Magnetic Ink Character Recognition (MICR) is a technology developed in the 1950s that transformed the banking industry. Before the advent of MICR, checking to sort by account number was a manual process. Two manual systems were previously used in the industry to handle the vast numbers of processed checks: Sort-A-Matic and Top Tab Key Sort.
However, these methods were time-consuming, and it was evident that computer technology could be leveraged to make the process more efficient. This article will provide a brief history of MICR and describe how the technology works.
The Sort-A-Matic system included 100 metal or leather dividers numbered 00 through 99. Each check was placed in the corresponding divider by the first two numbers of the account. The sorting process was then repeated for the next two digits of the account number, and so on. When the process was complete, the checks were grouped by account number.
On the other hand, the Top Tab Key Sort system used small holes punched at the top of the checks to indicate the digits. For instance, the first hole indicated the value of the first digits (0, 1, 2, 3…). A metal “key” was inserted through the holes to separate all of the checks with the same value in the first digit, and this step was repeated for each digit until all the checks were sorted.
The development of MICR was an ideal solution to the manual sorting of checks. Stanford University and Bank of America were the first to successfully use computers to sort and match checks. They developed what is now known as MICR. The MICR font was developed by Stanford University in conjunction with Bank of America and approved by the American Banking Association.
The font is known as the E-13B font. E-13B has a total of 14 characters: ten specially designed numbers (0 through 9) and four special symbols (Transit, Amount, On-Us, and Dash). The letter E indicates the fifth version considered. The letter B indicates the second revision of that version. The number 13 is derived from the 0.013-inch module construction used for stroke and character width.
MICR characters are printed with a toner containing iron oxide, which is capable of being magnetized. Three types of machines are used to read MICR characters. The two that read the characters magnetically are referred to as MICR readers, while the third machine is an Optical Character Recognition (OCR) reader.
MICR readers transport the checks containing the E-13B magnetic characters past a magnet, thereby magnetizing the iron oxide particles. The magnetized feelings then pass under a magnetic read head. The magnetic field (flux pattern) caused by the magnetized characters generates a current in the read head. The strength and timing of this current allow the reader to decipher the characters.
Magnetic readers come in two types: single-track (single gap or split scan) and multiple-track (matrix or pattern) readers. A single track uses a read head with one gap to detect the magnetic flux pattern generated by the MICR character.
When a magnetized E-13B printed character moves across the narrow gap of the read head, the electric voltage caused by the magnetic flux from the character generates a waveform unique to each character. The multiple-track reader employs a matrix of tiny, vertically aligned read heads to detect the presence of the magnetic flux pattern. The small individual read heads slice across the character to detect the presence of magnetic flux. This sensing of magnetic flux over time produces a unique matrix pattern for each character.
An OCR reader does not use magnetic properties to detect the E-13B characters. Instead, it uses a scanner to detect the amount of light reflected from the character and the amount of light reflected from the background.
Magnetic Ink Character Recognition (MICR) technology has revolutionized the way that checks are processed in the banking industry. By using a specially designed font and magnetic or optical technology, MICR technology has made it possible to sort and process checks quickly and accurately, resulting in significant time and cost savings for banks and increased efficiency for the overall banking system.
While MICR technology is not without its limitations, it has proven to be a highly effective and reliable way to process checks and is likely to continue to be used in the banking industry for the foreseeable future. As new technologies are developed and refined, there may be opportunities to further improve the efficiency and accuracy of check processing, but for now, MICR remains an essential technology for the banking industry.