LONDON (Reuters) - Amazon <AMZN.O>, Google <GOOGL.O> and other Big Tech companies could compete with banks in basic products and undermine their ability to offer free accounts, Britain's financial watchdog said on Tuesday.
The Financial Conduct Authority published its final report on its study of retail banking business models, saying new payments services could attract retailers like Amazon into banking.
"In terms of where we think real challenges are going to come into this market, it will be potentially around the entry of Big Tech firms," FCA executive director for competition, Christopher Woolard, told reporters.
"We suspect that many of those firms will not want to take capital on their balance sheets, they won't actually want to become a bank as such, but they may well want to offer products that compete directly with banks, like simple lending products."
Britain has sought to boost competition in banking, a sector dominated by the Big Four, HSBC <HSBA.L>, Lloyds <LLOY.L>, RBS <RBS.L> and Barclays <BARC.L>. Many new "challenger" banks have entered the market but have yet to win major market share.
Woolard said if Big Tech moved into banking, existing lenders could become more like a utility to support an Amazon or Google "front end".
This would force banks to think about how they make money.
Fees and charges allow banks to cross-subsidise free-in-credit bank accounts that underpin market share, but the entry of tech companies could change that, forcing banks to introduce charges for accounts, the FCA said.
(Reporting by Huw Jones; editing by David Evans)