In fact, Google may not pose any
threat at all to PayPal. Why? First, Google can't continue to provide Checkout for free without a credit- card processing fee, which is around 3%. PayPal doesn't actually make any money on that
credit-card processing fee; it makes its money through bank and PayPal account transfers. While the processing fee is the same, PayPal pays banks much, much less than credit-card companies to execute
Google deals only with debit or credit cards, which means the margins are miniscule. As with every other money-losing Google operation, Checkout will be subsidized by heavier
usage of its search advertising. Checkout, ultimately, is a gimmick to increase click-through rates, the number of competing advertisers and the price of keywords for retail products.
eBay actually faces a bigger threat from Checkout, especially since the current trend shows that shoppers are spending less on the online auction site. Meanwhile, PayPal's transactions outside of eBay have grown 59% in the third quarter, which means PayPal may be eBay's savior.