPal will disclose how many merchants or consumers are using their services. Pace says use of Google Checkout spiked in December after Google handed out $60 million in coupons to consumers to encourage them to try the payment option. He says Google Checkout processed nearly 1 million transactions in December, but that the number had settled to about 250,000 in March.

Among the major retailers accepting Google Checkout are Toys “R” Us, No. 39 in the Internet Retailer Top 500 Guide; Sports Authority, No. 162 in the Internet Retailer Top 500 Guide; Aeropostale, No. 423 in the Internet Retailer Top 500 Guide; Dick’s Sporting Goods, No. 133 in the Internet Retailer Top 500 Guide; and Linens ’n Things, No. 151 in the Internet Retailer Top 500 Guide. Pace says about 8% of the purchases at those web sites in March used Google Checkout, down from 19% in December. PayPal responded with a similar campaign last fall, offering up to $100 million in $20 coupons to consumers who paid with PayPal Express Checkout. However, Pace says Compete has not conducted a similar analysis of transactions through Express Checkout.

Any of the 143 million consumers with PayPal accounts can use PayPal Express Checkout. Other consumers would have to register. PayPal says it handled more than $11 billion in payments through all its services in the first quarter of 2007, up 30% from a year ago. 61% of its payment volume came from eBay.com, the auction site that owns PayPal.

That’s down from 70% in 2004, which indicates some progress in PayPal gaining acceptance from other merchants besides eBay, says analyst Vikram Sehgal of JupiterResearch. And the growth in PayPal volume should help consumer adoption of PayPal Express Checkout, he says. “You would expect people who already have PayPal to adopt it much quicker because they are aware of PayPal,” Sehgal says.

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