It is not a surprise, that both Google and Amazon want a slice of PayPal's cake. In the most recent quarter, PayPal had net revenues of $454 million, up 34% over the $339 million reported in Q2-06. More importantly, PayPal Merchant Services transactions jumped 57% to $4.92 billion globally from the $3.13 billion reported in Q2-06.

An explosive device blew out a thick, plate-glass window Tuesday evening at the Silicon Valley headquarters of PayPal, the online payments unit of eBay.

No injuries resulted when what local fire officials said was an explosive device shattered a 6-foot-square window on the ground floor of the four-story building in San Jose. The explosion occurred outside a building exit.

Investigators were still trying to determine the nature of the device. "Whatever it was, it disintegrated," San Jose Fire Department Capt. Jose Guerrero said. "Whatever caused this was pretty strong."

About 45 employees were working in the PayPal offices when the explosion occurred at 7:24 p.m., eBay spokesman Hani Durzy said. Most employees had left the building early ahead of the Halloween holiday celebrations, he said.

These high costs of card acceptance and consumer concerns about fraud are prompting online retailers to look for less expensive and more secure alternative payment methods. The Internet Retailer survey found that 52.7% of those responding thought it was "very important" or "important" to provide an alternative payments program.

"We're starting to see competition with credit cards," says Avivah Litan, vice president and research director at consulting firm Gartner Inc., adding that merchants are looking at such alternatives as financing, prepaid cards and gift cards. She says that alternative payments could account for between 10% and 20% of volume within three years.

Schatt says he expects that alternative payment options could account for up to 26% of all online payments by 2009, up from 14% in 2006.

In any case, retailers need to think hard and long before implementing new payment options, says Alicia Berry, director of operations for DVD Empire. "There are all different kinds of problems and issues," she says. "You're dealing with other companies, other servers, all different kinds of people, turnover in sales people. It’s not an easy process."

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When introduced, mobile phone users will be able to send a text message to 729725 (the spelling of PayPal on a numeric handset keypad) with the amount of money the sender wishes to transfer and the recipient's phone number. On the PayPal website, the company uses the example: "Send 5 to 4150001234"

A PayPal computer then calls back the text message sender on the phone and asks the user to enter a secret PIN to confirm the transaction. PayPal immediately notifies the recipient and tells it how to claim the payment online.

The website shows a second option where the customer calls 1-800-4PAYPAL, enters a secret PIN, the amount of the transfer and the phone number where the payment is to be sent.

PayPal has been testing the service with eBay employees and on a handful of customers. It plans to charge no special fees for text payments, but cautions users to check with their mobile phone companies to see if special charges may apply.

Wingo says that large sellers -- most of which already accept the credit card option -- seem to be happy with the change. "The reaction we've heard is that they're very much for it because they see that consumers get a little confused," he says.

However, small sellers, who want to avoid the higher transaction fees that come with accepting card-based PayPal transactions, are grumbling, Wingo says.

Typically, small eBay sellers open personal accounts that allow them to refuse credit card payments through the processor, an eBay unit. Personal accounts carry no transaction fees.

Under the new eBay policy, sellers with personal accounts will be required to upgrade to a PayPal business or premier account -- both of which allow credit card acceptance -- if they receive a card-based PayPal transaction. Both business and premier accounts charge transaction fees ranging from 1.9% plus 30 cents to 2.9% plus 30 cents.