I have been using Paypal and Google Checkout together for half a month now. Here are some observations:

Paypal gives you faster access to your money. Money from Paypal is spendable instantly if you have a Paypal ATM card (if you live in the US get one of these, as you get a 1% cash back from using the card, which is the easiest way to cut your effective Paypal fee). If you use an ACH transfer to your bank account, you will typically have the money credited on the third or fourth business day. I typically initiate a weekly ACH transfer every Monday morning (US time) and the money is spendable on Thursday (US time), with the payment actually clearing Friday.

Google, on the other hand, holds all transactions for two business days, then wraps them up together and sends them in a single ACH transfer to your bank account. Depending on timing issues, this can work out to be significantly slower than Paypal. For example, I had 2 purchases on the 22nd. They are still wending their way through my bank’s authorization system, although the bank has floated me the equivalent amount. In fairness, compared to the typical “We’ll pay you once a month” policy at a lot of the “real” shareware payment processors either of these policies are quite speedy.

Customer acceptance of both forms of payment is high. Google currently has a promotion going on to get people to open Google checking accounts (open an account, get $10 off a participating retailer — a pity I’m not participating! While I haven’t seen that many accounts which were signed up prior to making a purchase from me, customers in my (non-technical, B2C) niche do not seem to have much reluctance to filling out a form on Google’s site. The process is fairly painless compared to some purchasing processes I have been through. Paypal acceptance remains high, and the portion of my customers using Paypal who have a verified Paypal account has increased (I am assuming folks not having an account either prefer Google or, more likely, are agnostic and they just hit the button on the interface which is more convenient to them).

Free payment processing is nice. I have had customers from a couple of countries (including Ireland, a first for me) purchase through Google. If you’ve used Paypal before you know their rates are higher for cross-border transactions. Google is still free currently, and based on my reading of their current pricing policy it will still be free in 2008 so long as you’re spending enough on AdWords. Given that payment processing is my #2 expense every month after AdWords (#3 if you count taxes, I suppose) I’m quite happy seeing it get slashed.

Both have associated customer service headaches. For Google, you won’t see the customer’s real email address — they get a forwarding email address at Google, and can turn off delivery after completing the transaction with you (if, for example, they don’t want to get your newsletter). I don’t have a newsletter, but I do have to contact customers every once in a while, principally when they’ve done something that is about to cost them money (such as ordering Bingo Card Creator once on a CD and once without, which in my experience is generally a mistake so I always check). If they have Google set up to reject my “Pardon me, are you SURE you want to pay $55 for this program?” inquiry then I end up with customer service woes. On the other hand, many casual eBay/Paypal users have long since stopped using the mail address that they use to log into Paypal, which can result in their Registration Key being delivered into the ether.

Google Checkout interface is not great. I get the feeling it was designed by an engineer, not someone who has ever run a small business. It is difficult to ask fairly trivial questions like “How much did I sell in January?” without exporting your sales records to CSV. Exporting records to CSV doesn’t appear to actually work. Ahem, whoops? The biggest head-scratcher is that the search interface for transactions is terrible. You can’t search by customer name, you can’t search by a portion of their email address (which means you might end up typing something like, oh, Patrick-mvwerklgsgac@checkout.l.google.com to find a transaction, if your customer has chosen to get the email forwarded), and you can’t search by internally generated invoice numbers. As a result, if Bob of the obfuscated email address comes to you in a month to ask for a refund, and he doesn’t know his Google transaction number, you get to browse for it by hand. On Google, of all places.