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U.S. Bank Makes Mobile Credit Card Play

Stocks in this article: USB MITK

But U.S. Bank hasn't yet rolled out Mitek's Mobile Account Opening product. The ability to open a new checking account using only a smartphone, using the camera to take an image of a driver's license, along with a check image for an initial deposit, would obviously appeal to the 18 to 34 year olds coveted by the bank.

Badarinath says the bank will "eventually" explore the possibility of incorporating Mobile Account Opening. "As we start to look at money management and servicing, the next step will be to look at customer acquisition," he says.

Both U.S. Bank and Mitek expect other large banks to adopt Mobile Photo Balance Transfer and Mobile Photo Billpay relatively quickly, although USB may be in the lead position as mobile innovator for a while.

"Clearly, the bigger banks tend to have longer sales cycles. A number of them are dealing with regulatory and compliance issues. It is very impressive how USB has been nimble and has been able to do what it has done, considering their scale and reach," says Carter.

What does this mean for investors?

U.S. Bancorp has for many years been among the strongest performing large banks in the United States. The company's mean return on average tangible common equity for the 10 year period through 2012 was 18.13%, according to Thomson Reuters Bank Insight. Among the top 10 bank holding companies in the nation, none of the others came close to that performance. USB's return on average tangible common equity for the first three quarters of 2013 was a very strong 18.1%, according to Thomson Reuters Bank Insight.

USB is mainly a commercial lender, but credit card loans are a coveted asset class, especially during a period of very low interest rates. The company reported average credit card loan balances of $16.9 billion for the third quarter, increasing 2% from a year earlier.

The mobile balance transfer option will provide the bank with quite a market advantage, at least for a while.

Please see TheStreet's earnings coverage for details on USB's latest financial results.

U.S. Bancorp's stock closed at $37.83 Friday, returning 19% this year. Despite the high double-digit return on average tangible common equity, USB's stock trades for a relatively low 11.8 times the consensus 2014 earnings estimate of $3.20 a share, among analysts polled by Thomson Reuters.

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