As the name suggests, Magnetic Ink Character Recognition MICR uses special magnetic ink to print the characters on high-security documents like bank cheeks and vouchers.
Banks are using this technology to prepare and process the check. The checks contain the MICR number, and these checks are put under the machine, which can read the magnetic information and character.
The American Banker Association developed the MICR technology in the 1950s. Since then, most banking institutes have been using it to protect customers from thefts.
MICR contains the range of unique characters printed on the extreme bottom left side of the check. These characters are designed so that even if the signature overwrites it, the machines can read it accurately.
These characters are different from the IFSC code, and they may contain the string of account number, check number, and bank routing number.
Features of MICR
- It enhances the security of the documents and protects them from criminal activities.
- The MICR technology uses a laser printer to print the special characters.
- Not only the machines but people can also read these numbers.
- The banker can quickly process the check, saving human efforts and time.
Working Mechanism of MICR
The MICR uses special characters, most specifically in the form of E – 13 B and CMC – 7. These characters are designed so that the processing machines quickly read them.
E – 13B and CMC – 7 are used worldwide. Regions like the United Kingdom and North America use the E – 13B, whereas other areas like Europe and South America use the latter form of characters.
Banks have an automatic check clearing process where they use special machines to clear the check at the end of the day. Every check is printed with machine-readable numbers. When the checks are put in a machine, they are cleared within a minute without any error.
How does a bank create the MICR Codes?
- The bank uses an array of three different combinations to create the MICR code.
- It is a nine-digit number consisting of bank, branch, and city codes.
- The first three digits are the city code, the next three are the bank code, and the last three are the branch code.
- The branch code and bank code are different for all the banks.
A glimpse of the MICR Check Scanner
Every check has to be submitted to the clearinghouse for processing. The scanner machine can read the unique information on the check within the blink of an eye.
The scanner machine plays an essential role in the process of check clearing. It can read the required information like a bank account, check number, and routing number before deducting and crediting the account of people.
The banking institution validates every transaction and keeps a record of it. The check can go under the clearing process multiple times throughout the process.
The primary purpose of the check scanner is to reduce the error in the transaction process and process millions of checks in a day without any hassle.
How is the MICR expediting the check processing?
- Every check goes through the particular machine that first reads the check’s branch code.
- Checking the branch code helps in quick check processing to automatically clear the process.
- The MICR code contains all the information related to the checks. It uses the iron oxide ink material, which not only has the machine-readable feature but is also error-free.
- The MICR codes are designed so that the machine can process many checks altogether without any errors.
Advantages of MICR
- The MICR technology can process the checks quickly with high accuracy.
- This technique saves the documents from criminal activities like forge and theft. No one can manipulate the characters.
- It has reduced the need for staffing, and the automatic system has led to a reduction in error.
- Even if someone writes on it or puts a stamp on it, they are still easily readable by the machine.
Drawbacks of MICR
- It is an expensive method.
- It can only read ten digits and four special characters.
The United States was the first to use the MICR technology. Still, later noticing the advantages of the MICR, other countries started incorporating this technology as the primary process in financial institutions.
Different countries use MICR in different forms. For example, some countries create the MICR code using account number, bank number, and check number, while others may use it in branch code, bank code, and city code.