In a company-issued statement, Google CEO Eric Schmidt said the company does not plan to offer what he called a "person-to-person stored-value payments system."
One of the main features of PayPal, a division of eBay Inc., is the ability for consumers to store balances in order to make e-commerce payments.
Following a story by the Wall Street Journal published on Friday, speculation ran rampant about Google offering a PayPal competitor.
Instead, Schmidt said that Google is looking to expand its current online payment services, which is largely used to handle payments from advertisers and to Web publishers in Googles popular online advertising programs.
Schmidt stopped short of offering details about Googles next online payment plans or when the Mountain View, Calif., company will introduce a broader service.
"The payment services we are working on are a natural evolution of Googles existing online products and advertising programs, which today connect millions of consumers and advertisers," Schmidt said in the statement. "We are building products in the area to solve new problems in e-commerce."
Google earlier this year disclosed plans to handle more e-commerce transactions, specifically for its video-search service.
When Google launched its video submission program in April, Jennifer Feikin, director of Google Video, told Ziff Davis Internet News that that the company would let content owners charge a fee for video playback on Google. Google would then earn a small revenue share from video playback fees.
Google also has moved into digitizing books and other print content through its Google Print program. Though officials have not said whether Google will offer paid access to those copyrighted works, it could be another area ripe for online payments.