Small and midsize banks lack the innovation budgets of their big bank counterparts, but they might be able to make it up on volume.

Umpqua Holdings Corp. in Portland, Ore., is looking to lead the charge in bringing community banks together to innovate by launching a lab in Silicon Valley. While it announced the lab, known as Pivotus Ventures, on its own, Ray Davis, the company's president and chief executive, hopes other banks will soon join.

"It's very challenging to try and keep up with technology [when] you don't have the resources the largest banks do," Davis said. "Smaller banks typically have to wait to get ahold of the latest technology innovation, and we want to change that."

The $23.1 billion-asset company announced last week the creation of Pivotus to explore the disruption in the industry and keep the bank relevant five to 10 years from now. He said Umpqua will seek to invite other "like-minded" banks to be a part of the work done at Pivotus testing new products and innovation.

By pooling resources, banks like Umpqua and those it will partner with can innovate with greater efficiency than doing so with just internal resources. Of course, that means any technology developed in this fashion won't be proprietary, but it's a trade-off Davis feels is well worth making to take a shot at being on the cutting edge of tech innovation to enhance the customer experience and stave off competition from much bigger banks.

"We are going to be selective in making the choices of institutions we will collaborate with," he added. "But once they are invited, there will be no contracts or agreements [that Umpqua gets to use the innovations first]. Whatever we develop out of this is as much theirs as it is Umpqua's."

It's been a trend in recent years for banks to create internal "innovation labs," including a select group of community banks. But Pivotus' plan to work with other banks distinguishes it from Eastern Labs, an innovation center created by Boston-based Eastern Bank, and C1 Labs, a technology innovation group within St. Petersburg, Fla.-based C1 Financial. (Bank of the Ozarks announced last month that it had agreed to acquire C1.)

Observers say that, while the idea of creating a multibank lab is great, assembling one may prove difficult.

"Bank innovators and technologists definitely like to be around each other, but bankers are not always naturally collaborative," says JP Nicols, president and chief operating officer of Innosect, an innovation enablement and analytics company. He is also a co-founder of the Bank Innovators Council, a global organization that promotes bank innovation. "I certainly applaud the effort and hope they achieve this because there is so much duplication in the products and processes that it makes sense to work together."

The more than 30 global banks that have come together to back blockchain venture R3 CEV is perhaps a sign that the industry is starting to embrace collaboration, Nicols said.

Davis said there has been some informal talks with prospective partner banks, but none have been formally invited yet. However, he expects that formal partnerships will be announced in the first quarter of next year and work will begin on developing new products. Davis added that Umpqua won't just look at U.S. banks to partner with, but to European and Asian institutions as well.

Umpqua's strategy of collaboration is interesting given the industry trend toward internal innovation labs, said Peter Wannemacher, a senior analyst with Forrester Research.

Many banks have a "desire to just incubate inside their own organization, but Umpqua is pursuing a model of open innovation."

It's still too early to predict how successful Pivotus will be, but Umpqua's track record of innovation gives it the benefit of the doubt, Wannemacher said.

"Umpqua is an institution – like a USAA – that has shown it not only talks the talk, but walks the walk," he said.

USAA is considered a leader in its digital offerings, while much of Umpqua's noteworthy innovation has been around transforming its branches. Some of its "flagship" branches have an app wall with a large touchscreen. Meanwhile, associates are armed with iPads to assist customers with transactions. Umpqua also noteworthy for its marketing programs like hosting yoga classes and book readings. The bank also launched a podcast about money in September.

In addition to bringing on fellow bank collaborators, Pivotus will also look to recruit technologists in areas such as data analytics and user design from outside the financial services industry. For that reason, Pivotus will be based in the heart of Silicon Valley, in a 4,400-square-foot building in Menlo Park, Calif.

According to a local report, the decision to place Pivotus in Silicon Valley was criticized by the founder of a Portland tech startup collaborative, who felt the bank should have focused on Portland.

But Davis said that in order to attract the top tech talent, it was necessary for Pivotus to be located in Silicon Valley. He also added that the bank's technology operations largely remain in Portland.

"We've already been able to attract people that are with some very large technology companies," he added.

Wannemacher praised Umpqua's decision to locate Pivotus in Silicon Valley and immerse itself in the culture there.

"It's fine and dandy to just visit Silicon Valley every few years and try and mimic ideas from there, but it's even better to be there and really pursue innovation," he added.

Robert Barba contributed to this article