US-based Umpqua Bank is partnering with several financial institutions in other countries to develop a human-friendly approach to digital banking. The first offering from Umpqua’s Pivotus Ventures development team is a service enabling customers to enjoy digital access to dedicated real-life advisors. Robin Arnfield reports.
Umpqua Bank – pronounced “ump” as in “umpire”, and “qua” as in “aqua” – was founded in 1953 in a small town beside the South Umpqua River in Oregon. Headquartered in Portland, Oregon, the community bank has a long history of innovation, and originated the concept of bank branches as “stores.”
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By GlobalData“We realised over 20 years ago that we needed to do something different to compete with the larger banks,” says Umpqua President and CEO Cort O’Haver. “We saw that people treated bank branches like post offices, somewhere you didn’t want to go to unless you had to.
“So we created a retail environment in our stores where you would want to go in to do business and meet other people. Of course, a lot of other banks have copied this concept. But we’re still known for our unique human face-to-face experience in our branches”
Innovations
Umpqua opened an Innovation Lab 10 in 2007 in one of its Portland stores to showcase technologies to improve the customer experience.
Umpqua has opened up its 300 stores across the American West to local communities as a space where customers, local businesses and organisations, and community members can host events such as business meetings, children’s parties, and book clubs.
Another Umpqua innovation was the development of the Universal Associate. “In lieu of a teller and a team of more specialized bankers, we created the Universal Associate, an empowered expert who can handle most customer concerns on the spot, no hand-off required,” Umpqua says on its website.
“Umpqua receives visits from banks from all over the world, who want to see its branches,” a spokesperson says. “In fact, we had to start charging as we get so many visits.”
Pivotus Ventures
In 2015, Umpqua launched Pivotus Ventures to develop and commercialise technologies that emphasise the human aspect of digital banking for Umpqua and its FI partners.
Umpqua and Pivotus deliberately chose like-minded FIs as partners which share Umpqua’s focus on customer service and the human touch. While the partner FIs don’t hold equity in Pivotus, they do contribute funding to its development program.
In 2016, Umpqua and Pivotus signed a technology development agreement with their first partner, the UK’s Nationwide Building Society. This was followed in August 2017 by agreements with Netherlands-based De Volksbank and with CUA, Australia’s largest credit union.
“We’re planning to sign up one additional financial institution partner for Pivotus,” says Ray Davis, a veteran banker who is former President and CEO of Umpqua and now CEO of Pivotus and Executive Chair of Umpqua.
“We chose the name ‘Pivotus’ because we decided we need to pivot the bank from branch-based transactions and operations to more of a digital-based bank that still has the human touch. Our view is that customers should always be able to talk to our staff any time they want to.”
“Pivotus’s value proposition to Umpqua and its collaborator FIs is that it will generate top-line non-interest income revenue for these FIs, drive efficiencies dramatically in the way we do our business, and take the customer experience up to the highest level possible,” says Davis.
“Pivotus has assembled an excellent development team,” says Marc DeCastro, Research Director at IDC Financial Insights.
Steve Götz, Pivotus’ COO, has a background in technology incubation as a venture capitalist and is a former Technology Director at AT&T Labs, while Chief Data Scientist Dr Andrew Eichenbaum has worked with organizations including Orange, Intel, and Intuit.
“Best financial friend”
The first technology to be developed by Pivotus provides FIs’ customers with digital access to a dedicated real-life bank employee, a “best financial friend (BFF),” targeted for rollout in 2018.
“We’re currently piloting BFF in the greater Portland, Oregon market,” says Umpqua’s O’Haver. “The term ‘best financial friend’ is the term we are using for the pilot, but this term may change. The BFF can do anything that tellers in branches can do, such as transferring funds or paying bills.
“We realised some years ago that, with the move to digital banking, we needed to make our unique personal and human experience a digital experience. When you sign up for a BFF, you select from a list of possible BFFs and you see a button on your app with your BFF’s picture.”
Currently, Umpqua’s BFF pilot is only available for Apple iOS devices. Nationwide Building Society is in an early-stage pilot of BFF, a Nationwide spokesperson told RBI.
“The concept of video banking – the banker in your pocket – is really interesting,” says IDC’s DeCastro.
O’Haver says that the purpose of the BFF pilot is to discover how customers want to use the application. “Ultimately, we want to use data analytics with BFF so that, for example, an associate could say to a customer – ‘I see you regularly make mortgage payments to Bank X, but we could offer you a better mortgage rate.’”
“Pivotus will be commercialising the BFF technology in early 2018 to financial institutions around the world,” says Davis.
NextGen
Umpqua has a modernisation program called Umpqua NextGen, which O’Haver said in a Q2 2017 earnings call “represents an evolution of Umpqua Bank, not a change to its core strategy.”
“Our BFF technology is a key element in NextGen,” O’Haver tells RBI.
NextGen’s goal is to increase Umpqua’s return on average tangible common equity to 13-15% by 2020, O’Haver said in the earnings call.
Following a series of bank acquisitions, Umpqua completed a core IT systems upgrade two years ago, and all its systems are now on a single platform
Model bank for innovation
“Umpqua has always been a model bank for innovations,” says Celent analyst Stephen Greer. “For example, its CEO allows any bank customer to call him directly from within an Umpqua branch. Historically, it has been very consistently focused on branch enhancements. Umpqua employs a flat organizational structure which has been really successful in fostering innovation and creating its concept of ‘universal bankers’ in the branch.”
“Since the launch of its Innovation Lab, 10 years ago, Umpqua has been the role model for successful retail banking in the community,” says international retail banking consultant David Cavell. “Its combination of service standards, community outreach and innovative use of technology provides an industry showcase for the valuable role the branch can play within an omnichannel delivery model. Importantly, this has worked for the benefit of both Umpqua’s customers and its shareholders.”
Umpqua’s innovations include:
- App Walls: These large-format interactive touchscreens in Umpqua locations feature bank products and services as well as a collection of in-house and curated mobile apps;
- The President’s Phone: all Umpqua stores include a phone that connects directly to the CEO’s desk;
- Local Spotlight: Umpqua showcases and sells products from local companies, and returns all proceeds directly to those small businesses.
