eBay is to spin its PayPal business arm off into a separate, publicly traded company in the second half of 2015.

The move has been rumoured for several months following demands by activist investor Carl Icahn to do so, but had previously been resisted by eBays president and CEO John Donahoe, who said that PayPal was integral to eBays business, and vice versa.

However, following Icahns demands, several other key investors became concerned that PayPals growth was being held back by rival companies to eBay not wishing to partner with the payments business.

In an interview with the New York Times, Donahoe acknowledge the decision was following Icahns recommended strategy, but contended that the company had arrived at it following a deliberate process and was not simply reacting to outside pressure.

“eBay and PayPal are two great businesses with leading global positions in commerce and payments,” said Donahoe. “For more than a decade eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value.

“However, a thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively. The industry landscape is changing, and each business faces different competitive opportunities and challenges.”

The tax-free spin-off is expected to be completed in the second half of 2015, subject to market and regulatory conditions. Donahoe and CFO Bob Swan will oversee the separation of each business, with Devin Wenig, the current president of eBay Marketplaces, becoming the CEO of the new eBay company and Dan Schulman joining from American Express to serve as President of PayPal until the split, and CEO-designee of PayPal after the spin-off.

Separating from eBay should provide PayPal with more autonomy to compete in the rapidly-growing payments market, which will be essential following the introduction of Apple Pay and the growth of other mobile wallet providers. Mobile proximity payments are expected to grow from $3.5bn (£2.16bn) in 2014 to $118bn in 2018.

Equally, the retail eCommerce market continues to grow, expected to reach $305.7bn in the US and £52.45bn in the UK in 2014, with mobile eCommerce also rapidly growing, and predicted to account for 19 per cent of the US eCommerce market and 27 per cent of the UKs by the end of the year.