Amazon has set out to take on eBay by unveiling an online payment service which will compete directly with PayPal.

The new service, called Checkout by Amazon, will give online retailers the option of having Amazon manage their payments and allow them to avoid having to register customers afresh.

Sites which adopt the service will be able to use details such as billing and address information that their customers have already logged with Amazon. They will also be able to offer the same 'one-click purchase' as Amazon, as well as other Amazon features, such as order tracking.

"Customers will be coming through an experience that is really similar to Amazon's," Mark Stabingas, vice president of Amazon Payments, was quoted as saying. "People will like the familiarity and comfort associated with that."

The service, which was introduced yesterday along with a more slimmed down version called Amazon Simple Pay, will compete directly with PayPal, the online payment system that was bought by eBay for $1.5 billion in 2002.

PayPal, which has built up a strong reputation as a trusted and secure service, now accounts for more than a quarter of eBay's total revenues, bringing in $602 million in the most recent quarter. Analysts said that the possibility of offering customers a one-click purchase button may well entice some sites to offer Amazon as an alternative, however.

"Consumers trust Amazon - they're been shopping there for years," Victoria Bracewell Lewis, an analyst with Forrester said. "The idea that you have to do very little by way of registration to buy something will increase impulse buying, as well as general convenience."

She also dismissed suggestions by some analysts that retailers may be discouraged from choosing Amazon because they feared losing their customers to a much larger site that sold similar goods. "Research suggests that the more payment options a merchant offers, the greater the conversion - i.e. the number of customers buying goods.

"Any potential loss in brand equity as a result of presenting Amazon as a payment option would I think be outweighed by the increased revenue potential," she said.

PayPal remains by far the most popular payment service, but does not offer one-click purchase. Online retailers using the system will typically display a 'buy now' button which, when clicked, takes the customer to a PayPal site where he or she has to enter a user name and password. Amazon's service promises to allow other retailers to sell goods with one click.

Two years ago Google introduced a rival service, called Google Checkout, but it has struggled to gain traction, particularly in the UK.

In the past couple of years, Amazon has expanded its reach far beyond the sales of books, CDs and clothing for which it is best known. In September, the site - which is used by 80 million people worldwide - launched its long-awaited music download service, which competes directly with Apple's iTunes.

Two years ago, it launched an online storage service which allows customers to store documents, photos and other information on the web for 15 cents per gigabyte per month.

Explore Tech & Web

• Personal Tech

• The Web

• Gadgets & Gaming