The Office of Fair Trading has pledged to continue its fight with banks despite giving up its legal battle on unauthorised overdraft charges.
The trading watchdog said it would not be taking any further legal action against the banks over the charges after the Supreme Court ruled against it last month.
But it said it still had "significant concerns" about the personal current account market, and planned to discuss a range of options, from voluntary measures to legislative change, with banks and consumer groups.
It added despite some recent and planned improvements by banks around transparency and customer switching, it believed fundamental changes were required for the market to work in the best interests of consumers.
Banks earn around a third of their revenues for personal current account from unauthorised overdraft charges, with the charges bringing in around £2.6 billion a year.
But the OFT said the charges were "difficult to understand, not transparent and not subject to effective consumer control".
Customers who go into unauthorised overdraft or breach their agreed limit can be charged as much as £35 for a single bounced payment, although campaigners claim the actual cost to the banks could be as little as £2.50.
John Fingleton, chief executive of the OFT, said: "We remain deeply concerned that the market for personal current accounts is not working well for consumers and does not give banks sufficient incentives to compete.
"We are committed to securing significant changes to unarranged overdraft charges going forward, whether through voluntary agreement with the banks or by other means."
But he conceded that following the Supreme Court's ruling that the charges do not come under the OFT's regulation under unfair contract rules, any investigation into the fairness of the charges would have "very limited scope and low prospects of success".