8 Check Benefits of Magnetic Ink Character Recognition (MICR)
Have you ever looked at the numbers on your check or airline ticket and wondered why they use such a strange font? While this is a somewhat mundane detail that many people overlook, this particular font actually serves a very specific purpose. The purpose of this font, one which many people describe as “robotic”, is to make it very easy for computers to read.
For decades, checks were processed, recorded, and interpreted by hand. However, as computing technology developed a little bit further, bankers and businesses around the world discovered that their checking processes could be significantly improved. The development of Magnetic Ink Character Recognition—or MICR for short—revolutionized the checking industry.
The MICR Line, which can be found at the bottom of a check, contains the banking numbers and checking numbers that are needed for a check to be processed. While the value of the check and the intended recipient will often still need to be read by hand, including this technology has benefit businesses in many different ways.
In this article, we will discuss just a few of the ways that MICR technology has helped banking and other industries become much more efficient. Though this technology can be rather expensive for some smaller businesses to implement, it has clearly created a positive impact that can be felt throughout the business world.
- Accuracy in Check Processing
The most obvious reason your business would want to use an MICR system is that, contrary to the less developed alternatives, these checks can assure the greatest degree of accuracy. MICR numbers contain iron oxide, which allows them to adopt magnetic qualities. The magnetic components of the check make it easy for computers to read even if the printed numbers have been smudged. Additionally, the numbers themselves have been carefully crafted to maximize computer readability—this is exactly why MICR fonts appear to be so robotic.
2… yet, still readable by humans
In many ways, MICR is a technology that is very comparable to bar codes. With both of these technologies, a machine scans a specific code (whether numbers or lines of varying thickness) in order to take inventory or process specific information. Unlike a bar code (or the related QR code), MICR numbers are “normalized” enough that they can easily be read and interpreted by humans. In the rare case that there is something wrong with the check and it cannot be interrupted by machines, humans can then intervene and make the corresponding entry by hand.
- Protection against Check Fraud
MICR technology can help provide protection from check fraud in various different ways. Because the bank and account numbers use a very specific font, it is very difficult for this font to be replicated by hand. But, even more importantly, the magnetic component of these numbers is even more difficult to replicate. In order to create MICR checks, you must first invest in some very expensive technology—this makes check fraud much less accessible to the common criminal. According to a recent ABA report, banks were able to stop nearly $17 billion worth of check fraud attempts in 2018 alone. This is largely due to advanced fraud recognition systems, such as those made possible by MICR.
- Protection from Potential Printing Errors
One of the ways that MICR technology is better than the comparable bar code is that—due to iron oxide magnetism and other factors—these checks can still usually be read by machines, even in the event that there is something wrong with the check. Minor smudges, marks from “wild signatures”, wrinkles, and other problems can usually be overcome. As a result, MICR technology can proudly claim a readability rate of more than 99%. The “misread” rate—instances where characters were processed, but processed incorrectly—is typically less than 1 in 100,000. Compared to alternative forms of processing checks, MICR is clearly among the most reliable.
- Accelerated Check Processing
The clearest benefit of advancing technologies is that long-standing practices—such as issuing, receiving, and processing checks—can now be done more efficiently than ever before. The amount of time it takes for a MICR compatible check to be processed is significantly less than the time it takes to process a check by hand. If your business is processing thousands of checks on a regular basis, the amount of time saved can really add up. As a result, most businesses can use an opportunity cost framework in order to justify an investment in MICR technology.
- Compatible with Digital Checking
When MICR technology was first developed in 1959, the concept of “digital checking” was virtually unheard of. However, as computers, smart phones, and other online technologies have played an increasingly important role in our lives, a large number of checks are now processed via digital scanning. Because of the universal readability (particularly for machines) of the MICR line, the transition from mail or paper checking to digital, online checking has been quite smooth. Checks that are scanned in the morning can now appear in your bank account by the end of the banking day.
- Applicable to Multiple Types of Checks
While the MICR line is usually associated with the personal checks you write for ordinary expenses, the application of this technology is truly universal. As a result, businesses around the world have been finding innovative ways to introduce MICR technology into their operations.
- Employee paychecks and payroll documents
- Checks that are issued to suppliers
- Transfer checks between various bank accounts
- Rebates, refunds, and other checks written to customers
Online check writing software like https://www.smartpayables.com/ has become more popular as businesses move away from physical checks. Overall, if there will be a physical check involved, then MICR technology can help make that process more efficient.
- Standardized around the World
Another reason why MICR technology is popular is that these checks (for the most part) have been standardized around the world. The ISO—an organization responsible for promoting standardized processes—has a running list of “best practices” when it comes to checking. Because almost all check readers have been designed to read either E-13B font or CMC-7 MICR font, this technology has been proven to be quite useful in an increasingly globalized world.
Successfully running a business is all about paying attention to the smaller details. While MICR technology is something that many people have taken for granted, it still plays a very important role in our everyday lives. By working with a professional check issuing company, your business can operate more efficiently and also help promote check security.