According to multiple online sources, Facebook is planning to challenge Google’s Checkout and eBay’s Paypal with their own version of a “Pay With” option.

Facebook’s option, dubbed “Pay with Facebook” and will take a huge chunk of the market away from already established Paypal and Google Checkout. Here are 4 reasons why:

Facebook Connect

Facebook Connect has been a hit with various sites, making it easier to leave comments and connect with other users on the site. Connect is a one click option that many users prefer than having to register with the site or type in codes to verify a comment. Facebook connect has also increases user interaction, with multiple web publishers claiming user registrations and comments increasing immediately.

Prashant Fuloria

Most people might not know this man, but he was the genius behind Google Checkout, Google’s pay with option. Last month he left Google after 6 years, for Facebook and is the man behind the “Pay With Facebook” feature. Fuloria is the latest ex-Google employee (Xooglers) to jump ship over to Facebook, giving Facebook a strong foundation to challenge Google for Internet domination.

User Base

Paypal claims to have a user base of more than 100 million. Facebook’s current user base is over 250 million. Even if a portion of their user base decides to use the “Pay with Facebook” feature, it’s still a significant chunk of people. This number could increase if merchants decide to offer a “Pay With Facebook” option. Facebook is planning to make it similar to Facebook Connect, a one-click pay option.

Gifts

Remember those tiny virtual “gifts” everyone was sending to each other when Facebook first introduced them? (You know you sent out some yourself). The virtual “gifts” made Facebook a fortune to the tune of over $15 million. And now Google has their sights on making more money off of the virtual “gifts”.

If users are willing to buy these gifts with a credit card, it’ll only be easier once a one-click option is introduced. This will make it easier for merchants: no registration required, just click, buy and send. Gifts are a small indication of what Facebook can do.

So, look out Google and Paypal, Facebook is coming for you and you better be ready for a fight for your users, customers and merchants.