Mitek Siezes an App Opportunity: Enabling Your iPhone, BlackBerry, or Android Phone to Scan and Deposit Your Checks
San Diego’s Mitek Systems, the developer of optical character recognition and intelligent pattern recognition technologies that processes 10 billion checks a year, might have created a new opportunity in the emerging market for mobile check processing. Today, the U.S. Patent and Trademark Office granted Mitek a utility patent for “systems for mobile image capture and processing of checks.”
A spokesman for the company, Jim Byrnes, tells me the patent covers Mitek technology that enables mobile users with camera-equipped smartphones, including the iPhone, BlackBerry, Android, and Windows Mobile, to use a picture of a check (front and back) to make check deposits. Byrnes says the patent issued today is Mitek’s seventh U.S. patent in image analytics and related fields; the company has five other patent applications pending.
Mitek Systems (OTCBB: MITK) CEO Jim DeBello, who joined the company about five years ago, was out of the country and unavailable for comment today. He outlined the company’s strategy for me earlier this year, though, saying Mitek’s “aha! moment” occurred two years ago—Use Mitek’s longstanding expertise in character recognition to “pivot” on the growth of smart phones. “We’re turning the camera on the smart phone into a virtual check scanner in your hand,” DeBello said. “What it’s meant for Mitek is essentially a transformation of skill sets.”
It’s an intriguing strategy and a compelling investor story. The question is whether Mitek can really pull it off. (Yesterday, the company posted a loss of $647,000, or 4 cents a diluted share, on revenue of $822,000 for the third quarter that ended June 30.)
Even though bookings were down in the third quarter, DeBello said in the company’s earnings report that Mitek has established itself as the “gold standard for mobile remote deposit capture of checks.” He also notes the company has signed five new distribution agreements for its mobile deposit technology with Wausau Financial, FIS, Skyline’s DirectFed, Secure Payment Systems, and Bluepoint Solutions.
So mobile check scanning could add a new dimension to Mitek’s business, but how much? DeBello told me it represents a bigger business opportunity than Mitek’s existing check processing business. Still, in our conversation earlier this year, he acknowledged that while some 30 million checks are processed each year in the United States (more than anywhere else), it is not a growing market, especially with the availability of other payment types (such as debit and credit cards). Rival technologies for mobile retail transactions also are emerging from companies like San Diego’s Transaction Wireless and Qualcomm’s Firethorn subsidiary.
Mitek has been operating mostly under the radar in San Diego for 20 years or more. The company initially was founded to develop Tempest, a Cold War security software technology designed to prevent Soviet electronic surveillance units from eavesdropping on sensitive U.S. computer communications. As the need for such technology waned in the 1990s, Mitek acquired its optical character recognition and related technologies from HNC Software, a San Diego pioneer in software analytics.
DeBello calls it a “tenacious company,” and he sees a less-frequent, but broader use of mobile check scanning in both consumer and business markets as part of a huge emerging opportunity in mobile banking. It’s an initiative we’ll continue to monitor.
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