Mobile Deposits Drive Mitek's Turnaround

Posted by Mark Brousseau

An interesting article on Mitek in yesterday's USA Today:

Mitek CEO pins turnaround on wireless check deposits
By Greg Farrell, USA TODAY

When Jim DeBello launched his technology career two decades ago, a mentor told him that on top of getting an education, he'd also get bloodied and bruised.

"He was right on all counts," says DeBello, CEO of Mitek Systems. "It's been a school of ups and downs and sideways."

Not that DeBello, a defensive end for his college football team, minded getting knocked around. Just the opposite: The lessons from his failures have improved his game immeasurably. "It's a lot of fun to be challenged by the unknown and untried," he says.

Into the unknown is where DeBello has brought Mitek, an image-recognition software company based in San Diego. After being installed as CEO five years ago, DeBello has pushed Mitek's image-recognition tools onto wireless platforms. In January, the company introduced an application that enables consumers to scan and deposit checks with their cellphone cameras.

Whether it works — and returns the company to profitability — remains to be seen. But for DeBello, who dabbles in oil painting in his spare time, technological innovation is inspiring.

"Innovation is the heart of technology start-ups," he says. "I'm not an artist, but it's the closest thing to art I can think of."

DeBello's first tech start-up, Solectek, married wireless technology to laptop computers. Great idea, right? Sure, but not in the early 1990s. Today, nearly every computer is configured for wireless operation, but back then, at a time when Internet connectivity was painfully slow and before the widespread adoption of cellphones, DeBello's wireless local area network concept was an idea ahead of its time.

Getting ahead of yourself can be costly
"If you're way too early, you're thinking too far ahead," says the 49-year-old San Diego native. "Sometimes it takes anywhere from eight to 10 years for technology to get adopted. We need to digest it."

The experience of being sacrificial pioneers was a painful one to DeBello and his colleagues.

After selling the company in 1996, DeBello moved to Qualcomm, where he continued to work in the wireless area, and eventually ran a joint venture. But he grew tired of corporate hierarchy. "I didn't want to spend all my time working on internal alignment, the political nature of the organization and such," he says. "It was just not inspiring or enjoyable."

By 1999, DeBello had accumulated enough experience to qualify as a "grown-up CEO" candidate in the world of dot-coms. He became chief executive of CollegeClub.com, an early social-networking site. But in 2000, just as the company was about to go public, the dot-com bubble burst and the game was over.

Through his mentor, technology investor John Thornton, DeBello had held a seat since 1994 on the board of Mitek Systems. During the Cold War, Mitek had been a major supplier to the U.S. government of security hardware products that helped prevent the Soviet Union from eavesdropping on electronic data transmissions through computers, faxes and printers.

When the Cold War ended, demand for its product disappeared, and the Mitek workforce dropped from 300 to 16. In the 1990s, Mitek used its recognition technology capabilities to help banks with their check-processing operations. But the financial results were disappointing.

Giving Mitek a new direction
In 2003, dissatisfied with the direction the company was taking, Thornton installed DeBello as Mitek's new CEO. Since then, DeBello has divested two products and redirected the company toward mobile imaging.

The result: In January, Mitek announced a new software application, Mobile Deposit, designed to allow consumers to scan and deposit checks into their bank accounts using the cameras on their mobile phones.

Although some banking experts believe consumers will embrace mobile banking in the near future, DeBello wants to market the product to small businesses that accept and deliver goods or services. Of the 32 billion checks written in the USA each year, DeBello says 20 billion are for business transactions.

For truck drivers who collect cash on delivery, Mitek's application would allow them to cash a customer's check instantly, instead of leaving the premises and hoping that the check doesn't bounce. It would also come in handy for anyone from the plumber to the Amway salesperson who accepts checks for payment.

"Mobile banking 1.0 was bill pay and balance transfers on the cellphone," DeBello says. "Mobile banking 2.0 is about payments. We have a real big piece of that in terms of the ability to deposit checks."

For Mitek, which lost $384,000 in fiscal 2007 on revenue of $5.6 million, the new product could transform red ink into black. DeBello's now working with several companies to test drive the product.

How Mitek's technology can be put to work
"This is a technology that will change the game," says Chris Cramer, CEO of Karl Strauss Brewing, a San Diego craft beer. California state law restricts how much credit a beer distributor can extend to restaurants and bars, and Cramer says he's considering putting Mitek's new application into the field.

"There's tremendous turnover in the restaurant business," Cramer says. "You need to keep people 30-days current. Here's an opportunity to know instantly if there are sufficient funds in an account, and to have that information routed through the accounting system and go to the (chief financial officer's) desk so he can make a decision."

Danny Jett, executive vice president at Georgian Bank in Atlanta, says Mitek's product could add greater efficiency to the banking process. "All banks are suffering from margin compression," Jett says. "You look for ways to do things more effectively. That's what I see with Mitek's product. Is it going to be accepted now? Who knows? But within 12 to 18 months, acceptance will increase. That's the way Internet banking was."