China's behemoth banks beat their nimble young challengers in handling mobile payment business with fewer transactions, but of greater value.

Chinese banks dealt with 1.67 billion payment applications through smart phones worth 9.64 trillion yuan (about 1.6 trillion U.S. dollars) last year, compared with 3.78 billion transactions valuing 1.19 trillion yuan for third-party payment institutions, the Payment & Clearing Association of China (PCAC) said Wednesday in a report.

Via the Internet the dominance of banks was more obvious, 1,061 trillion yuan in 23.7 billion transactions.

Third-party payment firms dealt with 15 billion online transactions worth a mere 8.96 trillion yuan.

Data from the PCAC showed China had granted licenses to 90 non-bank institutions to carry out online payment business by the end of last year, while allowing 37 non-banks to take mobile payment business.

Still, the PCAC acknowledged in the report the importance of Internet finance in third-party payments, peer to peer lending and wealth management by companies like Alibaba and Tencent, but noted some risks and problems have been exposed.

"The current supervision and regulation [of Internet finance] are not enough and need to be updated," said Wang Suzhen, deputy secretary-general of the PCAC.

The report warned of accumulating risks behind the growth of Internet finance, saying the risks cannot be spotted during good times or in a short period.

"But the risks could bring shocks to the entire industry when the economy is in a recession cycle or over a longer period," it said.

Internet finance has been the buzz of China's finance industry since 2013, led by different online money market fund products separately created by Alibaba and Tencent.