U.S. Bank is rapidly adding new mobile banking services to meet the needs of young consumers who have high expectations, says Niti Badarinath.
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U.S. Bancorp's Plans to Remove Friction from Mobile Banking

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U.S. Bancorp, which last month became the first large U.S. bank to offer mobile photo bill pay, hopes that letting people pay their bills with a tap of a smartphone camera will enable it to do three things.

"One is to take away some of the friction," says Niti Badarinath, senior vice president and head of mobile banking and strategy at the $354 billion-asset Minneapolis bank. Over the next few quarters, the bank plans to further use imaging to save customers having to type their own details into their mobile banking app. "We want to take away some of the more tedious manual data entry," he says.

The second goal is to acquire new customers. "Getting people to become active users of bill pay is key to our digital strategy, because we recognize the value and stickiness of the relationship when people pay bills" digitally, he says. The new feature makes it easier for customers to switch their bill-pay relationships to U.S. Bank; the first phase of the bank's mobile photo bill-pay rollout was focused on adding new billers. The next phase, which will begin in a few weeks, is the ability to take a picture of an existing online biller's payment coupon.

The bank's third goal for mobile photo bill pay is to make it easier for people to pay bills in 30 days. "Industry data tells us that there are people paying 7-13 bills a month through their primary banking relationship," Badarinath says. "We're going to make it easy for them every month to take a picture and pay a bill."

In the three weeks U.S. Bank has offered the service, it's seen rapid adoption of customers adding new billers, he says. The bank is not marketing the service beyond giving press interviews.

The technical challenge of image-processing an invoice is greater than that of a check, Badarinath observes. "Checks come in a very standard shape and size, the information is always on the same place on the check, you know where the amount and the payee is, and it's easy to build the recognition software for your phone and camera," he says. However, in spite f the challenges, the bank's internal testing has shown that its software recognizes 90% of bills within seconds. "I'm sure there are some tiny stores where they have a unique format for a payment coupon that may not be recognized, but we're confident that we got most of them and we're going to get all of them at some point," he says.

Customers do occasionally have trouble taking a picture of their bill, there's often an imperceptible shake in the phone as the customer taps the camera button, that can cause a blurry image or one that's not within the frame. After three attempts, U.S. Bank's app rejects the check and requires the customer to enter the information manually.

To solve this problem, the bank plans to soon upgrade to image capture technology from Mitek that lets the customer hover his phone over the check or the payment coupon while it continuously takes pictures like a video camera. When it finds the right image, that image is taken and posted. USAA is testing a similar process using the video camera on the customer's phone.

U.S. Bank has had remote check deposit for two years now, and Badarinath reports a 97% image capture success rate. The bank is one of the very few to charge a fee, 50 cents per check, for this service.

Adoption is strong, according to Badarinath. As of the end of February, 60% of the total deposits coming into the bank through imaging (including small businesses' use of desktop scanners) were coming through mobile phones.

To ensure the security of its mobile imaging offerings, U.S. Bank's back-office provider, FIS, analyzes transaction data and puts it through several security and KYC filters before the funds are fully available to customers.

The bigger security question with remote deposit capture is that theoretically, you could deposit the same check in different banks and maintain possession of the paper check, Badarinath points out. However, "The fraud rate of remote deposit has been miniscule for us," he says.

U.S. Bank is turning its attention next to the emerging and growing segment of customers who are mobile-only. Many millennials don't have a desktop computer, they have a tablet or a smartphone. "They're starting to expect an experience optimized for their device," Badarinath says.

For this set, the bank is developing location-aware services such as fraud alerts and marketing offers. Further smartphone camera imaging features are also planned. "What if I can take a picture of a credit card and initiate a card balance transfer?" Badarinath says. (Mitek already has such a service.) "We're currently prototyping this at the bank and figuring out how quickly we can get it to the customer."

The bank is also working to create a friction-free mobile account opening process and a video chat feature — two technologies we'll see from other large banks later this year, as the competition for customers continues to play out on four- and five-inch screens.

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