PayPal has announced its separation from eBay and it will function publicly as the traded company next year. Speaking about the separation, John Donahoe, president and CEO eBay, said “The industry landscape is changing, and each business faces different competitive opportunities and challenges.”

Donahoe will not be handling the management of either of the companies but will just be overseeing the separation process which is scheduled to be completed by second half of 2015. However, he will have a position on the board of directors in either one or both the organization. The companies feel that the decision of separation is the best one and will foster the growth of both the companies.

Commenting about the separation, Eden Zoller, Principal Analyst, Consumer, Ovum said “The decision to split PayPal from eBay next year is a smart move that will benefit the payments provider. PayPal’s revenues are not yet as big as eBay’s ($9.9bn and $7.2bn, respectively) but the gap is closing and PayPal is the faster growing business with 19% revenue growth year-on-year. At the same time, eBay now represents less than a third of PayPal’s total payments volume. An independent PayPal will have the freedom to set its own strategic agenda terms in of management, investments, and priority areas for development. A standalone PayPal should be able to move more quickly and innovate more sharply, which is important given that the payments provider is facing increased competition on all fronts, from hungry start-ups like Stripe and Square to powerhouses like Amazon and now Apple that has 800 million iTunes accounts on file compared to 152 million active accounts for PayPal. We would expect to see an independent PayPal put even more emphasis on mobile payments where it has made good progress but it needs to up the ante and be more nimble, particularly as Apple has big ambitions to be a dominant force in m-payments.”