The mobile revolution has arrived, and camera capture technology could be the most significant technology development of the decade. While most investors are familiar with mobile check deposit (RDC) now being launched at hundreds of banks, it is hard to grasp just how transformational RDC is.
Mitek Systems has now licensed 25 of the 40 largest banks to use RDC. While RDC is currently the most utilized license for mobile data capture, it may not be the largest potential market. With 13 patents Mitek Systems (NASDAQ:MITK) is well positioned to pioneer significant parts of the industry. There are equally large markets for mobile capture technology, but the applications are still in the infancy or beta stage of development.
Residual Paper Worksheet
According to a White Paper by Harvey Spencer Associates, these are some of the residual paper worksheets that will slowly gravitate to camera capture:
- Home healthcare documenting 3rd party communications from pharmacies, therapists, and patients etc.
- Onboarding for proof of ID, citizenship, residence, income or training.
- Transportation for Bills of lading, toll, fuel, operating expense receipts, or delivery receipts.
- Expense reports categorizing any expenses that need to be itemized.
- Scan to the cloud for a multitude of correspondence.
- Assessment for many forms or correspondence.
The Insurance Industry
Mitek has already signed a license with Progressive Insurance for their Mobile Photo Quoting Solution. For insurers, Mitek Systems offers four key solutions:
- Mobile Photo QuotingTM - automates the insurance shopping and buying process by taking photos of driver's licenses, insurance ID cards, and Vehicle Identification Numbers.
Mobile Photo ClaimsTM - streamlines the claims process by enabling customers and agents to simply snap photos of customers' driver's licenses, insurance cards, and license plates.
Mobile Photo PaymentTM - simplifies enrollment in electronic payment through checking accounts or direct deposit for a claim reimbursement transfer by taking photo of a blank check.
Mobile Photo Document Capture and SendTM - enables policyholders and agents to take a photo of any document and send it as a high quality PDF to any email address or fax number.
Mobile Photo Bill Pay
According to a Consumer Market Outlook for Mobile Photo Bill Pay prepared by Alex Partners LLC, published January 2012, image capture technology offers several specific benefits to the consumer:
- Eliminates the need to enter multiple elements of information for a new biller in an online application
Overcomes the inconvenience of not being able to add a new biller that is a common issue with current forms of mobile bill pay
Offers the ability to pay non-recurring bills in a simple and convenient way
- Helps reduce the barriers to switching by enabling consumers to easily add new payors with their new bank by using their camera-equipped mobile device, rather than migrating payors from their online banking application
Past Game Changing Technologies and Transformative Companies
Leading edge technology offers an amazing investing opportunity to those with the foresight to catch the trend and ride the wave to triple, and sometimes even quadruple, digit gains. I have listed some transformative companies to give you a idea of the returns that are possible.
Google (NASDAQ:GOOG), the predominant search engine of our time. Google has now developed the Android operating system as well. Early Investors in Google has seen the stock appreciate from $85 in 2004 to the over $600 it is today.
Priceline (NASDAQ:PCLN), the ultimate travel portal on the Internet today. Who would have thought a reverse auction site would transform they way many people book their travel. PCLN has gone from $7 in 2002 to a high of $760.
eBay (NASDAQ:EBAY), the premier auction site on the internet. EBAY purchased PayPal and has become a multibillion-dollar company. You could have purchased EBAY split adjusted for $1.87 in 1998 and sold it for $59 in 2004.
Amazon (NASDAQ:AMZN), the ultimate store on the internet. Amazon has expanded from books to anything. AMZN could have been purchased split-adjusted at $1.50 in 1997 and currently trades at $236.
Cisco Systems (NASDAQ:CSCO), the company was instrumental in the internet revolution. It would be impossible to get information from the internet without the proper routing system, and Cisco System was the clear leader for routing systems. CSCO could have been purchased (split adjusted) at $.06 in 1993 and sold for $77 in 2000.
The mobile imaging market is being driven by irreversible trends. Most of the phones being sold today are smartphones that have sophisticated cameras. The pixel clarity improves with each new generation. As the mobile camera improves, the capture rate of data improves. One company stands poised to storm the market and capitalize on this technology.
Mitek has signed licenses with 408 banks, including 25 0f the 40 largest banks. Bank of America (NYSE:BAC) just launched RDC, licensed with Mitek's technology. According to a recent study by Javelin, 58 percent of financial institutions plan to deploy mobile RDC over the next year. The research report published by AlixPartners calls for 1.5 billion mobile deposits by 2014.
- Mitek Systems has an application to take a picture of your drivers' license and insurance card and get an insurance quote.
- Mitek Systems has $15 million in the bank, alleviating the need for additional financing.
- Mitek Systems' Bill Pay (pdf) was named best of show at Finovat Spring 2011.
- Mitek Systems has developed a point-and-shoot application to transfer credit card balances to springboard into new markets.
- Mitek Systems has a proven and experienced management team.
- The current short position in MITK is 6.5 million shares and growing; large short positions can be quite difficult to cover, often resulting in a short squeeze when market conditions turn.
- Art Samberg just filed a 13g and now owns over 5% of Mitek. He is one of the smartest technology investors ever to work on Wall Street.
- Please go to the Mitek Systems website for additional information.
It is important to understand the competitive advantages for banks that implement RDC. They range from increasing new accounts to saving money on deposit transactions.
According to the Conestoga Bank case study:
"Conestoga also achieved the competitive advantage it sought which is evident in its success metrics. In the first thirteen months following the introduction of Mobile Deposit, the organization has seen:
- 10 percent increase in new account openings
- 20 percent of customer base using Mobile Deposit
$1.5 million average in deposits through Mobile Deposit each month
7 percent of total consumer and small business deposits are conducted through Mobile Deposit
Mobile Deposit usage is being utilized across all age groups: 17-34 32% 35-54 44% 55 plus 16% other (business) 8%. "
The USAA Lawsuit
The shorts began getting into the stock when it was around $11, and the lawsuit with USAA collapsed the stock, shaving $200 million off the valuation of Mitek Systems. The suit stems from USAA questioning Mitek Systems development of the patents. USSA has questioned the patents and the payment they owe Mitek Systems and Mitek has counter sued for damages. This lawsuit has not deterred other banks from licensing RDC from Mitek but should be considered when investing in the stock. The fact the company has been issued 13 patents and licensed an additional 93 banks for RDC last quarter satisfied my due diligence.
There is a huge short position in MITK and a enormous market to participate in. I have done extensive research on this industry and believe Mitek Systems is the best positioned company to immediately gain a dominant market share within this evolving space. I encourage you to do your own research.
The smartphone revolution is underway and it will change how we live, and how we communicate with banks. New applications will soon change how we pay bills, fill out expense reports, and open up a new frontier where changing the way we capturing data will simplify our lives. Ironically, at some point, the professional shorts will be able to deposit their margin calls with RDC.
Disclosure: I am long MITK.