After rapid growth over the past several years, development of direct banks in China is showing signs of slowing down, according to a newly released report.

Direct bank refers to a bank that doesn't have any branch network, but offers services remotely via online banking and telephone banking.

From the second half of 2017 to the end of August this year, the number of direct bank mobile applications only increased by nine, fewer than the number recorded a year earlier, which saw an increase of 11, according to the 2018 China Direct Bank's Blue Book, published on Wednesday.

It was also much fewer than the increase in the number recorded from 2015 to 2016, which was 39.

The report, compiled by the China Banking Association and Internet Finance Association of Small and Medium-sized Banks, was published on the sidelines of the China Digital Banking Forum, held in Shenzhen on Wednesday.

"Direct banks are currently facing challenges in further development," said Fei Yiming, an official with the association.

"Increasingly stringent supervision policies are placing higher requirements on direct banks' business, products and risk management system. Also, the emergence of internet technology enterprises are grabbing the market, leading to more intense competition," he said.

"From the perspective of direct banks themselves, meanwhile, they don't have a clear strategic positioning, which results in overlapping of business with traditional banks."

As of the end of August, 114 banks in China were running direct bank mobile applications.

Among them, city commercial banks accounted for the majority, 61.4 percent, followed by rural commercial banks at 22.8 percent, and joint stock banks, 6.1 percent.

Most direct bank customers, or 80 percent, are aged between 26 and 40 years old, as the younger generation is more demanding of more convenient and quicker services.

As many as 65 percent of direct bank users were attracted by its products, while 49 percent were drawn in due to its marketing, said the report.