Online and mobile banking is fundamentally different from most of the other functions in a bank.

Digital channels exist in a lightning fast market, where the pace is set by Silicon Valley's fizziest start-ups and sustained by the Goliaths of Web 3.0, such as Apple, Google and Amazon.

Conversely, market change impacts banking operations or risk at a more sedate pace. Change in these areas is more likely to originate from regulators rather than competitors. As a result of these differences, few banks have been able to foster the culture of rapid innovation necessary to deliver a sustainably differentiated digital channel experience to customers. At a recent customer advisory board, a number of banks told me that customers feel online banking experiences are becoming commoditized.

And this is happening at the worst possible time. Customer faith in banks is at a very low ebb. New entrants are nibbling at the best bits of the market. One or two mega-players are starting to invest. Most banks could find themselves squeezed on all sides in the next 12 to 24 months. So what to do?

Start innovating. Banks need to regain their verve for innovation in digital channels. Banks cannot abdicate their responsibility to innovate. There needs to be the same level of care about the innovation in digital channels as there is in ubiquitous cost reduction schemes or risk models. If we can harness the same levels of enthusiasm and willingness to experiment, then we will see banks delivering on the promise of a differentiated digital channels proposition. Rather than invest heavily in one big risky project, banks should concentrate on many small innovations, beta test them – and invest where customer feedback is positive.

Be brave. Banks need to stick their necks out a little. That is the essence of innovation. At the same time, banks can mitigate risk by paying attention to successes in non-financial services companies. One good example is gamification – the use of the principles of gaming in delivering a customer-facing process. Gamification has proved very effective in boosting customer engagement and retention, while also making use of social networks for word-of-mouth marketing. Again, rather than taking a big risk with a large investment, banks can look at cloud-hosted solutions that lower the cost of entry and enable them to grow organically as adoption rises.

Don't give it away. Banks hold treasure troves of data. This data is the key to unlocking the best possible experiences for bank customers. Don't give it away! I have heard some banks talk about exposing their APIs – and a couple of financial services companies have started to do so. The idea is to allow digital agencies to come up with wacky and creative ways to use the bank's data. The argument goes that this would let the banks focus on what they do best – and leave all the innovation in the hands of more creative types. I disagree. Banks should not be giving their key advantage away to third parties. They should be using their data to learn even more about their customers. Banks should work with partners who have expertise in digital channels innovation, but continue to own the end-to-end customer relationship and all the related data. This data can then be used to personalise customer experiences as much as possible, giving the bank the edge in the war to gain market share.

If banks keep innovating, are brave about these pursuits and retain control of their data, ultimately, they will have a better chance of catching the eyes of an increasingly demanding marketplace.

Alex Bray is retail channels director of banking at Misys, a financial services technologies provider. You can follow him on Twitter @StGilesResident.