Magnetic Ink Character Recognition (MICR) Line is discussed in this article. You will find it helpful and informative.

magnetic ink character recognition examples

Magnetic ink character recognition (MICR) is a technology meant for the recognition and procedure of checks like payment.

Read Also: How to Trade RSI profitably: RSI+5 MA+12 MA trading strategy

The magnetic ink makes provision for a system to read the characters with signatures, cancellation marks, bank stamps, or other marks.

This technology was initiated in the nineteen century primarily in the late 1950s by a group called the American Bankers Association (ABA) and in due time, it was modernized as a company by the American National Standards Institute.

Despite its existence in these periods of years, the expertise has been used to develop to convene with the current technology of today’s world and has been global.

Let’s discuss how the Magnetic Ink Character Recognition (MICR) Line Works

The magnetic ink character recognition line allows a processor or a computer system to speedily decode and document numerical values, facts, and information from its hypothetical published leaflets or texts to numerical figures such as a check number, routing number, account number, and so on.

Read Also: Key Rate Duration, Definition, Formula & Example of Key Rate Duration

The purpose of the MICR on a check is that it makes use of a certain sequence or thread of fonts that may emerge at the base (usually the left side) of the check.

It comprises three collections of numerical figures which are: a nine-character bank routing number, a 12-character account number, and a four-character check number which are listed in no order of priority.

This technology enables the system to read, process, and record information based on check numbers, routing numbers, and account numbers. This is the sole aim of magnetic ink character recognition.

MICR figures are planned in such a way that these figures process an acceptable stylistic quality or are at least functionally composed and are legible by humans and computer systems.

The unique feature of every MICR figure is that it cannot be duplicated. Two individuals are not entitled to the same account, routing, and check numbers but an individual can possess different account, routing, and check numbers.

This technology has built improved security and over the years it has guaranteed against fraud and computerization of check handling and control.

Read Also: Delayed Draw Term Loan (DDTL) – Overview, Structure, Benefits

Hence, among these three MICR numbers which are the account, routing, and check numbers, the account number is the most popularly known MICR number and is often mistaken to be the entirety of the MICR line thereby ignoring order checks.

Benefits of the MICR Line

MICR lines assist and simplify mechanized check-clearing for instance when a commercial bank directs its checks to the system or central processing systems at the end of each day, the MICR Line will make the information to be simply legible by people such that this information and check can be conveyed effortlessly.

The MICR Line makes it easy for the numerical figures to be produced in designed fonts, called E-13B and CMC-7. This proves that MICR Line is globally used by both developed and developing countries globally.

Research shows that E-13B is used mainly in North America, Australia, and the United Kingdom while the CMC-7 font is solely used in Europe and some parts of South America.

Read Also: Retail Foreign Exchange Dealer (RFED) Registration | NFA 

MICR line makes use of a check Scanner where each check is administered by both the bank and the clearinghouse to ensure that the checks are passes a test of authentication and legality.

When it is done, such a transaction is confirmed that the value of money will be subtracted from that account and transferred to another depending on the nature of the transaction settled but in the case of a particular check, it must be treated numerous times and processed severally by Federal Reserve Centers and according to the banking policy.

This is important to know that throughout the clearing process, a check is permitted to be read numerous times at very high speeds of about 1/1000ths per second. This explains why checks are so identical and consistent in setup or format.

Conclusively, the issue of fraud has been an alarming debate in the MICR Line. Reports of tax fraud, credit card fraud, wire fraud, securities fraud, and bankruptcy fraud have been dedicated so far in the financial services industry.

Read Also: Deep out of the Money Definition and How it Works

In order to resolve this disorder, according to section 3-407 of the Uniform Commercial Code (UCC), the magnetic ink character recognition line has developed tamper-proof magnetic ink and unique fonts making it hard to alter checks.