Alipay, China's largest third-party payment platform, on Monday launched the nation's first online investment fund aimed at individuals.

Analysts said the increasing popularity of Internet-based financial services will challenge banks' short-term financing business.

Alipay, owned by Alibaba Group Holding Ltd, will launch other financial services in the coming years, said Zu Guoming, director of the small and micro financial services group under the Alibaba umbrella.

Annual earnings for investors in the fund could exceed 4 percent, while the interest rate for one-year deposit is expected at about 3.25 percent, according to Zhou Xiaomin, deputy general manager of Tian Hong Asset Management Co Ltd, publisher of the fund.

The fund service can handle at least 1 million transactions each day, and it is looking to increase its transaction capacity as its user base grows, said Zhou.

"The service will give Alipay users a convenient way to participate in small-scale investments and increase their earnings," said Zhang Meng, an analyst at industry consultancy Analysts International.

Alibaba has been aggressively tapping into the financial sector in recent years, further challenging the business of traditional banks whose operating costs are higher than those of their Internet counterparts.

Transactions by third-party payment companies reached 3.8 trillion yuan ($620.2 billion) in 2012, up 76 percent year-on-year, according to Analysts International.

China's bank transactions were worth 346.2 trillion yuan last year, according to the People's Bank of China, the central bank.

Guo Shuqiang, general manager of Tian Hong, said Alipay's new service will have a "very limited" impact on banks' business.

"Fund acquisition channels in China are very mature. What Alipay is doing merely offers a new option for customers," he said.

Alipay obtained regulatory approval to process online fund transactions a year ago, joining other online payment platforms such as China UnionPay and ChinaPnR.

The company is the country's biggest third-party payment platform in the country, with about 800 million registered users. It processes 100 million daily transactions.

Alipay's transaction volume hit 1.8 trillion yuan last year thanks to surging business on Taobao and Tmall, two e-commerce websites owned by Alibaba.

The platform also is in cooperation talks with other fund firms but no final deals have been reached, said Fan Zhimin, president of Alibaba's small and micro financial services group.

Alibaba is aggressively building its financial service arms to achieve a higher valuation before a possible initial public offering.

The group may have a market value of as much as $200 billion by the end of 2014 after the IPO, Bloomberg News reported, citing Carl Huttenlocher, chief investment officer of hedge fund company Myriad Asset Management Ltd.

Alibaba may become a listed conglomerate this year or next. The Internet giant could be valued at as much as $100 billion, similar in size to Facebook Inc.