PayPal splits from eBay in face of Apple Pay challenge

eBay and wholly-owned subsidiary PayPal will officially split into two independent publicly traded companies in 2015, the company has confirmed. After a review of the company’s growth strategies and structure, the board of directors concluded the split will enable both companies to better position themselves to respond to competitive change.

In an official announcement, eBay President and CEO, John Donahoe explained the reasoning behind the decision for the two parties to split. Primarily, at least for PayPal, it appears that operating as a single entity will allow it to act more responsively to new market entrants. In the payments space, Apple launches Apple Pay this month.

“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,” he said. “The industry landscape is changing, and each business faces different competitive opportunities and challenges.”

According to CNET, Donahoe stated during an investor call this week that he believes PayPal needs to be a presence “however consumers want to pay”, before going on to state:  “The future of payments is one where people have multiple ways to pay. We want PayPal to be present in each of those environments.”

This statement may indicate willingness from eBay and PayPal to work with Apple on mobile wallet solution Apple Pay. The iPhone leaves Apple well positioned to kick start the mainstream adoption of mobile payments and the mobile wallet. Over the past 16 years, PayPal has established itself as a leading facilitator of simplified payments online, however wider mobile wallet efforts, such as NFC, have been slow on broader uptake.

Despite the probable horn-locking between competitors, both Apple and PayPal would stand to gain by riding each-others’ coat tails at the dawn of a new day for payments. Whether the separation of eBay and PayPal facilitates any kind of relationship with Apple remains to be seen.