PayPal, the most popular online payment system, on Monday said it will pay up to $100 million in promotional incentives to customers who use the service on up to 100,000 merchant sites in North America.

In a statement, the unit of online marketplace eBay Inc. said millions of PayPal customers will be eligible to receive cash rebate offers of up to $20 when paying with PayPal from November 23 through May 15, 2007.

The PayPal promotion follows speculation earlier this month that Google Inc. was preparing to offer its rival Checkout payment service to merchants for free during the year-end holiday season, in a move to grab market share.

Stifel Nicolaus said that a free promotion move by Google could help the Web search leader wrest merchants and consumers away from PayPal during the crucial holiday season, which accounts for as much as 35 to 40 percent of annual transactions.