(Adds comment from CITIC, PBOC, details)

By Hongmei Zhao and Heng Xie

HONG KONG/BEIJING, March 14 (Reuters) - China's central bank demanded on Friday that payments made by scanning a bar code with mobile devices be halted, hitting the payment arms of Internet companies Tencent Holdings Ltd 0700.HK and Alibaba Group Holding IPO-ALIB.N , amid concerns over the security of their verification procedures.

The move is the latest in a series of clashes between China's finance sector and Chinese Internet companies, which have pushed into the banks' territory by ramping up their own financial services, offering online payment services and wealth management products.

Tencent, China's largest listed Internet company, and e-commerce firm Alibaba confirmed to Reuters that they had received a notice from the People's Bank of China (PBOC) about the move.

A PBOC spokesman said the bank is asking the companies to submit detailed reports on their procedures.

"The notice was issued all of a sudden ... This notice had a great impact on our business," said an official from Alipay, Alibaba's online payment affiliate, who declined to be identified as they were not authorised to speak to the media.

Shares of Tencent slid as much as 6.4 percent, while China CITIC Bank Corp 601998.SS 0998.HK plunged in Hong Kong and Shanghai. China CITIC Bank has said it will operate virtual credit cards with Tencent and Alibaba that use the payment process, known as a "QR" code. ID:nL3N0MA3TZ

QR codes are bar code-like images that can be used to transmit web addresses, payment details, or other information.

Shares of China CITIC Bank were later suspended at midday in Hong Kong, down nearly 7 percent.

In December, the PBOC said it would closely monitor the development of online financial services to ensure companies do not cross any legal red lines. ID:nL4N0JK28K

"If the government is pushing back on the QR code thing, it's probably a temporary thing until the government figures out what is going on," said Michael Clendenin, managing director of Shanghai-based RedTech Advisors.

China CITIC Bank told Reuters it had not received any document from the PBOC.

This week Tencent and Alibaba received licenses from the bank regulator to participate in a trial plan for privately-owned banks. Both firms have announced they would launch virtual credit cards.

These virtual cards allow customers to use credit to pay for products through Tencent and Alibaba's payment arms.

(Additional reporting by Paul Carsten in HONG KONG and; Pete Sweeney and Garbriel Wildau in SHANGHAI; Editing by Anne Marie Roantree & Kim Coghill)

((paul.carsten@thomsonreuters.com)(+86 10 6627 1299)(Reuters Messaging: paul.carsten.thomsonreuters.com@reuters.net))

Keywords: CHINA CENTRALBANK/TENCENT ALIBABE PAYMENTS (UPDATE