Umpqua Bank in Portland, Ore., has developed and is piloting software that will allow the “universal bankers” in its branches to also act as personal bankers on digital channels.

In doing so, the $25 billion-asset Umpqua is trying to solve at once multiple problems that all bankers face: What do you do with branches that get little traffic but that customers nevertheless like to have around? How do you make the best use of branch employees’ downtime? And how do you provide a personal touch over digital channels?

“Twenty-plus years ago, we started looking at how could we differentiate ourselves in our approach to banking,” explained Eve Callahan, executive vice president of Umpqua.

In earlier eras, standing out involved high-end branches or “community hubs” that provided internet cafés, free coffee and cookies, and Wii bowling.

Now the branches will be redesigned to help branch staff multitask on digital channels while helping walk-in customers.

Private banker for everyone

“We were and are focused on customer experience and a customer-centric operating approach, a store model and a universal associate model that breaks down the barriers around finance and money and makes banking enjoyable and approachable,” Callahan said.

In other words, the bank wants to keep its branch staffers in the loop, even on digital channels.

“A lot of the market, as it embraces digital — and we all have to embrace digital — is looking toward automation efficiency, taking the human out of the loop,” said Oren Goldschmidt, president of Pivotus Ventures, Umpqua’s innovation arm, which developed the new Engage software.

Oren Goldschmidt, president of Umpqua’s innovation arm, Pivotus Ventures.
People first
“Artificial intelligence and machine learning are great, but they need to empower people rather than stand in place of people,” says Oren Goldschmidt, president of Umpqua’s innovation arm, Pivotus Ventures.

Goldschmidt compared Engage favorably with bots like Bank of America’s erica.

“Having erica be your main means to manage a relationship is like a bank executive sending an executive assistant out to have a meeting with a premier customer and then executing on the outcome of that meeting,” Goldschmidt said. “You might get the main business, but you've closed off five avenues of conversation that could lead to more business. So our view is, artificial intelligence and machine learning are great, but they need to empower people rather than stand in place of people.”

Callahan said Engage will “scale people so they can do what people do uniquely well, which is build relationships and have conversations,” she said. The software will help agents better understand their customers and spot opportunities. It will guide their workloads, prioritize conversations and text chats, help navigate conversations, and provide context.

“Those are all things that machine learning is already great at doing,” Goldschmidt said. “Having conversations is something AI will be great at doing in seven years' time.”

Each customer will be able to pick a personal banker with whom he or she interacts on all channels.

“It's kind of democratizing private banking,” Callahan said. “You have your own personal banker, and technology is enabling that relationship.”

If certain staff members become so popular that they hit capacity, they will be removed from customers’ list of choices.

Though human labor is expensive, especially compared with mobile and online transactions, the hope is that Engage will make customer service agents more efficient.

“With chat, the channel is asynchronous, which means I as a customer am perfectly happy sending a message and waiting 15 minutes to get a reply,” Goldschmidt said. “So that shift lets you scale. Then layer on top of that artificial intelligence and machine learning, and you can turn agents into super agents who can maintain, manage, explore and deepen relationships with many customers.”

Early results

Umpqua has been testing the Engage software for five months and will expand the pilot in October, Callahan said. Soon it will be rolled out in three branches in the Portland market.

“We are looking at the pilot as an opportunity to dig in and understand what resonates with customers in this approach,” she said. “And also, how are we going to change our operational approach to support it.”

One thing the bank has learned is that customers are more interested in the text channel than any other.

“That’s great for us because that helps us scale,” Goldschmidt noted. “But it's convenient for customers as well.”

Another lesson is that customers rarely opt for video chat. “We thought that would be much more used than it is,” Callahan said.

The people who use video are typically checking that they are dealing with an actual human being, just as people used to call Ray Davis (the former CEO of the bank who is now executive chairman of Umpqua Holdings and CEO of Pivotus) on the bank’s famous red phones five or six times a day just to see if he really answered. (He used to. Today Cort O'Haver, the president of Umpqua, answers the red phones.)

The new software is bringing about a rethinking of Umpqua’s branches. With their basic needs being met on digital channels, the customers who still visit branches will have more challenging conversations and complex needs, Callahan said.

“Finances are central to people's lives, yet banks have done a poor job of making it comfortable and approachable to talk about your money,” Callahan said. “It's tough to get trusted advice. One of the things people look to us for is that we are trustworthy. So there's a great opportunity to extend that trust into other parts of the relationship. This platform is giving us a tool to do that.”

Team innovation

Engage is the kind of inventive product Umpqua had in mind when it formed the Pivotus subsidiary in 2015. (Since then it has added Nationwide Building Society in the U.K., De Volksbank in the Netherlands and Australian credit union CUA as partners.)

Banks often struggle to innovate due to inflexible legacy systems, bureaucratic cultures and regulatory compliance constraints. Callahan adds another cause: Most banks focus on managing risk. “That's what the business model supports, and that's how we make money,” Callahan said. “That requires risk aversion, whereas innovation is all about taking risk.”

Two years ago, Umpqua’s board asked its management team how it planned to keep the Umpqua brand relevant and preserve its market position in a mobile-first world.

“That's where we came up with the idea of a separate subsidiary focused on innovation and disrupting the operating approach through technology,” Callahan said.

The Pivotus partners are collaborating on the future of customer experience, how to scale customer experience using technology, and what it takes to transform the operational model of the bank.

“That perspective forces you to look up, rather than looking at today's problems,” Goldschmidt said.

Pivotus is not looking to have other U.S. banks join.

"Collaboration is not infinitely scalable,” Goldschmidt said. “It's a one-team approach. We work together on product, on our vision of the future, and on our operating model, and that works well with a limited set of people.”

However, Pivotus plans to offer Engage to other banks, starting in the first quarter of next year.

Editor at Large Penny Crosman welcomes feedback at penny.crosman@sourcemedia.com.