The reluctance of banks to place innovation at the centre of their strategy is partially a result of pressure from governments, regulators and consumers, which is making some firms risk-averse and "creating a culture of introversion and inflexibility," according to Richard De Lotto, principal research analyst, Gartner.

"The predominant view of IT is that it is only useful for cutting costs so tactical thinking about automation and rationalisation overwhelms longer-term decision and strategic plans and goals," he says.

The research firm says innovation is becoming increasingly important because non-banking competitors, such as retailers, online firms and telecos, are making inroads into the industry with strong customer-oriented services.

Gartner recommends that banking and investment services firms focus innovation initiatives on service improvements, as opposed to pure product development and says personalisation is a critical component of new offerings.

In addition, despite the increased outside competition, through 2013, 75% of banks will lack the means to systematically identify and exploit potentially disruptive technologies.

Gartner argues that creating a systematic methodology for tracking disruptive technologies when they appear, market trends and discontinuities is essential to meet competitive challenges. In addition, few product innovations last more than six months because they can be swiftly mimicked. Therefore, technology - rather than products and services - will remain the leading enabler of sustainable competitive advantage.

The company also predicts the continued rise of an innovative alternative to banks: person-to-person lending. By 2013, P2P lending will soar at least 66% to $5 billion of outstanding loans, driven by a combination of people shunning their banks and being shunned themselves.

Banks should not ignore this growing trend but would be better served partnering and collaborating with existing players rather than trying to build their own P2P networks, says Gartner.

Another trend over the next three years will be the diminishing importance of branch networks, with 75% of retail banks in North America and Western Europe predicted to shut down 10% or more of their traditional branches by 2013.

Retail banks are shifting to non-local, franchised, multi-tenanted and virtual branches as the drive to improve efficiency and cost-to-income ratios will be constrained by the high fixed costs locked into large physical networks.

Finally, in its predictions for the next few years, Gartner claims that by 2013, 90% of bank services hub initiatives that are planned or under way will need to be re-architected on a global basis.

Most banks that are undertaking payment, lending and treasury management services hubs are doing so in an isolated fashion without using common organisational services.

However, Gartner predicts that, in the next five to ten years, significant progress will have been made on industry reference models, messaging and process standards, and SOA governance, enabling more-holistic approaches to services hub designs along the lines of "virtual hubs" that tap common services.

"These institutions must now look beyond the fire-fighting of the current crisis towards planning for the eventual recovery and the new world that comes with it. If they don't, they will become uncompetitive and fall behind more-forward-thinking rivals," says De Lotto.

In November a more upbeat survey from Accenture found that the vast majority of US and UK banking and capital markets firms have continued or increased funding of large innovation initiatives through the financial crisis but did warn that most do not see innovation as a way to rebuild their businesses over the coming years.