Meet Umpqua, the bank that became No1 by thinking like Starbucks.
When banks start opening ‘stores’ instead of ‘branches’, it’s a sure sign they are ditching 19th-century tradition for 21st-century design. And, in the process, transforming how we bank.
Umpqua Bank, a small local chain in America’s Pacific Northwest, was an unlikely pacesetter for a design-led revolution. But the Oregon company has inspired ‘me too’ rebranding throughout banking.
Founded in 1953 to provide banking to lumberjacks, Umpqua had by 1994 become a trusted, modestly successful chain of six community branches, with assets of £74.3m. When long-time president Ron Culberston retired that year, the board was unsure whether to sell up or appoint fresh blood.
Taking a risk, Umpqua appointed consultant Ray Davis as president, with the remit to introduce wholesale change to create shareholder value. To differentiate Umpqua, Davis focused on making its delivery unique. By conceptualising financial services as products, Davis asked himself: “How do you sell products well?” Answer: by being a service-driven retailer. This meant looking to the likes of Starbucks and Ritz-Carlton, not US Bank, for inspiration.
Umpqua’s vice president of creative strategies, Lani Hayward, puts it simply: “We had to give customers a reason to drive past two or three other banks to get to us.” Umpqua’s ‘store’ concept was born and put into practice in 1995 with a brand new £2.1m bank in Roseburg, a town of 20,000 people that had become the company’s home.
You must have an innovation culture. Lone innovators will die a quick death, especially in banking Lani Hayward, Umpqua
Working with retail consultancy Stern Marketing, Umpqua designed a new space and customer experience. “Our store model created an open invitation for customers to browse displays, have a cup of coffee, read the papers and check their email. We evolved into a community centre as much as a bank,” says Hayward. The self-effacing slogan used to launch the store, ‘Pretty cool for a bank’, was well earned.
‘Universal associates’ replaced tellers and, after training with respected retailers, were given decision-making authority and offered incentives to improve service. “They love working in the stores, and they love seeing how customers respond and use the space,” says Hayward.
After three years the Roseburg store went from third to first in market share, moving over £53m of deposits. A branch near the flagship store thrived and further stores opened in Eugene, Portland and Salem. The Salem store acquired twice the predicted deposits for the entire year in its first 90 days of opening. Umpqua’s innovation was paying off, fuelling rapid growth through mergers and acquisitions.
By 2002, with competitors imitating this approach, renewed effort was required to maintain Umpqua’s innovative lead. A new generation of stores was required. Together with Thompson Vaivoda Architects, Ziba Design designed a breathtaking new store in Portland’s Pearl district, concentrating on comfort to coax customers into staying longer and taking action on their finances. Never had a bank looked more like a plush hotel lobby.
To encourage users to get the most out of banking, large displays ‘productise’ their services, signs tell customers to ‘sip’, ‘read’, ‘surf’ or ‘bank’ and floor-to-ceiling windows entice passers-by to investigate. The next generation store opens in the evenings for book clubs, poetry readings and movie nights.
When it opened in March 2003, the Pearl store attracted £1.3m in deposits in its first month. Within nine months this figure had soared to £15.9m – doubling expectations. By the end of 2004, Umpqua had 65 stores and assets totalling £1.6bn – a far cry from the humble chain Ray Davis took charge of just ten years earlier.
With 127 stores, Umpqua’s risk-taking has paid off. Hayward says: “Without creativity we wouldn’t be where we are today. Creativity drives vision and fuels implementation. Never settle, even when you’re doing great – go so far as to seek out criticism. You must have a culture that thrives around innovation. One or two innovative thinkers will die a quick death – particularly in banking.”
For Umpqua, the next challenge, says Hayward, is to “apply a Starbucks strategy to banking. Multiple stores in close proximity, smaller in size, embedded in the neighbourhood next to the favourite grocery store. All built from permit to opening in 48 days, and all with the Umpqua allure.”
Integrating design thinking into its business has driven Umpqua’s growth. The bank’s greatest asset is its innovative culture but, says Davis, “Without the design, it wouldn’t work.”
Article first published in Design Council Magazine, Issue 1, Winter 2006