BEVERLY HILLS, Calif. — Citigroup and other banks are increasingly looking to startups to help them compete in a world in which Google, Apple and other tech firms are rapidly becoming potential threats.

In a small and very crowded room at the Beverly Hilton at the Milken Institute Global Conference, Debby Hopkins, chief innovation officer at Citi and chief executive at Citi Ventures, said the bank is "boldly stepping" into the disruption scene.

"The name of the game has to be speed," said Hopkins.

Like some of its rivals, Citi has been seeking out startups that can scale. It hosts hackathons — a word some heavily regulated banks fear to say out loud– around the world. And Citi has a fund to invest in disruptors like automated investment service Betterment.

"Partnering is very important," Hopkins said, because it can help banks extend their offerings and understand technologies that could take off.

To be sure, the titans have an uphill battle in nurturing Silicon Valley-like thinking into their decades-old companies that employ tens of thousands of employees. They also face significant regulatory hurdles that challenge innovation efforts.

Still, the need to modernize banking is vital. At the World Economic Forum in Davos, Bank of England Governor Carney said tech companies could do to banking what Uber is doing to taxis, for example.

But sandboxes, a software testing environment that isolates the testing from apps running in production, are seen as a way to provide startups with a runway without destroying the incumbents' business lines.

Arjan Schutte, founder and managing partner of Core Innovation Capital, said sandboxes are a powerful way to work with innovators as they "give front row seats to understand what's going on."

The Consumer Financial Protection Bureau also has an initiative designed to nurture innovation.

Pursuing the Underbanked

In banking, many institutions are more aggressively pursuing an audience who needs a different kind of banking: the underbanked.

People who live paycheck to paycheck often face heavy fees and overdraft charges. Schutte said ACH payments can take days to clear, which doesn't work for people who need to keep better track of their liquidity. Many use expensive products like payday loans or visit pawn shops to take care of an emergency instead of waiting for something that could cost less.

Some heavy hitters believe the potential to reimagine money for the underbanked is huge. Bill Gates has been advocating the use of mobile phones to bring banking to more people, for example.

Better cash flow tools have been an area of interest among upstarts that are trying to design digital experiences with the promise of transparent fees (or no fees). EvenLevel, and Digit are among the new crop of startups trying to help consumers smooth out the timing of income and payments owed. Cryptocurriences, meanwhile, aim to quicken payments that could, among other things, help consumers avoid late fees when they need to wait until the last minute to pay for something.

Phin Upham, principal at Thiel Capital, said some companies are already improving the ways they think about repeat business among the underserved. He cited LendUp, which can offer consumers lower rates over time, as an example of a startup trying to improve the relationship. Check-cashing shops have also been working to enhance their loyalty programs.

But with all of this digitization of financial services come newer risks. Upham, for one, points out one very real concern: algorithms taking the narrative out of finance. Just as Google can serve up an ad based on a link for shoes a person clicked on by accident, an algorithm could include a false piece of data, he said. Sure, the tech can serve more people but it could also make a different kind of error.

He sees a future where banks could effectively disappear as they become more like utilities. Consumers may login to a dashboard and choose from various offers without necessarily being tied to any one brand, he said.

"Ten years from now, finance will be more like water," said Upham. "Turn on the tap and water comes out."