PayPal will become separate company to eBay

eBay and PayPal will split to become two companies next year, because PayPal's revenues are climbing too fast for eBay to keep up, the company has said.

"The industry landscape is changing, and each business faces different competitive opportunities and challenges...keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively," eBay's chief executive John Donahoe said.

"We and our board believe the best way to drive long-term shareholder value is to keep eBay and PayPal together, to capitalise on the opportunities."

Although PayPal's revenues are lower than eBay - in the last year revenues for the payment site were $7.2 billion (4.5 billionn) while eBay's eclipsed $9.9 billion (6 billion) - the auction site is only growing at a rate of 10 per cent year-on-year.

Last year, hedge fund investor Carl Icahn tried to convince the companies to split, encouraging eBay to sell off PayPal, but they refused to. He said of the recent announcement: "We are happy that eBay's board and management have acted responsibly concerning the separation - perhaps a little later than they should have, but earlier than we expected."

The move is notable, since it's likely PayPal will start to see some pressure from rival payment services such as Apple Pay, which was announced earlier this year.

eMarketer commented: "Breaking off from eBay will provide PayPal with more autonomy to compete in the payments space, particularly with respect to Apple Pay and other emerging mobile wallet providers."

The website thinks smartphone mobile payments will reach $3.5 billion (2.15 billion) this year, soaring to $118 billion (73 billion) by 2018.

eBay bought PayPal in 2002 for $1.5 billion and since then, it has become the main accepted payment option on the auction site.