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Top Banks Get Wise to Using Smart Phones for Check Deposits

MITEK SYSTEMS INC.

CEO: Jim DeBello.

Revenue: $5.1 million in 2010; $3.6 million in 2009.

Net loss: $682,000 in 2010; $1.3 million in 2009.

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No. of local employees: 30.

Headquarters:

Kearny Mesa.

Year founded: 1986.

Stock symbol and exchange: MITK. Over the Counter.

What makes the company innovative: Mitek Systems’ technology allows smart phone users to scan and transmit checks into their banking accounts without a trip to the ATM or the Post Office.

Mitek Systems Inc. wants to end the drudgery of driving to the neighborhood ATM to deposit those irksome paper checks.

San Diego-based Mitek is the leading provider of so-called mobile capture products, one of which allows bank and credit union customers with smart phones to scan and transmit scanned images of checks for deposit into their checking and savings accounts.

President and Chief Executive Officer Jim DeBello, a San Diego native, notes that his business is a leader in high-speed check processing for the banking industry. He says the addition of mobile check deposit capabilities to his product line will help boost the mobile banking sector.

“We are a leader in capturing financial documents using a smart phone camera,” he said. “That’s our invention, and our innovation is treating the camera as a keyboard. We’re bridging the physical world with the digital world.”

Three of the top 10 largest retail banks in the U.S. use Mitek’s technology, including JPMorgan Chase & Co.’s retail arm. Chase just signed on in February, the largest big bank to do so to date.

The other top 10 banks plan to do so, including the retail banking arm of Bank of America Corp., which says it will introduce the service in 2012.

Cutting Paper Chase for Customers

And dozens of smaller banks and credit unions are adopting the technology, too, given the convenience that the system offers customers, especially the Generation Y crowd.

In 2010, using Mitek technology, midtier bank United Services Automobile Association, or USAA, processed 4 million checks valued at $4 billion from mobile banking customers, according to DeBello.

“Retail banking is so competitive these days that banks and credit unions see mobile check deposit as a must-have differentiator, leaving those who don’t yet have comparable apps scrambling to catch up,” DeBello said. 

Online payment system PayPal is a user of the service.

Mitek’s technology is sold to third-party industrial-strength application providers, who, in turn, market the technology to financial institutions as part of their offering.

According to Deloitte Consulting, mobile banking will surpass online banking in just a few more years because of the savings it offers the industry.

Mobile Capture Brings Savings

Deloitte said a bank with 100 branches and 250 automated teller machines could save $5 million annually by adding mobile capture products to its mix of customer offerings.

A mobile transaction costs 10 times less than an ATM transaction.

Mitek also has developed technology to pay bills, as well as send faxes or other documents from smart phones.

Customers merely take a picture of the paper bill, and the software scans the amount and other information and makes the payment.

“The massive proliferation of the cell phone — the most connected device ever used — is in the palm of your hands,” he said, adding, “Every one of those devices has a camera, and we’re turning the camera into a virtual scanner in your pocket.”

The software uses algorithms to read the text and numbers from forms and translates that into data that can be processed by financial institutions.

System Proliferates

Meanwhile, mobile check depositing is starting to attract a lot of attention.

One source says mobile payments will grow close to 70 percent annually during the next five years.

Mitek has established partnerships with leading mobile banking application service providers, including mFoundry Inc., ClairMail, Kony Solutions Inc. and Monitise Americas LLC.

Shares in the Mitek, traded on the OTC Bulletin Board under the symbol MITK, reached at 52-week low of 60 cents and a 52-week high of $6.75. The stock closed at $5.35 per share on April 8.

Mark Schwanhausser, a senior analyst with market research firm Javelin Strategy & Research in Pleasanton, says Chase’s recent decision to offer mobile check deposit to its customers will help attract more consumers to the technology.

“Consumers have had two reasons to resist (the technology),” he said. “One, they don’t get it, and two, they don’t think it’s safe.”

He said when viewers see a recent Chase television commercial promoting mobile check deposits, “it helps that light bulb go on.”

“They get it,” he said.

Meanwhile, DeBello says 15 million customers are using mobile banking, mostly to check account balances and to conduct limited transactions. But that number will explode as consumers begin to adapt to mobile depositing and mobile bill pay from their phones.

“Our goal is to own the capability of the camera on a smart phone, and make it practical, too,” said DeBello. “We see habits changing, and we think our timing is perfect. We want to make this a practical tool at your convenience.”

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