"Internet financing platforms lack sufficient supervision and information disclosures, and involve very high-risk loan business and sometimes also fraudulent activities," said Zhang Zhiwei, an economist at Nomura Securities. "More of these cases will occur."

P2P lending firms have mushroomed on the mainland since 2006. They match lenders and borrowers, who are usually owners of small firms. As their activities supported the small private firms that are the victims of the mainland's unbalanced financial ecosystem, regulators had been supportive until recently when defaults surged and sparked concerns over social unrest.

China Chengxin Credit Management, which helps companies and financial institutions assess the creditworthiness of borrowers, has been busy receiving P2P company owners recently, according to Shen Shuangbo, general manager of the Beijing-based company.

Chengxin turns down most of their requests to assess the creditworthiness of their borrowers.

"We don't want to put our reputation at stake," Shen said. "Some are children of officials or the rich, who are not serious about the business but want to make big bucks quickly."

P2P players normally register themselves as consultancies. The annualised lending rate on the P2P platforms can be as high as 15 per cent, nearly five times the benchmark rates guidance of the central bank. P2P companies also usually charge service fees ranging anywhere from 1 to 10 per cent, according to a P2P company executive.

"The integrity of a P2P company owner is important," Shen said. "It's because the first risk is moral hazard if lenders' money flows to the P2P companies before reaching borrowers."

Leading P2P platforms have introduced custody systems under which clients' money is deposited in a third-party account to minimise the chance of fund embezzlement. After a nationwide inspection that started in July, the central bank has advised in a report to the State Council that all P2P firms should set up capital custody systems.

Another major potential pitfall is credit risk, and Shen said risk management had not been made any easier because of big data internet technology, which centres on organising vast amounts of digital information about people's behaviour which can then be analysed.

"Internet finance companies, except for a few, have not grasped the vast data or the technology or methods to apply borrowers' data for their creditability appraisal," she said, adding that borrowers' assets and liabilities and loan-grant rules were fundamentals that were crucial to online loan quality.

"Little is known about what P2P companies do to ensure loan quality, but the shutdowns have shed light on the effectiveness of their risk controls," she said.

Theoretically, in the big data era, your repayment capability is automatically computed based on your track record of consumption, payment and other behaviour. When the data is sufficiently large, your default possibility can also be computed, according to Xie Ping, a vice-president of China Investment Corp, the nation's sovereign wealth fund.

"With this data available, you can invest and repay any time you like," Xie told a forum. "It is an application of big data, cloud computing and social network."

But in the absence of the data and technology, most online lending firms are scrutinising their borrowers by traditional means and doing so insufficiently, many analysts have said.

Lu Chenggang, a deputy to the Shenzhen People's Congress, is calling for the mainland's first legislation to be introduced to regulate P2P companies.

"The regulation should govern their business scope and risk control measures, which are very basic to the industry's development," he said.