The City watchdog has released evidence there is "no such thing as free banking", and said major banks have a captive audience of customers who do not switch and can be cross-sold other products.
The Financial Conduct Authority (FCA) published a progress report into a review designed to give it a greater understanding of retail banks' business models.
It said most current account customers contribute to their bank's profits, but a small proportion pay significantly more than others.
Around 10% of customers generate between a third and a half of all contributions to profits from current accounts.
The FCA said retail banking markets "remain highly concentrated" and there is a relatively high probability that personal current account customers will stick with their existing bank when taking out another financial product.
It found that, for example:
- Just over half (52%) of personal current account (PCA) customers with credit cards have one with their provider;
- Nearly half (48%) of PCA customers with personal loans have one with their PCA provider;
- And nearly a third (32%) of PCA customers with mortgages have one with their PCA provider.
People may see banking as "free" but in reality they may forego money they could have received by getting a better deal elsewhere or pay more in charges than they could have paid if they had shopped around.
The FCA said: "Major banks have a captive audience of customers who do not switch and can be cross-sold other products.
"Together they have a large share of the PCA market, currently over 80%, giving them considerable competitive advantages."
Andrew Bailey, FCA chief executive, said: "This is an important piece of work to help us understand the complexities of the retail banking market and how this may develop in the future.
"It provides more evidence that there is no such thing as free banking.
"In particular, this evidence will inform the work we are doing on overdrafts, so we can fully understand the potential effects of the significant action we are considering taking in this market."
The FCA said developments such as changing customer behaviour, new technology and bank closures could lead to significant changes in the overall picture of the market.
It has collected information from 45 firms to inform its review, including banks of a range of sizes, building societies, specialist lenders and new digital banks.
The FCA is asking for responses to its update, including evidence or views, by September 7.
The next stage of the review will look at a range of possible future scenarios, including what branch closure programmes mean for consumers and banks' business models, and how technological and regulatory changes may affect the market.
In May, the FCA proposed potential changes on overdrafts for discussion as part of its high cost credit work and will consult on any changes later this year.
The FCA said in May that it is considering a number of measures to make it easier for customers to manage their accounts, including mobile alerts warning of potential overdraft charges and stopping the inclusion of overdrafts in the term "available funds".