Released: January 2012 The smartphone revolution is underway, and it is changing how we live and how we manage our money. Banks and other financial services providers are increasingly recognizing consumers’ demands for greater convenience, speed, and engagement. In response, leading financial services competitors are now developing an array of mobile banking offerings to meet the needs of consumers’ increasingly mobile lifestyles. Research has shown that the use of image capture technology in these mobile banking applications is not only providing increased convenience to consumers, but it is also changing how and with whom consumers bank. Specifically, Mobile Remote Deposit Capture (RDC) is gaining increasing consumer attention and adoption, and is a key decision factor driving bank choice. Another image-based mobile banking application, Mobile Photo Bill Pay (MPBP), offers consumers greater simplicity and choice in paying bills. With Mobile Photo Bill Pay, consumers with a camera-equipped smartphone or tablet have the ability to take a picture of a bill, confirm payment, and click to pay. This capability not only gives consumers a new payment option, but it also gives them a fast way to use their mobile device to pay one-time or non-recurring bills, quickly add a new payee to their traditional online bill pay, and set up recurring bills and payments. The ability to add a new payee with a mobile device is a key competitive advantage over existing online bill pay applications. As mobile banking applications have increasingly become table stakes, it is even more critical for financial service providers to understand which new value-added applications should become a part of their core suite of mobile banking offerings. Mobile image capture technologies, and specifically MPBP, can provide banks with the critical marketplace differentiators they need. Market growth of Mobile Photo Bill Pay will be driven by continued aggressive adoption of smartphones and tablets among consumers and the implementation of broadening mobile capabilities by leading financial services firms. MPBP adoption is forecasted to reach 33% among adult U.S. consumers by 2018, and result in 1.4 billion bills migrating to the MPBP channel. To fully understand the potential of this mobile banking application, it is important to first consider existing consumer behavior in the bill payment market.

1. Consumer Market
Outlook for
Mobile Photo Bill Pay
Prepared by AlixPartners LLP
for Mitek Systems
January 2012

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THE MOBILE FINANCIAL REVOLUTION
The smartphone revolution is underway, and it is changing how we live and how we manage our money.
Banks and other financial services providers are increasingly recognizing consumers’ demands for
greater convenience, speed, and engagement. In response, leading financial services competitors are
now developing an array of mobile banking offerings to meet the needs of consumers’ increasingly
mobile lifestyles. Research has shown that the use of image capture technology in these mobile banking
applications is not only providing increased convenience to consumers, but it is also changing how and
with whom consumers bank. Specifically, Mobile Remote Deposit Capture (RDC) is gaining increasing
consumer attention and adoption, and is a key decision factor driving bank choice1
.
Another image-based mobile banking application, Mobile Photo Bill Pay (MPBP), offers consumers
greater simplicity and choice in paying bills. With Mobile Photo Bill Pay, consumers with a camera-
equipped smartphone or tablet have the ability to take a picture of a bill, confirm payment, and click to
pay. This capability not only gives consumers a new payment option, but it also gives them a fast way to
use their mobile device to pay one-time or non-recurring bills, quickly add a new payee to their
traditional online bill pay, and set up recurring bills and payments. The ability to add a new payee with a
mobile device is a key competitive advantage over existing online bill pay applications.
As mobile banking applications have increasingly become table stakes, it is even more critical for
financial service providers to understand which new value-added applications should become a part of
their core suite of mobile banking offerings. Mobile image capture technologies, and specifically MPBP,
can provide banks with the critical marketplace differentiators they need.
Market growth of Mobile Photo Bill Pay will be driven by continued aggressive adoption of smartphones
and tablets among consumers and the implementation of broadening mobile capabilities by leading
financial services firms. MPBP adoption is forecasted to reach 33% among adult U.S. consumers by 2018,
and result in 1.4 billion bills migrating to the MPBP channel. To fully understand the potential of this
mobile banking application, it is important to first consider existing consumer behavior in the bill
payment market.
Understanding Today’s Payment Market
In the U.S., consumers pay approximately 20 billion bills a year, (an average of 12-to-14 bills per
household per month) across a variety of billing categories including utility, rent/mortgage, credit cards
and other loans, medical, and insurance. 2
As presented in Figure 1, this total figure has held relatively
steady over the past five years and is expected to remain in the 20-21 billion range in the next 12
months. Any forecasted growth in total bill payment volume is essentially driven by overall household
population growth.
1
AlixPartners, October 2011, “Mobile Remote Deposit Capture: Changing How Consumers Bank and Banks
Compete.”
2
AlixPartners analysis is based on data provided by the USPS for bills paid through the mail, and available market
research of the percent of bills paid by mail.

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Figure 1
Total Bills Paid in the U.S.
Source: AlixPartners analysis, U.S. Postal Service Household Diary Study Mail Use and Attitudes FY 2010
While the total size of the bill market has shown little change over the past few years, the means by
which consumers pay bills have changed dramatically. As consumer lifestyles have changed, the need
for greater flexibility, immediacy, real-time information, and convenience has shifted consumer
payment behaviors. This shift includes moving from physical payment channels, namely in-person visits
with cash and paper checks via the mail, to electronic means, namely online bill pay and automated
payments. Today, all three payment options remain, but electronic channels are becoming increasingly
dominant, as seen in Figure 2.3
Figure 2
Payment Channels
Source: AlixPartners analysis 2011
3
Physical payment channel includes mail and walk-in. Online/electronic channel includes online bill pay and biller
direct. Automated payment channel includes direct debit and automated cards.

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What is clear from consumer research is that today there is no single preferred payment channel.
Consumers frequently use multiple payment methods. For example, it is common for consumers in any
one month to use automated direct bill to pay their utility bills, online bill pay to pay credit card bills,
writing a check for a one-off medical bill, and walking into their favorite department store to pay a store
card bill. Consumers’ choice of bill payment method also situationally varies and may change depending
on such factors as the balance in their Demand Deposit Account (DDA), cash flow requirements, the
need for expedited bill payment, the type of bill, or the need for additional speed and convenience.
Online bill pay has dramatically transformed how consumers pay bills by allowing them to click their way
– quickly and inexpensively – through a series of bills anywhere they have access to their online account.
Nevertheless, access to online bill pay is not complete across all consumer segments. Moreover,
sometimes timeliness and convenience issues even limit the availability or consumer utility of traditional
online bill pay. For many consumers the hassle of entering new payees online via their laptop or PC, or
the inability to enter new payees using their mobile device, sends them back to non-electronic
approaches to bill payment. Because of some of these limitations and inconveniences, the growth of
online bill pay, as we know it, is inevitably stalling. MPBP offers a way to overcome some of these
limitations and to enhance the growth and usage of bill pay accounts, by leveraging the mobile device,
whether smartphone or tablet. As consumers have come to rely on their mobile devices to manage their
day to day, social and financial lives, there is a specific need that the mobile device can fill in bill pay.
FRAMING THE MOBILE PHOTO BILL PAY OPPORTUNITY
As mobile devices replace PCs or laptops, bill payment channels will continue to evolve. Over time,
smartphone-or tablet-supported bill pay may replace traditional online payment capabilities by offering
some consumers with the “bank anywhere” option they have come to expect, freeing them from the
reliance on and requirement of using their laptops or PCs. For other consumers, mobile bill pay will
enhance their online banking experience and potentially drive greater usage.
A brief review of the Mobile Photo Bill Pay application is warranted. The MPBP application captures the
biller’s information and address, the consumer’s account number and address, and the amount due via
the camera, and simply prompts the consumer to verify the amount to be paid.
The image capture technology offers several specific benefits to consumers:
 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
Target Markets for Mobile Photo Bill Pay
To frame the Mobile Photo Bill Pay market, the first step is to define the relevant market segments.
Some of the potential target consumer segments include:

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 The young smartphone generation, ages 18-25
 Active smartphone/tablet users who are mobile banking and Mobile RDC adopters
 Active smartphone/tablet users who rely on a combination of offline and online channels for bill
payment
 The unbanked and underbanked
Each consumer segment is briefly discussed below.
Young smartphone generation, ages 18-25
The younger, smartphone-oriented consumers represent an interesting acquisition opportunity for
banks. Forty-seven percent of consumers between the ages of 18 and 25 years old use smartphones. By
2016, 82%4
of these consumers will. These consumers have grown up using mobile devices to
communicate with their world, connect with friends, plan an activity, make purchase, research products,
etc. In terms of bill paying behavior, it is likely that this group has written few checks if any at all, may
use their PC only when necessary, and as such are less likely to establish and actively use a traditional
online banking bill pay account with their bank, or set up separate biller direct accounts with the handful
of businesses they use. These young consumers may prefer to rely on their mobile devices to take care
of such mundane activities as paying bills.
Active smartphone/tablet users who are mobile banking and Mobile RDC adopters
The next target group includes those smartphone/tablet owners who are also active mobile banking
adopters and perhaps are already using other image capture technologies such as Mobile RDC. This
group is increasingly managing their lives via their mobile device, and may be attracted to new mobile
banking features.
Active smartphone/tablet users who rely on offline and online channels for bill payment
The broader addressable segment are active smartphone or tablet owners who use online bill pay, but
only for a portion of their bills, and may resort to checks or other payment options for a one-off bill or
because they perceive adding a new biller in their online bill pay account to be a chore. Having access to
a mobile feature that removes the hassle of adding a new biller, and allows them to pay whenever and
wherever they prefer, represents an attractive value proposition for this group.
The unbanked and underbanked
In addition to these consumer segments, MPBP also offers the unbanked and the underserved banking
segment a new and much more convenient payment mechanism. By originating a payment through
their mobile device, and accessing a stored value card or other alternative payment method, these
consumers can pay bills in a speedy and less costly means than traditional options offered to them
today.
MARKET SIZE AND OUTLOOK
To define the opportunity for Mobile Photo Bill Pay, we have completed new analysis to forecast the
overall adoption rate among U.S. consumers and potential migration of bills to the mobile bill pay
4
AlixPartners analysis

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channel. We evaluated two major factors, first the rate of consumer adoption of MPBP, and then
second, the overall migration of consumer bill payment volumes across the available payment means.
The adoption rate forecast considers:
 Availability of MPBP in the banking marketplace
 Adoption of camera-equipped smartphones and tablets
 Adoption rates for Mobile RDC (as a proxy for consumer MPBP adoption behavior)
Consumer bill payment migration forecast considers:
 Bills mailed to consumers
 Churn rate among billers
 Three primary payment channels, bills paid by mail or walk-in, automatic deductions, and online
or other electronic means
Based on our analysis, Mobile Photo Bill Pay adoption is expected to reach 33% among adult U.S.
consumers by 2018. As a result, we forecast total MPBP payment volume of 1.4 billion bills in that same
year. Figures 3 and 4 present our forecasts.5
Figures 3 and 4
Mobile Photo Bill Pay Adoption and Volume Forecasts
Source: AlixPartners analysis 2011
The bill migration analysis spotlights the following consumer behavior shifts:
 Total bills mailed are expected to decline from 14.2 billion in 2013 to 11.5 billion in 2018 as
more bills are received electronically
5
This forecast includes both one-time bill payment as well as recurring bill payment.

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o Physical channels, namely, walk-in or payment by mail will decline from 38% of bills paid
to 27%
o Automated payment channels decreases slightly from 17% to 16% of payments made
 Overall non-automated electronic payment channels, however, will increase from 45% to 57%,
with the majority of this increase coming from the migration away from physical channels,
namely walk-in or payment by mail
 Online bill payment activity will increase as more users migrate away from physical channels and
set up new payees with their mobile device, but some of this increase will be offset as some of
those bill pay accounts will be accessed solely through the MPBP application
 Importantly, the 57% of non-automated electronic payments is made up of 12% Mobile Photo
Bill Pay and 45% online
 The adoption rate of Mobile Photo Bill Pay is forecasted to be 33% of all consumers by 2018
 Overall, MPBP adopters will migrate 37% of their total bills to Mobile Photo Bill pay for both
one-time and recurring bills
 In aggregate, 1.4 billion, or 12% of all bills will migrate to Mobile Photo Bill Pay by 2018
WHY MOBILE PHOTO BILL PAY MATTERS
Given today’s mobile-oriented lifestyles, there is greater demand by consumers for convenience, speed,
and flexibility in how they manage their lives and particularly in how they manage their money. To
remain relevant with their existing customers and attract new customers, it will be critical for financial
service providers to deploy mobile capabilities that meet the needs of today’s consumers.
Mobile image capture technologies, and specifically Mobile Photo Bill Pay, can provide banks with the
critical differentiators they need. MPBP offers consumers speed, flexibility and convenience in bill
payment, and it gives them greater alternatives in managing their finances.
Market growth of Mobile Photo Bill Pay will be driven by continued aggressive adoption of smartphones
and tablets among consumers and the implementation and roll out of MPBP by leading financial services
competitors. Mobile Photo Bill Pay adoption is expected to reach 33% among adult U.S. consumers by
2018, and result in 1.4 billion bills migrating to the MPBP channel. The value-proposition for both
consumers and banks is compelling.
For financial institutions seeking to leverage their existing bill pay platforms, drive increased usage,
expand their mobile banking offerings, and address consumer needs and demands for increased
convenience, Mobile Photo Bill Pay offers great opportunities.

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MOBILE PHOTO BILL PAY FORECAST METHODOLOGY
Our Mobile Photo Bill Pay volume forecast was developed using consumer research and a forecasting
model built around the following seven factors:
(1) The availability of Mobile Photo Bill Pay in the marketplace
The availability of Mobile Photo Bill Pay or the implementation rate of MPBP by financial institutions is
expected to increase from 10% at the end of 2013 to 90% by the end of 2018.
(2) The penetration of camera-equipped smartphones / tablets
The camera-equipped smartphone/tablet adoption rate is based on industry data for 2010 and then
forecast forward. Penetration of camera-equipped smartphone/tablets is forecast to grow from 22% in
2010 to 73% by 2018.
(3) Mobile Photo Bill Pay adoption
The Mobile Photo Bill Pay Forecasting Model assumes that MPBP adoption rates among customers who
have relationships with banks offering MPBP and have camera-equipped mobile devices will parallel
Mobile RDC adoption rates. As a result, adoption among this group of consumers is expected to grow
from 4% in 2013 to 50% by 2018.
(4) Number of bills sent by mail
Only those bills sent by mail are considered in the Mobile Photo Bill Pay adoption forecast. Bills
presented electronically are not included in the potential pool of bills for migration to MPBP. Based on
the United States Postal Service's annual Household Diary Study, which tracks the number of bills mailed
to U.S. households each year, mailed bills have declined steadily by just over 4% per year since 2006. It is
forecast that this rate of decline will continue and mailed bills will decrease from 14.2 billion in 2013 to
11.5 billion in 2018. The decline is expected to result from the increase in electronic bill presentment.
(5) Biller churn
Based on USPS Household Diary Study data on the types of bills that consumers receive in the mail, and
our estimates of how frequently different types of billers change, it is estimated that 10% of bills
received come from new billers. Of these, it is assumed that adopters would pay 90% of these new
billers with MPBP due to MPBP being the most convenient means of capturing the information on the
new bills.
(6) Bill payment channels
Three primary payment channels are assumed in the Mobile Photo Bill Pay model: mail or walk in
(physical), automatic debit or charge, and online/other electronic. In 2010, data from Fiserv show that
38% of mailed bills were paid either by mail or walk-in, 45% online/electronically, and 17% automatic
debit/automatic card6
. We assume that MPBP adopters would move half their mail / walk-in bills to
online due to the ease of setting up billers online with MPBP. For 2013, payment channel mix for
adopters is expected to be 8% physical, 53% online, 16% automatic debit/automatic card, and 24%
MPBP. This is expected to shift to 4% physical, 44% online, 16% automatic debit/automatic card, and
37% MPBP by 2018.
6
Fiserv, “2010 Billing Household Survey: Consumer Survey of Offline and Online Billing and Payment Practices.”

9. 9
(7) Mobile Photo Bill Pay migration for different bill payment channels
Assumptions for migration to MPBP depend on how bills are paid. Bills paid automatically are assumed
to not migrate to MPBP since they are already being paid with no effort. In 2013, 10% of bills paid
online are expected to migrate to MPBP and increase to 25% by 2018. For those bills paid by a physical
means, 55% of these bills are expected to migrate to MPBP in 2013 and increase to 80% by 2018.

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About AlixPartners
AlixPartners is a global firm of senior business and consulting professionals that specializes in improving
corporate financial and operational performance, executing corporate turnarounds and providing
litigation consulting and forensic accounting services when it really matters—in urgent, high-impact
situations.
The AlixPartners Financial Services Practice provides strategic research and consulting services to
financial institutions including banks, brokerages, wealth management firms and payments providers.
We work with executives to make business growth decisions, and advise private equity firms on retail
financial services investments.
The Financial Services Practice team has extensive experience in mobile banking and mobile payments
and is dedicated to delivering the insights, innovative thinking, and information required by our clients.
AlixPartners has more than 900 professionals in offices across the world and can be found on the Web at
www.alixpartners.com.
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