U.S. Bank in Minneapolis has chosen to become the first large U.S. bank to offer mobile bill payment in the manner of mobile check deposit - letting users pay a bill by simply taking a picture of it with the camera on their smartphone or tablet.

The feature will be included in new mobile apps U.S. Bank expects to launch in early 2013. The bank is currently integrating Mitek's photo bill pay process into its CheckFree bill pay workflow; developers are also testing Mitek's technology and the integrated solution.

This deal is a coup for Mitek, which has 564 banks signed up for its mobile check deposit technology, including the top 10 U.S. banks and the Walmart/American Express Bluebird account, but has also been embroiled in a legal dispute with USAA over its mobile check deposit technology.

"Mobile photo bill pay is the next big imaging solution to be launched," says Jim DeBello, CEO of Mitek. "This could be bigger than mobile check deposit." The potential market is not only existing online bankers but those who are not using online payments and have smartphones. "We think the market could reach 50 million Americans, and that's why we're so excited about this. This is the next big thing," DeBello says. He notes that there are more than 100 million smartphones in the U.S., 600 million worldwide, and that number keeps growing.

Chris Peper, vice president of mobile channel at $352 billion-assets U.S. Bank, calls this "the next step in this imaging innovation journey." The bank was one of the first to pilot NFC technology, mobile check deposit, and mobile P2P.

"We've seen the customer enthusiasm for mobile check capture and want to provide that same level of convenience to bill payment," Peper says. "What we hear from customers is that one of the biggest barriers to the adoption of bill pay is taking the time to do all that data entry, manually inputting the addresses and entering the payment info. It's easy to do transpositions and other typing errors, especially on a mobile device. This puts a very positive, exciting user experience in front of what was a barrier to using the service. We're excited to bring that new perspective to it and we do feel it's an opportunity for us to differentiate in the market."

Turning a paper invoice into an accurate stream of text for a bank's payment processing systems is harder than it may sound. Unlike checks, where each data element (payor, payee, amount due, date) is in a predictable spot and is therefore relatively easily to translate from image to ASCII text, invoices have no standard template. Information is all over the place and can be printed or in block or script handwriting. According to DeBello, Mitek used hundreds of thousands of bills to train its system to read invoices.

"The magic in the algorithms we've created and our sophisticated technology on the back-end, is to enable the camera to think like a brain and to be able to dynamically read those bills," he says.

In U.S. Bank's technology testing, "People have been working really hard to try and find the gaps in service," Peper says. "It's a pretty solid implementation. We tried hard to break it and have not found many opportunities to do that yet."

Making the app easy to use is critical, DeBello says. "What we've discovered in focus groups on bill pay and learnings from mobile deposit is that the experience has to be completely delightful and easy for the consumer, meaning they take one snap and the technology takes over. It corrects the image, preprocesses it, compresses it, encrypts it and extracts the data." The user simply verifies the information and selects when they want to pay the bill and the amount they want to pay.

U.S. Bank will provide tech support for the new app. "We'll provide the first level of user support and if there are technical issues on the back side, our folks will reach out and engage the Mitek developers and customer support people," Peper says. "But U.S. Bank wants to be there all the way from the first interaction with the app, and provide feedback and hints to the customer that they can take action on." That's been a key lesson from providing mobile deposit, Peper says - customer satisfaction is partly hinged on how well the bank helps customers deal with problems and error messages. "We plan to bake those learnings into the customer experience for photo bill pay," he says.

Peper declined to say whether or not the bank plans to charge for the new service. The bank is one of the few to charge a fee, 50 cents, for mobile check deposit. Other banks have expressed interest in using mobile photo bill pay as a way to raise revenue. "Those conversations are always ongoing," Peper says. "U.S. Bank has taken a position with photo bill pay that there's value to the bank there, but there's also value to the customer because of the things they don't have to do when they use mobile deposit."

That said, the bank mainly sees the new product as a competitive differentiator, hence the need to be first. It's also viewed as support for the bank's online bill pay product. "This is the killer app for bill pay in the mobile space," Peper says. "We hope we can bring new people who are mobile users but maybe haven't tried bill pay yet into the fold."

Among the 25 largest banks, 92% offer some kind of mobile bill payment and 48% offer mobile check deposit. In a report released in February, AlixPartners forecast that mobile photo bill pay adoption could reach 33% among adult U.S. consumers by 2018 and result in 1.4 billion bills migrating to the mobile payment channel.

A community bank, $4.3 billion Abilene, Texas-based First Financial Bankshares, announced in November that it's offering mobile photo bill payment based on Picture Pay software from Malauzai Software. The product was developed with Fort Wayne, Ind.-based Allied Payment Network and works the same way Mitek's does.

"As we see more of our customers bypassing the online channel in favor of the mobile channel, mobile payment capabilities become increasingly important," said Gary L. Webb, executive vice president of First Financial Bankshares, in a statement. "Our customers expect intuitive and quick transaction capabilities through our SmartApp mobile banking solution, and traditional bill pay can require upwards of ten steps to complete."




The early adoptors of mobile photo bill pay may have a competitive advantage over the laggards. bottomline BottomLine The early users of mobile photo bill pay may have a competitive advantage over the laggards.