PayPal is splitting from eBay and will become a separate and publicly traded company next year.

The separation is expected to occur in the second half of 2015.

The board of eBay decided the separation is the best path for growth and shareholder value creation for each business.

Dan Schulman, the president of the enterprise growth group at American Express, will be the new president at PayPal, effective immediately. The 56-year-old will become chief executive after the separation takes place.

The announcement came almost a year after billionaire Carl Icahn opened a proxy fight and pressured eBay for a spin-off of PayPal.

Current eBay president and chief executive John Donahoe will step down after overseeing the separation of the two companies and will not have a management role in either of the two afterwards. He might have a seat on the board at one or both, along with eBay's chief financial officer Bob Swan.

"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," Mr Donahoe said.

California-based eBay connects sellers to buyers online. PayPal, acquired by eBay in 2002, has been its fastest growing segment.

In the most recent quarter, PayPal gained four million new, active registered accounts, up 15% to 152 million.

Consumers who use PayPal can send and receive payments online, with all transactions backed by prepaid user accounts, bank accounts or credit cards. The service is available in 203 markets worldwide and is on track to process a billion mobile payments this year.

But major competitors are getting into the mobile payment sector, including Apple, which last month announced a new digital wallet service called Apple Pay which is integrated with its Passbook credential-storage app and its fingerprint ID security system.

There is a push away from traditional credit cards, particularly after a string of high-profile data breaches ensnared major retailers.

Citibank predicts that the mobile payments business will grow from a billion dollars (£617 million) last year, to nearly 60 billion dollars (£37 billion) by 2017.

Shares of eBay soared more than 11% before the opening bell, close to its high for the year.

Devin Wenig, currently president of eBay Marketplaces, will become chief executive of the new EBay Inc. He will lead the eBay Marketplaces and eBay Enterprise businesses.