Oct 7, 2010 13:48 GMT  ·  By

PayPal will launch its micro-payments service this month at the PayPal conference Innovate, the company has confirmed. It has been known that the company was working on such a product, but the launch date had not been announced.

At the same time, there are rumors that the Google - PayPal partnership for the Android Marketplace will also be announced at the same conference.

The two companies are said to have been working together to bring the payments system to Android devices.

PayPal has been one of the highlights of eBay's financial reports for a few years now and the company is synonymous with online payments.

But it's position is far from assured, spurred by PayPal's success, competitors have been popping up, including the likes of Visa and MasterCard.

And even that may be moot, as the world moves to virtual currencies and micro-payments as means of paying for things online. Those two markets have exploded, especially in the last year, and PayPal wants in.

PayPal is already making a lot of money from virtual transactions and currency. Zynga, the social gaming powerhouse, is PayPal's second biggest customer after eBay, the payments service's parent company.

The company hasn't named any launch partners, but Zynga certainly fits the bill. The gaming company would be a perfect fit for a micro-payments system and it certainly has the scale to get PayPal interested.

PayPal's current tools aren't ideal for small transactions of a few dollars or even less than that. The fees PayPal collects on these transactions and the overhead make it not worth it to pay small sums.

The micropayments system would eliminate these issues and also make it possible for developers to integrate PayPal into their apps via an API.

The platform may also be used for the Android Marketplace. Google and PayPal have been rumored to be in talks for months now.

One of the biggest weaknesses of the Android Marketplace has been its reliance on Google Checkout as the sole payments system. While Google positioned Checkout as a PayPal competitor, it is hardly on par with eBay's offering.