Baidu Inc., China's largest search engine, has teamed up with Citic Bank Corp., a state-owned corporation, to start an online bank. The deal targets the country's $90 billion mobile payments business, according to local reports on Tuesday.

According to International Business Times, Baidu, also known as China's Google, is declaring its intentions to enter the business even as strict regulations for online payments were recently debated by the People's Bank of China. Authorities are suggesting a spending cap of 5,000 yuan ($782) for each individual per day.

Like Us on Facebook

Which investor will have a controlling stake in the new venture that will be called Baixin Bank is yet to be determined, according to a statement by Citic Bank on Wednesday. Citic Bank, which is owned by CITIC Group, has more than 4 trillion renminbi ($626.6 billion) worth of assets under management.

Baidu CEO Li Yanhong pointed out that Baixin Bank is a gain for Baidu's financial services and a milestone for China's Internet finance, Oracle Union reported.

The move has sparked a debate on Chinese micro blogs and domestic media.

China's online payment market saw a 140% growth in transaction volume in the first quarter of 2015. The rapid growth of the sector has resulted in various tech firms vying hard for a share.

Alibaba Holdings Ltd. and Tencent Holdings Ltd. currently dominate the market. The transaction volume is expected to reach $1297.5 billion by the end of 2015, according to iResearch, a Chinese analytics firm.

Apart from shopping, online payments firms also allow registered users to pay bills, invest in money markets, and also transfer money to other registered users. Additionally, most of these firms give loans to small companies and individuals.

Despite this, these banks have experienced regulatory roadblocks as a result of not having physical locations required by regulators for services such as having bank accounts. Baidu's new firm would still require a banking license, as reported by Reuters.

The partners intend to acquire a whole new set of customers by enhancing affordable loans as well as extending credit to the small and medium enterprises who find it challenging to get from traditional banks.

Despite being a latecomer in China's nascent online finance market, analysts say the deal with CITIC Bank will give Baidu a taste of the China's Internet-enabled private banking sector.

TagsCitic Bank Corp, Baidu CEO, people's bank of china, Baidu-Citic joint venture, Baidu Li Yanhong, Li Yanhong