• by Shankar Gupta , July 7, 2006

The rivalry between online giants eBay and Google heated up this week, as eBay declared it won't accept electronic payments made from Google's new online payment system, Google Checkout.

eBay currently owns one of the leaders in the online payments space, PayPal--and offers that service to all of its buyers and sellers in its online marketplace. Since rumors of a Google online payment service surfaced a year ago, analysts have speculated that the service would likely pose a threat to PayPal.

Catherine England, a spokeswoman for eBay, said simply that the company won't accept Google Checkout because the newly launched system is largely untested in the marketplace.

"One of those criteria for inclusion is having a proven track record for service, and we just don't have that information yet with Google Checkout," England said. She added that eBay might allow the service in the future.

But Google said the service had undergone thorough testing. "Billing and payments have historically been a core part of Google's advertising programs and online services. Google Checkout is a natural extension of this history," a spokeswoman for the search giant said in an e-mail. "We rigorously tested the service with external merchants before launching and have used this same service to process Google Video, Google Earth, Google Base, and Google Store transactions for months."