Umpqua Sells Digital Banking Innovation Unit to Fintech

In a first of its kind transaction, a fintech company is purchasing an innovation unit from a traditional financial institution. In an exclusive interview at Money 2020, The Financial Brand probed how this landmark agreement between two very progressive organizations came about, and how they may continue to work together going forward.

It is not uncommon to hear about a traditional financial institution making an investment in, or purchasing the assets of, a fintech start-up. But, when an established fintech organization decides to purchase the innovation subsidiary of a traditional financial institution … that’s a breakthrough. It also illustrates the potential for a smaller financial institution to make an innovation impact in an industry usually dominated by larger banking players.

The agreement will enable Kony, Inc. to purchase the assets of Pivotus Ventures, the innovation subsidiary of Umpqua Bank expanding the capabilities of its Kony DBX portfolio of digital banking applications. The Pivotus unit of Umpqua is probably best known for its Engage platform, where a customer can select a dedicated personal financial expert to engage with through chat capabilities.

I had a chance to sit down with Rilla Delorier, EVP and Chief Strategy Officer of Umpqua Bank and Jeffery Kendall, SVP and GM of Kony DBX at Money 2020 to discuss this exciting announcement. Here is part of that interview.

What is Pivotus Ventures, Engage and Go-To Banking?

Rilla Delorier: About three years ago, our CEO, Ray Davis wanted to figure out a way to innovate around how to bring our customer service obsession into the digital space. So we started Pivotus Ventures to come up with new and innovative ways to take Umpqua customer service into new channels.

One of these innovations, Engage, is a chat-based opportunity for all customers to have a dedicated banker that they can select based on their criteria, and that banker is there for them in a one-on-one relationship, but through chat. This one-on-one chat solution is able to give consumers access to a human who can help guide them through critical money issues, instead of standing in a store or waiting online at a call center.

From Kony’s Perspective, What Was Interesting About Pivotus?

Jeffery Kendall: We’ve made a name for ourselves developing engaging experiences, using digital tools for banks and credit unions for several years. But most of that innovation was focused around transactions. With the Pivotus Engage solution, we saw a very natural fit as to how we could extend our digital portfolio to bring people closer to the bank and to the credit union through human engagement.

Why Did Umpqua Want to Sell Pivotus to Kony?

Rilla Delorier: We wanted to find a home for Engage where it can go and continue to accelerate on the product roadmap, where we can benefit from that, but we can also turn our attention to other elements of our customer experience journey. So our strategy was to partner with Kony on Engage, but also to look at several other strategic partnerships that we can add to what it is that we’re delivering to customers. And the piece we are gonna weave together is how that all combines and shows up for our customers.

What Are Kony’s Future Plans for Pivotus Engage?

Jeffery Kendall: There’s a huge value in this partnership, and something that we see as the foundation of continued innovation and partnership together. Rather than say, “Hey, this is an acquisition and now we’re going to take full responsibility and leave Umpqua behind,” we believe they’re a key component of driving this solution forward in the future. We can bring some R&D and engineering talent and scale that may be hard for banks to have and invest in, and can build on the foundation of greatness that was there.

Read More: Umpqua Bank’s New ‘Human+Digital’ Strategy: A Banker In Every Pocket

How Was a Successful Innovation Unit Built at Umpqua in Only 3 Years?

Rilla Delorier: It’s interesting, because banks are built to be risk-averse. So doing an innovation lab where, by nature, you’re gonna fail, is a difficult thing for banks to do. So, Pivotus Ventures was set up as a separate organization, in Menlo Park, away from the mother ship of the bank, so that it could operate pretty independently and try some new things.

The fact that something worked to this level within three years, and is enterprise-ready for rollout, is pretty extraordinary. A lot of that goes to the willingness to let it run on its own, let it run very quickly and nimbly, test some things and fail fast, and then lean all the way in when they found something that was working with customers.

Speed has been miraculous here. And coming from a large bank, I can see the difference in the ability to move quickly, with very few decision-makers who can decide quickly, keep moving, look at the right data, use that information to continue on, and the result of that is a really good success in a short period of time.

How Important Was Having an Innovation Culture at Umpqua?

Rilla Delorier: First of all, our board is very innovative, our leadership team is very innovative. You have to continue to perform well as a bank, but we also had to invest in a very thoughtful and focused way around transformation. And that’s what Pivotus has been. And the culture also helped set the direction for what we were innovating for, in service of our mission, which is personalized banking for all, any time, anywhere. So that helped to focus Pivotus’ efforts on bringing that mission to life.

Why Did Kony Decide to Partner With a Smaller Organization?

Jeffery Kendall: I think it ties back to the culture that Rilla just mentioned, which is, there’s an affinity for speed and flexibility in the Pivotus brand and what was built. And that ties very nicely into the Kony DBX culture, which is all about moving forward at a faster pace than normal, and helping bring along our customers on that journey. So there’s a nice tie-in together, because we both believe that that’s key to succeeding in this market.

The other component is, there was a really nice fit in the fact that Umpqua really does use their size to their advantage. Every day I talk to banks, and people are worried about the larger banks and the budgets of the larger banks, and sort of the innovation that they can do on the digital side. This is an inspiration to other financial institutions, to say “Look, it’s not about how much you spend, it’s about the partners you select. It’s about the culture and the sort of perspective that you bring to the table.”

How Important Is Personalized Chat in the Future?

Rilla Delorier: We talk so much as an industry about personalization, and at Umpqua our strategy is “human digital.” It’s about personalizing by actually putting a human in the conversation with the customer. The question is, how can you scale that? And that’s what’s beautiful about Engage. It’s a digital way to connect with a human. So personalization by having a person in the conversation … it’s a novel concept.

Jeffery Kendall: The Engage application fits nicely as one of those additional applications that can be deployed either stand-alone or threaded within other digital banking experiences. It’s about presenting that opportunity to engage with a real human while you’re in the process of applying for a loan, or coming on board with a new account, or simply asking a question about a transaction. If you create those opportunities for a human touchpoint, that really becomes the strength of tying all those digital experiences together, and we think that’s gonna be a unique advantage for us.

Is Umpqua Selling a Competitive Advantage?

Rilla Delorier: No. The competitive advantage at Umpqua is our culture. It is our strategy and our commitment to customer service through a combination of human and digital. And channels are just ways for banks to interact with their customers, but how they interact is a depiction of their culture, of who they are and what they do to serve their customers. And I think that’s our differentiator that will show up through all of our channels, and will continue to do that as more and more channels get introduced to the market.

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