The split is a logical progression for PayPal, but eBay needs to show that it's also a smart decision for its core e-commerce business as Amazon lures away sellers.
The company's marketplace business continues to grow, despite a security breach in the spring, but it doesn't meet Wall Street's expectations for overall revenue.
PayPal co-founder Peter Thiel says it makes sense for eBay to split from the online payments service. Now, PayPal will need to focus on making its product more competitive in a mobile world.
"We want PayPal to be a presence however consumers want to pay," eBay CEO John Donahoe says.
The separation, brought up by activist investor Carl Icahn in January, will include new management teams for both businesses.
The mobile payments space got competitive quickly and Samsung and Paypal are teaming up to take on Apple.
In a newspaper ad reacting to Apple's new payment system, PayPal suggests it's not secure. And, well, PayPal is.
How would you like to pay for that? Cash, credit, or smartwatch?. By using voice and a few taps, users can find participating stores and pay for items with their Android Wear smartwatches through the PayPal app. CNET's Sumi Das visits PayPal headquarters for a demonstration.
As vice president of messaging products, Marcus will develop and expand mobile messaging for the social network.
The e-retail giant plans to become the middleman between customers and companies that offer subscription-based payments, according to Reuters.