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The following is part 2 of Scot Wingo's take on Google Checkout. Scot's articles are post in full with his permission.

Merchants and Google Checkout

You can’t track the merchant side without first understanding the consumer side, so first please read that post. ok, thanks. Now here are the reasons I believe merchants will adopt Google Checkout at a rapid pace:

1. Consumers will want merchants to support Google Checkout
2. There are compelling features especially on the risk management side/fraud protection for sellers.
   
3. The paid-search badge system described in the consumer benefits will drive Merchant adoption
   1. It increases the ROI of paid-search/Adwords spend because it will have a positive impact on click-through-rate (CTR). The Adrank algorithm uses CPC and CTR as the primary components. CTR is a measure of relevancy (today)
   2. Thus Merchants can either spend less for the same traffic or
   3. Spend  the same and get more traffic
4. At an “out of the gate” 2% and .20 per transaction merchant fee, the economics of Google Checkout are extremely attractive. They will be one of (if not the) lowest credit card processors that I’m aware of.
   1. This will give merchants more margin or they can invest it in… Adwords! (see step 2)
5. Amplifying those basic economics are the discounts that apply as AdWords spend increase. This gives a nice positive feedback loop to step 2 above.
   
   1. The way it works is you get free payment processing on 10X your adwords spend.

Here's a great graphic that illustrates this.