Our Opinions: 'Interactions not transactions'


We're not knocking our local, home-grown banks, as they have been part of the fabric of the community for a long time and know their customers well.

However, they, and all banks in general, could learn a thing or two from a Portland, Ore., -based bank.

But first, some basic facts about Umpqua -- it has 364 branches spread across Washington, Oregon, California, Nevada and Idaho, and it intends to add more; its return on equity is 14 percent, far above the average; it has $12 billion in assets and $9.5 billion in deposits and ranks among the largest 60 banks nationwide; the parent company, Umpqua Holdings, is publicly traded; in the second quarter of this year, it generated a 0.92 percent return on assets while the median for all banks was 0.85 percent; and its loan growth in the second quarter was 7.2 percent versus a 5.7 percent median for all banks.

"This sort of expansion runs contrary to accepted wisdom, which holds that cheap competition from internet banking is killing off the physical sort," notes The Economist. "To the extent that branches still make economic sense, runs the general view, it is in clumps (for efficient marketing), filled with aggressive salespeople pushing ancillary products. Perhaps as a result, few customers warm to their local bank branch. Most offer similar products in similarly drab surroundings. Streets crowded with them are dull during the day and dead after 5 p.m. Visiting them is tolerable at best and often tedious, thanks to long queues and tiresome paperwork."

Why is Umpqua thriving while other banks are struggling to remain relevant?

Let's just take a look at its new flagship branch in San Francisco's Financial District, which Kathleen Pender of the San Francisco Chronicle said looks like a cross between an Apple Store, a Starbucks and a W Hotel lobby.

"Upon entering the branch ... visitors are offered free samples from San Francisco's Tcho chocolates, free coffee (a house blend) and free use of the branch's computers and iPads. There is a Muni schedule out front and bike racks inside. If you need to run an errand, you can borrow a bike provided by San Francisco's Public Bikes."

In addition, the bank offers free meeting space for small businesses, nonprofits and community groups, complete with coffee mugs, wineglasses and a big screen for Skyping out-of-towners, noted Pender.

Ah, but that's California, respond many of our astute readers, where that sort of touchy-feely stuff is de rigueur. Slow down on your conclusions we say, because this sort of personal attention is common at all of Umpqua's brances.

"The counter just inside the entrance to the (Portland) branch of Umpqua Bank offers locally made hand cream rather than deposit slips," wrote The Economist. "It has recently been used to peddle pottery, bike components and glasses frames, among other local products; eager local merchants have booked up the stand for the next year and a half. Much of the rest of the branch is put to unusual uses as well, including art exhibitions, yoga classes and ... group knitting. At another branch located near an old-persons' home, the manager hooked up a gaming console to large monitors hanging on the wall to create a popular virtual bowling league."

At Umpqua's 364 branches, tellers hand customers a chocolate with each cash withdrawal and there is a phone that rings in the bank president's office.

If he is at his desk, he answers," notes The Economist. "Typically, he says, the caller just wants to know if the line is genuine."

Does this all sound too good to be true? Well, wait, there's more.

"Instead of sending out junk mail offering consumer loans, Umpqua employees attached small flyers to potted plants and placed them on 1,700 doorsteps in the neighbourhood they were targeting," notes The Economist.

Umpqua started small in the early 1990s, with only six branches. In April, it underwent its biggest expansion when it acquired Sterling, a regional rival. Because of its quirky approach to banking, it is able to pay less interest on deposits and charge a little bit more on loans. But folks don't see to mind this, especially when they walk into their local branch and are greeted by coffee, chocolate, art on the wall, free computers to use and employees who have been trained by Ritz-Carlton.

"Umpqua's success suggests that banking is not merely about hard numbers," notes the Economist.

It's also about yoga classes, Christmas-package decorating and homeowner association meetings, notes Pender. At one branch, she writes, a photographer took dog glamour shots, and there was a line out the door that day.

"Banking is still a relationship business," Bank President Ray Davis told Pender. Customers "Want personal contact, not every day, but when they want it. Some want to be in here for an hour. Some want out in three seconds. We have to meet both needs."

At a recent conference, Lani Hayward, CMO of Umpqua Bank, boiled it all down to four components that have been the most important: Creating a value proposition or brand promise that everyone in an organization can rally around; rates are not always the answer; take risks and challenge the status quo; and align your culture to your brand.

But to get to the heart of their business model, said Hayward, "We build our stores around interactions, not transactions."

In a world that is changing as fast as a fiber optic cable can handle data, it's important for all businesses, and not just banks, to redefine their relationships with their customers. And Windham County businesses, which are under virtual attack from sales-free establishments in New Hampshire and the Internet, have to understand they can offer more than a good product at a reasonable price. They have to take a page from the playbook of Umpqua bank and build relationships with their customers that are long-lasting, respectful and innovative. There is room for creativity in the business world, and as Umpqua has proven, people are willing to pay for it, even if there's a cheaper alternative around the block.


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