Online boom

China is set to overtake the United States as the world's largest online retail economy this year, according to consultancy McKinsey, after online and mobile payments rose 47 percent last year to 5.37 trillion yuan ($863.48 billion), showed data from Beijing-based consultancy iResearch.

PBOC highlights virtual payment risks

Alipay to issue online credit cards

The surge has fuelled a clash between banks and internet companies who are pushing into financial services such as online payments and wealth management products.

Funds under Alibaba's Yu'e Bao nearly tripled to 541 billion yuan over the three months ended March, according to a quarterly earnings report released late on Thursday by Tianhong Asset Management Co, an Alibaba affiliate which manages Yu'e Bao funds.

Alibaba rivals Tencent Holdings Ltd and Baidu Inc offer similar money-market funds and payment services. This week, Baidu launched a new mobile wallet application.

Reuters previously reported that the China Banking Association was lobbying for restrictions on online financial products that would reduce the outflow of traditional bank deposits into wealth management products linked to third-party payment platforms.

Among other measures announced in the authorities' document, banks will have to set up virtual private networks (VPNs), firewalls and other dedicated channels to prevent the third parties from accessing the banks' internal data.

Banks must also analyse clients' ability to sustain risk before letting them make payments through third parties, and conduct real-time supervision of clients' third-party payment activity.

"Commercial banks must include their third-party payment business in overall risk control mechanisms," the central bank and regulator said in the document.