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Search giant Google has launched an online payments system which aims to compete with auction giant eBay. Dubbed Google Checkout, the system is designed to boost Google’s main source of revenue – selling advertising.

The service offers some free order processing to Google’s millions of advertisers, but will initially be available only to stores in the US. EBay unit Paypal is the market leader in online payments. EBay stock slipped ahead of Checkout’s launch.

Checkout’s long testing process – it has been in the works for a year or more – has meant that rumours have been rife about the service, which many had dubbed "Gbuy" .

Google says it will enable shoppers to set up a single account with all their credit card and delivery details, allowing online merchants to sell through their Google advertising.

"It’s not going to kill Paypal," said Greg Sterling of Sterling Market Intelligence, saying that there was room in a market long dominated by Paypal for several such services.

The Google service will simply act as a transferring house, whereas Paypal has the facility for users to set up their own accounts to pay into – as well as offering credit card payments.

Big names that have signed up to Checkout so far, Starbucks and Buy.com both have also retained Paypal as a method of payment as well.

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Chris Leckness is the Owner/Administrator of Mobilitysite. He is a Microsoft MVP, Mobile Devices and a member of the exclusive focus group, Mobius. Chris runs a Mobilitysite, GotZune, and a few other smaller sites and blogs. His personal blog is chris.leckness.com.