Google has confirmed that it is developing an online payment system, but said it has no plans to take on eBay's PayPal service.

Following media speculation about such a move, Google chief executive Eric Schmidt told reporters that the company is working on payment services to extend its existing online products and advertising services.

Google does not plan to launch a person-to-person stored payment system that would compete directly with PayPal, but it is working on improving the way e-commerce is done, Schmidt told reporters.

EBay's PayPal service allows businesses and individuals to send and receive payments online using existing financial infrastructure such as bank accounts and credit cards. Founded in 1998, PayPal now claims to have more than 71 million account members worldwide.

Schmidt said that Google's aim is to solve niggles with e-commerce. Much of the search company's activity revolves around online advertising and tools such as its Froogle online shopping comparison service.

Also founded in 1998, Google has been credited with disrupting business models with its innovative services, pushing technology stalwarts such as Microsoft and Yahoo to rethink their search and email offerings. There’ll be an in-depth look at all of Google’s services in the September 05 issue of PC Advisor, onsale 21 July.