China has the world's largest Internet population and Beijing is trying to better regulate the country's rapidly-changing Internet sector, drawing up rules for everything from censorship to cyber-security and e-commerce.
Companies which own payment systems can reap huge profits by charging transaction fees.
"Payment institutions should fully respect customer's right to choose, and must not force customers to use the Internet payment service they provide, and also must not stop customers using other Internet payment services provided by other institutions," said draft regulations posted on the People's Bank of China's website.
The move could shift the balance of power for China's online payment industry, where Alipay, the crown jewel of e-commerce king Alibaba affiliate Ant Financial Services Group, has long held the lion's share of the market.
If payment services from social networking and online entertainment firm Tencent, which backs e-commerce No. 2 JD.com Inc, and search firm Baidu are offered on Alibaba's e-commerce sites, users could opt to use those. Alternatively, Alipay could cement its dominance if customers opt to use it on rival's platforms.
The central bank is now seeking external opinions on the draft proposals.
Alibaba, its affiliate Ant Financial and Tencent all declined to comment while Baidu was not available for immediate comment.
Online payment is booming in China, boosted by the proliferation of hundreds of millions of smartphones. These handsets are now being used for everything from paying for taxis and meals at restaurants to buying goods at brick-and-mortar shops.
© Thomson Reuters 2015
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