Huge gaps will develop between banking innovators and banking laggards such that by 2025 a bank which invests significantly in technology can expect to develop an almost insurmountable lead over more sluggish rivals in terms of revenues, productivity, profitability and market capitalisation.A model developed by the National Institute of Economic and Industry Research, published yesterday, was used to predict trends for two hypothetical banks - one a technology and innovation leader with A$15 billion in revenues today, and one a "follower" bank with $12 billion of current revenues. The model predicts these revenues will diverge massively over the next dozen years, with the leader's revenues more than doubling, to $32 billion, while the laggard reaps much more modest growth to reach just $17 billion by 2025. The model also suggests that the banking leader, with a market capitalisation of $35 billion today, might expect that to surge to $69 billion by 2025. Meanwhile, the follower bank, with a current market cap of $27 billion, must expect the market to punish it with a valuation of just $22 billion by 2025.These stark predictions are contained in a report issued by the NIEIR yesterday in association with computer giant IBM. Re-inventing Australian enterprises for the digital economy paints a bleak picture for any company failing to invest in technologies that will allow them to participate and compete in the online world, but for banking laggards the future is bleaker than most.Peter Brain, founder and executive director of the NIEIR, said there were six technology mega-trends which were impacting on all businesses. These were ubiquitous high speed broadband; cloud computing; big data and analytics; mobility; interface and collaboration technologies; and intelligent systems, sensors and robots."Nowhere is the application of these mega-trends more evident than in the finance sector," he warned. For banks, the competition comes not only from nimbler local peers but from global digital upstarts that harness the internet to offer alternative financial services such as peer-to-peer lending, digital wallets and new payment technologies. According to the report: "The most dangerous threats are likely to emerge from other sectors, in the form of airlines, utilities and supermarkets... offering more financial services." The report predicts starkly diverging performance for leader banks and follower banks over the next 12 years in multiple areas, including net revenues, employment levels, productivity, cost margins and market capitalisation.IBM managing director Andrew Stevens said that many organisations were still adopting a wait-and-see approach in terms of innovation and IT investment. He warned though that business now faced a "tipping point where the risk of inaction outweighs the risk of action", and that those organisations which waited might find it impossible to catch up in the future.The report also argues for a complete re-think by the banks in terms of where they make their money. The NIEIR model forecasts that technology and innovation will cause a fall in fee income generated by financial institutions of 3.8 per cent a year on average between now and 2025.This, it argues, will prompt a