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Shares in Ebay fell almost 5 per cent on Tuesday amid speculation that Google, the world’s biggest search engine group, is set to unveil a test version of an online payment system to rival PayPal, the online auction site’s lucrative payment system.

The move, which has been expected for months, comes at a time of upheaval in the sector as the world’s biggest internet companies adjust their strategies to better compete with Google. The payment service, called Gbuy, would mark Google’s latest expansion into businesses traditionally dominated by companies such as Microsoft, Yahoo and Ebay.

Google this month unveiled a free online spreadsheet to rival Microsoft’s Excel software program.

It has also made inroads in e-mail with its Gmail service; and in online shopping through Froogle, a service that scans the internet to find the best prices on items for sale on Ebay and other online outlets.

PayPal remains the dominant online payment system aside from direct credit card payments. The service, in which customers use their credit cards to deposit money to a PayPal account that can then be used to make purchases with vendors online, accounted for 24 per cent of Ebay’s $1.4bn in net revenues last quarter.

The Wall Street Journal, citing people familiar with Google’s plans for the new service, reported on Tuesday that Google planned to introduce the service this week.

It said Google planned to introduce a special Gbuy icon next to Google text advertisements from vendors that accept Gbuy payments. Customers who click on that icon could make payments for items using a Google checkout process. Google is also expected to offer a rebate to shoppers who make purchases using Gbuy instead of PayPal or a credit card, according to the Journal.

Google sought to play down speculation about Gbuy on Tuesday. “We have nothing specific to announce at this time,” it said.

Google’s dominance of the internet search market and expansion into adjacent markets since its initial public offering nearly two years ago has sparked rumours on Wall Street of pending consolidation in the sector.

Last month, Ebay and Yahoo announced an alliance that included an agreement to offer PayPal services to Yahoo users. But in an interview with the Financial Times last week, Meg Whitman, Ebay’s chief executive, said that mergers between top internet brands were unlikely in the near-term.

Asked whether external factors, such as Microsoft’s ambition to become a bigger player online, could destabilise the existing industry structure and lead to mergers, she said: “It can, but I think in the near-term I see at least the major internet players kind of on their own path.”

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