In the world of printing or finance, you’ve probably heard or read the term MICR, but what is it really? If you’re in a business that prints regularly, particularly in the banking industry, then you need to have a baseline knowledge of MICR printing.
We’ve put together this article to explain what MICR is, how it works, and where it’s used.
What Does MICR Stand For?
MICR stands for Magnetic Ink Character Recognition, which might sound somewhat confusing but in reality, the concept is pretty easy to grasp. MICR is a technology designed to check that paper documents are truly legitimate and original, mostly being used in banking to verify the legitimacy of checks.
What Is a MICR Line?
You can find the MICR line at the bottom of any check that you receive, containing a total of 25 characters. The line is divided into three sections, a nine-digit routing number, a twelve-digit account number, and a four-digit check number, while the nine-digit number is known as the actual MICR code. The line represents everything a check needs to go through, such as the information of the account attempting to transfer funds, the amount being transferred, along with information about the bank itself and the uniqueness of the check.
The MICR code itself is split into three sections of three digits each, with the first three representing a city code, the second three representing a bank code, and the final three representing the branch code.
How Does MICR Work?
The process of MICR starts with a MICR printer, which essentially prints the characters of the city code, branch code, and bank code onto checks (and sometimes other documents) with magnetic MICR ink or toner that can be read by computers to process the information on the check. This allows checks to be processed instantly, rather than having to be authenticated in a longer, human-led process at the bank branch.
The MICR ink itself is sensitive to a magnetic charge, meaning that it can be read faster by computers than traditional or handwritten characters. It’s also generally printed in either E-13B or CMC-7 MICR fonts, both of which were specifically designed to be easily read by the human eye as well, to increase the ease of verification. E-13B is generally used in North America, the United Kingdom, and Australia, while CMC-7 is mostly used in Europe and select areas of South America.
Being a mechanized process means that the digits of a MICR code can be read several times by one reader in a fraction of a second, ensuring that the information is processed properly. In fact, a single reading only takes 1/1000th of a second. It also means that a single check can be processed at various different financial institutions.
To properly print MICR lines, you need both a MICR printer and a supply of MICR toner and ink. MICR lines are then read by special computerized readers, which can be found in banks, retail stores, and anywhere that processes checks.
It’s also worth noting that the banking industry of India uses its own form of MICR fonts and technology, of which the particulars differ slightly from the western format.
Why Are MICR Codes Used?
As stated earlier, MICR codes are primarily utilized to ensure the legitimacy of checks. MICR characters have been a staple in the global banking industry since its introduction, being a powerful line of defense against forgeries and false checks.
The nature of MICR characters is that they cannot be copied or forged, due to the magnetic nature of MICR ink or toner. Along with this, the magnetic ink applied by a MICR check printer can be read by computers even if it’s been covered with a stamp, signature, or any other marks. This means even slightly sullied or tampered with checks can still go through without a hitch, as it’s the magnetic ink that registers with the reader rather than any superficial additions to the check.
If a financial institution or business, a government agency such as the federal reserve, or any other company that prints checks doesn’t align with the ANSI MICR standards, then they are likely to incur some significant fees or charges.
Cases in which MICR technology proves essential include:
- Individuals attempting to use photocopied or forged checks
- Check fraud in the form of changed names, altered dates, and tampered dates
- Attempts at tax fraud, much in the same way as typical check fraud
With the security of MICR in place, banks can minimize their losses due to fraud and illegitimate transactions involving checks.
A Brief History of MICR
MICR was first developed in the late 1950s by the American Bankers Association, or ABA for short, and it didn’t take long before it was used all over the world as the go-to method for verifying checks. The technology was set as the standard by the ABA in 1959, and it only took four years for the American National Standards Institute, or ANSI, to certify the ABA standards as the industry standard for US businesses.
Other Uses of MICR
Along with the technology being used in MICR check printers and readers, MICR lines can also be used in a number of other financial documents to ensure their legitimacy. Some of the other cases where one might see MICR lines include direct mail correspondences, credit card invoices, rebate coupons, and negotiable orders of withdrawal, or NOWs for short. All of these can be adapted as MICR encoded documents.
Final Thoughts
Despite being a technology that’s been in use for over 60 years now, MICR is still the gold standard for detecting and preventing check fraud. As a bank or financial institution, it’s your responsibility to ensure that your MICR laser printer and toner are up to the right standards. If you’re interested in taking your MICR technology to the next level, or simply learning more about the printing industry as a whole, visit our site today!
