High-tech upstarts, facing few barriers to entry, are picking banks' payments pockets.

Mobile wallets are plentiful. PayPal, the San Jose unit of eBay, has recently announced a bevy of 15 merchants that will begin offering it as a fifth payments network at brick and mortar stores by the end of the year.

Google is moving into the physical world — and leveraging banking partners, as well as traditional payment networks — with its digital wallet.

Even Facebook has come to the realization that it can begin using its platform to better bring together buyers and sellers over its social network.

And those are just a few.

"The whole banking industry is on its ear," says Brian Riley, a senior research director in the retail banking and cards practice at CEB TowerGroup, at its annual conference in Boston last week. Riley worries that retail banks are just using technology for technology's sake, and throwing up personal financial management tools or mobile wallets just to be competitive without thinking about how best to leverage those services.

"The first [problem] is the ability to be displaced. The second thing is not being nimble enough. The third is, are we just throwing (stuff) out there and not becoming the new model."

And to complicate matters, no one knows what the business model will be in the next decade or so.

In a speech during the conference, Madge Meyer, chief innovation officer at State Street Corp., said it's important to marry the nimbleness of innovation with the experience of retail banks.

She warned not to let "legacy experience block new opportunities." Often, slow-moving bureaucracies at big banks block important developments in technology, industry analysts say.

Banks are more or less at an inflection point, experts say.

"The smart decision is to clearly rethink operations," says John Fishback, a senior director at the Corporate Executive Board. "Re-think systems."

That means changing branch strategies, and website and smartphone approaches.

"I think you have to rethink and reconstitute the branches," says Bob Hunt, senior research director at CEB TowerGroup.

"I would no longer build a big branch. You have to think about the purpose. We have already seen that at least an equal number of consumers prefer using the PC and the internet to access their bank as person-to-person branch interactions, and the number keeps rising every year.

"Now we have a whole generation of people who are using their smart phone to access information and pay bills whenever they feel like it. That says we're getting into a generation of people who really don't see much value in the branch."

All of this comes at a time that banks can least afford the tumult.

"The thing that we didn't talk about, because everyone here knew it, is there is balance sheet pressure," Fishback said, referring to the conference. "There is a lot of supply chasing very little demand, so when you look at the small business and middle market there aren't a lot of companies that are" lending.