Google Testing Online Payment Service

Google confirmed Thursday that it was working on and beginning to test an online payment system, but said it was nothing like PayPal and would not compete with the market-leading service. Instead, Google is looking to solve "new problems in the payments space," says CEO Eric Schmidt.

Analysts had long suspected that Google was developing a payment service, but most had seen it as a competitor to PayPal. Thursday's comments are the first public indication of the company's plans, although several questions still linger. Google still is staying mum on specifics.

What is known from Schmidt's comments at a meeting hosted by Conde Nast's Portfolio magazine is that the service would focus on advertisers, and was not necessarily intended for the general consumer. He declined to explain further.

Analysts disagree, however, saying Google is mincing words. Since it is one of the largest purveyors of online advertising, it makes sense to offer the program to that customer base first. But analysts see no reason why Google would not -- and should not -- expand to the average consumer.

Rumors of a Google payment service first surfaced in June of last year. The Wall Street Journal at the time reported of rumblings among industry executives that the search giant had plans for a "Google Wallet." Also last year, Google filed incorporate an entity called Google Payment Corp. in California.