The San Diego company is launching its mobile photo bill pay services for the first time with U.S. Bank, enabling millions of customers to snap a photo of a paper bill to quickly add a payee or pay off a bill. The service, which can be used via smartphones and tablets starting early next year, is integrated into U.S. Bank’s mobile app.

How it works

A user snaps a photo of a bill and Mitek’s technology cleans up and corrects the image, isolates and extracts the data, transmits the encrypted information to the bank, and then sends it back to the user, who can confirm the information and decide how much they want to pay. If it’s a bill from a new company, the app will establish them as a new payee. Users just click pay and then the transaction is complete. Or they can set up recurring payments if they choose.

Now, while it might seem everyone you know already pays bills online, there’s still a big opportunity for banks to extend bill pay to mobile phones using a camera. Mitek CEO Jim DeBello told me that there are 17-25 million who pay bills online and another 22 million who don’t pay online but have a smartphone. And there’s also an even larger group of 60 million people who pay some prepaid bills, often traveling to payment centers to pay in person. He said banks have the opportunity to make the paying experience more simple for existing online billing customers and pull in new users who have shied away from online payments.

DeBello thinks that mobile photo bill pay could be bigger than mobile check deposit, which Mitek started rolling out with banking partners two years ago. He said $10 billion in checks have been deposited remotely via mobile devices. Now that consumers are getting used to the idea of using their camera to input data, they will likely be even more comfortable paying off bills with their smartphone or tablet.

“We look at the mobile camera as a next generation keyboard,” said DeBello. “The key is leveraging existing user habits. They’re already using a camera and we’re using that habit for handling pain points in daily financial transactions.”

Advantages for banks and consumers

For banks, mobile photo bill pay allows them to better engage and retain their customers, enjoy some cost savings by handling less paper, and they can also make some money if they choose to offer expedited bill payments for people who wait until the last minute.

For consumers, it’s a way to pay more easily with a device that’s always on and with them. And it can get people over the hump of starting online bill pay because it makes the onboarding process easier. For some people, entering in your payee information is just enough of a barrier to keep them relying on paper checks or other payment options. Also, paying via picture also allows users to have a photo trail of payments in case of a dispute.

Mitek is pretty much the undisputed leader in offering mobile imaging software to banks. It has more than 500 banks using its check deposit service including the top 10 banks. But getting the algorithms to work with bills is harder than scanning checks. The data is largely structured but the bills come in up to 100,000 formats. That puts more pressure on Mitek’s software to identify and pull out the right data. But it’s creating a big opportunity if consumer get on board with mobile photo bill pay. The service will roll out to more banks in 2013.

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Apple becoming a bank is a pretty off-the-wall idea and not likely to become reality any time soon. But the study demonstrates the kind of trust that Apple has built up with its brand. Two-thirds (66 percent) of respondents cited “trust” as their primary reason to consider Apple for banking, and a little over half believed Apple could making banking with them easy to access and manage and reliable. KAE said that Apple would face no capital constraints in building a deposits base, even with its recent dividend and share buyback plan. And with its history of successfully cross-selling products, its potent retail locations and affluent customer base, Apple would be well positioned to become one of the most profitable consumer banks, KAE said.

Lee Powney, chief commercial officer at KAE, said it would be very unlike Apple to delve into banking, but the temptation could be hard to resist. Apple would only move in, said Powney, if it changed the existing rules of competition.

“The strength of Apple’s relationship with consumers is a result of its ability to redefine the terms of competition in an industry and design emotionally rich ‘human’ experiences,” said Powney. “This research tells us Apple customers perceive a fit where at first glance we would assume the brand could not travel. To observe a ‘wrong’ and ‘make right’ is a core characteristic of this business. Apple’s ethos, its way of being and way of doing is instinctively understood by its customers. This makes it a truly dangerous animal to a startling array of sectors.”

Maybe not banking, but how about mobile payments?

Again, Apple, is very disciplined about what areas it moves into and is famous for saying “no” to all kinds of projects. But the numbers indicate an openness from the public for Apple to get into more financial services. Apple may not want to get into banking, which would carry a lot of regulatory burdens, but it could take that trust and build a mobile payments service, something we’ve speculated about.

Apple’s brand is very much tied to computing and services built around that. But increasingly, the bigger game in mobile is turning to payments, which could be worth $670 billion by 2015. That’s a market that everyone from the carriers, banks, credit card companies and a host of start-ups would like to own. Apple already has a strong financial relationship with its consumers via iTunes, which is believed to have more credit cards on file than any other company. Apple has already applied for patents that could lead to an end-to-end system that would include mobile marketing, mobile payments and mobile retailing.

Apple also has a pretty smart customer base that may be open to some kind of financial play. KAE found that 81 percent of respondents open to banking with Apple are technology savvy and are already banking online. The survey found that 62 percent of these consumers already show great interest in using their smartphone for personal banking and 53 percent believe call centers will be replaced by online service centers.

I would be very surprised to see Apple make the leap into banking, though mobile payments is not a stretch. Consumers are already able to pay with their iTunes account for smaller items at Apple Stores using an App Store app. But whatever happens, it shows that Apple has a lot of options when it builds upon a foundation of trust, innovation and ease of use.

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Being a Citibank customer and an occasional user of Amazon’s Kindle Fire, I am glad to see that the bank has launched a Citibank app for the Kindle. The app is available for iPad as well. While I prefer the iPad, and since I am waiting for the new one, I downloaded and tried the app. It does all the basic things I want it to do.

I have seen quite a few mainstream apps starting to show up on the Kindle Fire. It is a sign that in the somewhat confusing Android world, Kindle Fire is a attractive option for app developers and mainstream brands such as banks. The sales of Kindle Fire have been growing at a decent clip so I’d expect even more developers to start gravitating to the platform soon.

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This doesn’t mean that efforts like Google Wallet, Square, Isis or PayPal will struggle or fail. Most of them are aligned with credit card companies and banks already. But from a consumer perspective, the embrace of mobile payments appears to be easier when its led by a known financial institution, like a bank or a credit card company.

In KPMG’s 5th Annual Global Consumer & Convergence Survey, the firm found that 56 percent of consumers said they trusted their financial services institution most to handle their mobile commerce financial data. Only 7 percent trusted retailers and 6 percent said they trusted their mobile/Internet service providers. Secure payment start-ups like PayPal fared better with 30 percent saying they trust them with their information.

The preference for financial institutions may come down to the fact that consumers are increasingly wary about data privacy and security when it comes to mobile transactions. KPMG found that the percentage of people worried about these concerns has gone from 75 percent in the previous survey to 90 percent now.

Sharma found some similar results when surveying 150 industry insiders for his 2012 mobile predictions. He found that respondents believed financial players were most likely to define the mobile payments and commerce space, with some 37 percent voting that way, up from a little more than 31 percent in 2011. Meanwhile, operators, Google and PayPal were well behind with respondents expressing less confidence in their ability to define the payment market in 2012 compared to last year. Start-ups as a group got more backing from respondents in 2012 while Amazon and Apple showed up on the charts for the first time this year.

Again, it’s still early in the mobile payments space but all the major players will need to address the trust issues consumers have. It’s not enough to just push out a new digital wallet. As we get closer to seeing mobile payments become every day tools, consumers will need to be assured they can trust their smartphones and other mobile payment systems to be as secure as their current options. Said Tudor Aw, KPMG’s European head of Technology:

I am astonished when I see that data privacy and security is not only the most critical issue among consumers worldwide, but that year-over-year those concerns increase. This is a key issue that should have been addressed by now.  Whoever can master the privacy challenge will gain a significant competitive edge. Consumers themselves point to the potential solutions with 76 percent citing better disclosure of security measures taken and 72 percent wanting to see third-party audits/certifications.

That’s why it’s important to watch what happens to the banks in the big NFC payment systems. They could be a big help in speeding adoption of certain platforms if they put their weight behind specific payment tools. Or they could be in a position to drive things themselves if they roll out their own advanced digital wallets. Also, keep an eye out on Visa with its V.me wallet and American Express with Serve, which could become popular tools this year. All of these entities enjoy strong financial relationships with consumers, who when confronted with a lot of noise this coming year, may find comfort in familiar names.

Whoever can address these trust concerns can look forward to a big opportunity. KPMG found that 2/3 of respondents are ready to use their mobile phone as a wallet, up from 2008 when half said they were uncomfortable with mobile banking. Sharma found that his insiders believed that mobile payments will be the breakthrough category in 2012 and payments and commerce will be the most popular consumer application in 2012. This coming year won’t necessarily be the big year (subscription required) that everyone is hoping in mobile payments but it will be pivotal in helping introduce many of these services to consumers for the first time. And those with the most appealing and secure story will have a jump on the competition.

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MasterCard and Intel Capital, which are new investors in mFoundry, join existing investors Motorola Mobility and FIS in this round. The money will help build mFoundry’s existing mobile banking business, which includes creating mobile apps for some top banks, including Bank of America and PNC. As it showed last week with its MasterCard partnership, mFoundry is looking to turn those mobile banking apps into digital wallets by adding support for MasterCard’s PayPass NFC payments. That will allow banks to provide their own digital wallets that work at NFC-equipped point-of-sale terminals.

MFoundry, which has raised $50 million to date, is trying to leverage the quick growth of mobile banking, which it said is on pace to hit 50 percent penetration in six years, far faster than ATMs and online banking, which took 15 and 20 years, respectively, to get to 50 percent consumer adoption. It has previously worked on mobile payments with Starbucks, developing and managing its Starbucks Card Mobile payment app.

“The opportunity in mobile financial services is enormous,” said mFoundry CEO and co-founder Drew Sievers. “While our existing mobile banking business is scaling rapidly, there are many other related opportunities that we believe can add significant incremental value to our company.”

This move to add more payment tools could be a big opportunity for mFoundry. As I wrote before, the banks have one of the most trusted financial relationships with consumers and are in a very good position to offer digital wallet services and teach people about new technologies like NFC. At the very least, having an option like mFoundry lets them offer their own alternatives to services like Google Wallet and Isis, the NFC carrier joint venture from Verizon, AT&T and T-Mobile.

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MFoundry counts more than 500 banks, credit unions and other financial institutions as customers including two of the biggest banks, Bank of America and PNC. More than seven million users turn to apps and services built by mFoundry. Next year, these customers will be able to make touch-and-go payments at thousands of point-of-sale terminals with their mobile phones through the app they use regularly to check their bank statements, pay bills and transfer funds. MFoundry said it will update its mobile apps most likely in the first half of 2012 to include NFC support. It will then be up to banks to turn on the capability with MasterCard. Users will be able to connect their bank-issued debit and credit cards for NFC phone payments.

The two companies are also working on a mobile application that allows mobile phone operators to offer PayPass payments from their phones. MasterCard isn’t just striking a deal with mFoundry, it’s also becoming an investor in the start-up’s latest round. Larkspur, CA-based mFoundry is set to announce its latest round on Monday.

This collaboration is important because consumers have a trusted relationship with their banks. While Google and the carriers through the Isis joint venture are trying to become a trusted wallet provider with their NFC-based systems, they still don’t have the kind of financial trust that consumers place in their banks. So banks could be instrumental in helping NFC along by introducing the technology to their customers through their existing banking apps.

For NFC to work, “you have to get consumers to change their behavior and we think banks are in a great position to do that,” said James Anderson, SVP of Mobile for MasterCard.

This will also bring the banks into the NFC mobile wallet market, where they have not been very prominent so far. Citibank is an early partner in Google Wallet while Isis, the carrier-led joint venture has not announced banking partners, though it hopes to have a few on-board when it launches next year. But for the most part, the banks have been largely silent. That might due to the fact that they’re not comfortable with the terms of the Google Wallet and Isis. Now, they’re in a position to leverage NFC themselves without having to work with another provider.

Drew Sievers, CEO of mFoundry said it’s not just big banks that can jump on board. The integration with MasterCard means a lot of smaller financial institutions will be able to extend support for NFC payments through their mobile banking apps. And he said this could be a catalyst for growth for mFoundry, helping it attract even more banking customers.

“By working with MasterCard, mFoundry will be able to evolve and expand its financial services platforms to reach more consumers through new and existing clients,” said Sievers.

It’s still unclear if all these banking apps will get direct access to the NFC secure element to enable payments. There seems to some wrangling going on as the carriers in Isis, AT&T, Verizon and T-Mobile, are not rushing to enable other wallets like Google Wallet to work on their NFC-enabled phones. It doesn’t appear that the Galaxy Nexus, Google’s flagship Android 4.0 phone, will support Google Wallet even though it has an NFC chip. That may come down to the fact that, unlike Sprint  Verizon is not a Google Wallet partner. But Sievers believes that phones will eventually be wallet agnostic and that will allow banking apps with NFC support to flourish.

I think this could add some confusion in the short term as we hear a lot of competing voices urging users to get on board with their NFC wallet. In fact, the term mobile wallet is going to get abused early and often, I imagine. But ultimately, this could be a good thing. New technology needs advocates to help sell it to consumers and in the case of NFC, which can trigger some security concerns in consumers, having the banks walk customers through the process would be a good thing. Provided these banking apps can actually leverage existing NFC chips properly without interference, it will be another way to get NFC adopted.

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Instead of cash wire services which can charge up to $15 to transfer money, Boom allows people to establish a bank account for $10 annually and then charges them $2 dollars each time they deposit money. After that, transferring money between accounts is free with transfers enabled by text message or with a phone call to a Boom operator. Users in the U.S. can load money at 15,000 locations including more than 6,000 7-Eleven stores. And users can pull out money from 150,000 ATMs in the U.S. and Mexico or 650,000 ATMs worldwide using a Boom debit card. There are also 23,000 merchant locations in Mexico where users can pull out money.

The service serves as a bank and mobile personal payment alternative for many migrant workers. But it can also serve as a way for parents to distribute money to their children. Bill Barhydt, CEO of m-Via, which created Boom, said almost half a trillion dollars is remitted each year internationally with fees generating $40-50 billion. He said m-via is trying to crunch down those fees, making it easier for people to distribute a lot more money more often.

“Our goal is to crunch those fees down to a 3-4 percent range rather than the 8-11 percent and provide more banking service so it’s better for consumers, safe, easier and more economical,” Barhydt told me.

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Rogers isn’t looking to build full-service physical banking locations, but will try to follow more in the footsteps of retailers that offer their own credit cards. But the move also puts Rogers closer to the action on mobile payments and in a better position to take a share of the revenue from payments made over cell phones. The new bank will be called Rogers Bank. Rogers is also reportedly looking to launch its own near field communication digital wallet soon with Visa and TD Bank.

Mobile payments, as we’ve noted, are poised become a $670 billion market by 2015, so it makes sense for carriers to want to benefit from this opportunity in emerging mobile wallets, especially as they get crunched on voice and SMS revenue and deal with exploding data network costs. Carriers in the U.S. are also looking at playing a part in mobile payments, including Verizon, AT&T and T-Mobile, which have banded together to form Isis, an NFC digital wallet platform. But after making an attempt to build their own payment network, the carriers opened to more credit card and banking partners that merchants were more familiar with.

Rogers isn’t the only carrier looking in this direction. Telefonica O2 UK also filed for an e-money license with the UK Financial Services Authority in February to become a payment service provider as part of a larger push into mobile payments. This would allow O2 to offer pre-paid accounts for peer-to-peer payments or to pay merchants for things using contactless NFC applications. In Asia, carriers like Docomo have become banks or like SK Telecom have partnered with banks. And other telcos in third-world countries offer their customers mobile payment services.

Mobile analyst Chetan Sharma said the move makes sense for Rogers and others because all carriers are trying to figure out where their next revenue stream is coming from. He said building a banking service can not only bring in revenue but also provide more services for consumers. He believes Rogers will be looking to integrate its banking service into a digital wallet that allows people to pay through their handset.

Rogers “is trying to see if they can extract more value by keeping a portion of these transactions and another impact would be to reduce churn, keep consumers a few months longer and increase the lifetime value of users,” he said.

He said the challenge for Rogers will be in seeing how serious it is in building this business, which will take a significant investment to succeed. He said the carrier will also need to work out its relationships with other banks. Sharma said it’s unlikely U.S. carriers will follow in Rogers’ footsteps because of the added scrutiny these days on banks and the necessary investment it would take to get such a service going.

It’s unclear how consumers will take to this option. Operators historically have had poor consumer approval ratings, lower than banks. So it’s not certain that operators would be trusted as a financial institution. But increasingly, consumers are putting more charges on to their cell phone bills through services like Zong, Boku, Billtomobile and others. That highlights the value the cell phone operators play because they have an ongoing billing relationship with consumers. Expect more carriers to find ways to get in on the mobile payments action. You can hear more about mobile payments at GigaOM’s Mobilize conference on Sept. 26 and 27 in San Francisco.

Image courtesy of Flickr user Jeffery Simpson. 

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The New York City-based company, founded by CEO Josh Reich, announced it will be partnering with Visa for its banking cards and will holding its customer deposits at The Bancorp Bank and CBW Bank, which are both FDIC-insured.

BankSimple, which I profiled earlier this year, is actually not a bank but will leverage partnerships with BanCorp and CBW to offer a very modern banking service that allows users  to combine all their credit, savings, checking and termed accounts into one banking card. BankSimple will use machine learning and statistical analysis to manage users’ money, help them reach their stated savings goals, and stay within their spending limits.

The service, which tries to add more transparency to the banking process and eliminate surprise fees, also leans heavily on smartphones, with which BankSimple users can deposit checks or monitor their funds. The phone’s location will also be used to help combat fraud. For now, BankSimple said it will widening its trials and is expanding to friends and family.

Take a look at a video interview I did with Reich.

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The latest example is ClairMail, which today announced a new mobile fraud prevention product for financial institutions customers that allows them to monitor their transactions and get alerts based on pre-set conditions. Users can get alerts when transactions exceed certain limits and can resolve transactions disputes from their phone. ClairMail already powers the mobile banking services for eight of the top 12 banks in North America and is in a good position to leverage its integration for better fraud protection.

But it’s hardly alone in this battle. As I’ve reported recently, more and more start-ups are looking to leverage the power of the phone to beef up fraud security. Start-up BillGuard is building a fraud protection system that uses crowd-sourced information along with other real-time fraud data to help alert users on their computers and phones. BankSimple, another New York start-up is creating an online banking service that focuses on mobile phones and will leverage the phone’s location to aid in fraud detection.

That’s where things get really interesting. The phone is great for instant feedback and monitoring, which allows users to spot fraudulent purchases. But when you add location into the mix, it gives customers, banks and financial institutions a better shot at sensing criminal behavior. If you use your card in New York and your credit card is suddenly charged in San Francisco, that should be a red flag. Similarly, if your phone says you’re in Berlin on vacation, there’s no reason for a bank to put a hold on your account because it already knows you’re in Germany.

That’s increasingly where this battle is going. In December, Visa Europe announced it was partnering with ValidSoft, a company that determines whether a user’s mobile phone is in the same place as the merchant or ATM where your card is being used. If ValidSoft sees a discrepancy, it sends an alert. Finsphere, a fraud monitoring service, launched a similar service in October called PinPoint that monitors a user’s credit or debit card usage and cross references that with the user’s phone location, their past transactional history and other signals to determine if a transactions requires an alert. The service, powered by Location Labs, does not require GPS to establish a user’s location.

Leveraging phones, especially their location, makes sense because in many cases, banks just look for larger pattern discrepancies. By arming users with instant feedback and the ability to tie their location into fraud detection, it closes the window of opportunity for criminal activity. We have our phones with us at all times so we should employ them to the fullest to undercut the threat of fraud.

Sharing location is still a sketchy proposition for many users, however. A recent survey conducted by Microsoft found that concerns about privacy were the biggest impediment to adoption of location-based services. Perhaps that’s why Gartner said by 2015, it expects 15 percent of all payment card transactions will be validated using mobile location and profile information. But I think fraud detection might actually be one of the cases where users who appreciate security enhanced through location can better comprehend the benefits location-enabled services.

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