What Is MICR?

Date First Published: 20th October 2023

Topic: Computer Systems

Subtopic: Computer Software

Article Type: Computer Terms & Definitions

Difficulty: Medium

Difficulty Level: 5/10

CONTENTS

Advantages and Disadvantages Of MICR

Learn about what MICR is in this article.

Stands for Magnetic Ink Character Recognition. MICR, pronounced "mick-er", is a character recognition technology developed in the late 1950s used to recognise characters with special ink and characters. It is mostly used by the banking industry to verify the legitimacy of cheques, but is also used with credit card invoices, money orders, gift vouchers, mortgage coupons, and more. Unlike barcodes and similar technologies, MICR characters are also readable to humans.

The MICR on a cheque consists of three groups of numbers. This includes the bank routing numbers (a 9-digit number used to identify the bank the cheque is drawn on), the customer's account number (a 12-character number used to identify the checking account associated with the bank), and the cheque number (a 3 to 4 digit number used to identify a cheque for an account holder), which are printed in magnetic ink.

When a document with this magnetic ink is processed, it is passed through a MICR reader, which magnetises the ink and extracts and translates special character information. This verifies the authenticity and validity of the cheque before it is accepted. Due to the use of magnetic ink and unique fonts, they cannot be faked or copied, giving enhanced protection against fraud. A computer with the right hardware and software can read the character printed in the ink.

Before MICR was invented, clearing cheques and documents took a long time due to its manual processing. In addition, the pending number of cheques was increasing on a daily basis due to processing difficulties. To eliminate manual processing and prevent documents from being faked, MICR was invented, which ensured a more organised and error-free method of data processing.

Advantages and Disadvantages Of MICR

The advantages of MICR are:

Reduced fraud. Since unique fonts and magnetic ink are used, it protects against some forms of fraud. For example, if someone tries to photocopy a check, the MICR reader does not detect the magnetic ink. The magnetic ink and unique fonts are also tamper-proof, making it almost impossible for fakes to be created.
It is more secure than OCR because the printed characters cannot be changed.
Error rates are low compared to other character recognition systems.

The disadvantages of MICR are:

It does not support alphanumeric characters and only certain characters and symbols can be read.
The process of printing cheques can be expensive due to the iron oxide ink and the strict printing format.