Google is ready to launch its GBuy online payment service on June 28, and it will compete directly with online auction powerhouse eBay’s popular PayPal Web payment service, the San Jose Mercury News reports.

The news comes from RBC Capital Markets analyst Jordan Rohan, according to the Mercury News.

The service’s release would likely spark a battle between the two Internet heavies, as Google’s name alone could draw droves of online retailers away from PayPal, which currently dominates the space.

Google derives a large chunk of its revenue from online retailers that purchase ad space on the Google site to attract new customers and make sales, according to the Mercury News. San Jose, Calif.-based eBay in the past has been a top customer of Google’s, the Mercury News reports.

The GBuy service would be similar to PayPal, which lets users conduct payment transactions online for a fee, according to the Mercury News.

In May, eBay announced a partnership with Yahoo, the world’s number-two search engine behind Google, to enhance the companies’ Web search, online advertising and Web payment services, and to better position them for competition with Mountain View, Calif.-based Google.

According to Rohan, users of Google’s Google Base service, which lets Web surfers peruse listings of items for sale, will initially be able to use GBuy free of charge, and smaller e-commerce locales will also have the option of employing GBuy as their online payment services, the Mercury News reports. GBuy users will eventually have to pay for the service, according to the Mercury News.

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