Magnetic Ink Character Recognition

MICR

Magnetic Ink Character Recognition

In today’s high tech world, nearly everyone takes electronic banking for granted and seldom gives a second thought to automated teller machines, electronic funds transfers, on-line statements, or even utilizing the computer to pay their bills electronically. However, few, if any, realize that these capabilities can be traced back to events that occurred over half a century ago and to the invention and proliferation of Magnetic Ink Character Recognition (MICR). MICR was devised to allow computers to electronically read and recognize consumer and business account information for the purpose of automating check processing and to automate the debit and credit of bank accounts electronically (http://www.rosistem.ro/www/technologies/micr/). Although most people were unaware they were using it, MICR could well be considered the first electronic banking innovation used by consumers.

It is said that necessity is the “mother of invention” and that is certainly true in the case of MICR. MICR was invented in direct response to the economic boom that followed World War II. Prior to that time, the vast majority of people used cash to complete their financial transactions and the use of checking accounts were limited primarily to businesses and the wealthy. As such, processing the quantity of checks that cleared each day was, at worst, a minor inconvenience to the banking industry and could be accomplished by a small number of people using an entirely manual process. However, as more and more Americans of the period experienced a significant increase in both prosperity and purchasing power, the use of cash wasn’t always practical and, as a result, the number of checking accounts increased significantly and checks became as common as the use of cash. In a very short time, banks were faced with the overwhelming burden of trying to process thousands of checks on a daily basis using the existing manual intensive processes (http://www.asapchecks.com/micr/a-checkitout.htm).

As a direct result, banks had to hire numerous additional personnel, build additional facilities, and charge additional fees just to process checks and update checking accounts in a timely manner. Around the same time, Bank of America was predicting that by 1970 they would be required to process over seven hundred million checks per year (http://www.sri.com/about/ermastory3.html). This increased workload, and future predictions of even more, made it painfully clear that a better, less expensive and less labor intensive system or process was severely needed. However, it wasn’t until 1950, when Bank of America tasked the Stanford Research Institute (SRI) with studying the feasibility of using computers in the banking industry, that the promise of automating, improving, and reducing this workload became a true possibility. When SRI released the results of their feasibility study in the Spring of 1951, Bank of America saw enough promise in the concepts presented that they approved and funded a “multi-year development effort” to allow SRI to make the concepts they presented a reality (http://ftp.sri.com/about/timeline/erma-micr.html).

As a result of this on-going development effort, SRI invented the Electronic Recording Method of Accounting (ERMA), the first computer processing system designed to automate various banking tasks, including check processing. As with any new invention, throughout ERMA’s development SRI had to overcome numerous difficulties to make ERMA comply with Bank of America’s stated requirements. One such difficulty SRI encountered, and the one most often considered the most challenging, was in giving ERMA the capability to electronically read, input, and store information already printed on deposit slips, checks, and various other banking documents and forms. This requirement strained the primitive state of 1950s electronics technology and several very promising solutions failed to provide the desired accuracy when optically reading the alphanumeric characters printed on the documents. SRI eventually solved the problem with their invention of Magnetic Ink Character Recognition (MICR) (http://www.sri.com/about/timeline/erma-micr.html).

MICR differed from the other approaches because it did not rely on the visual or optical recognition of the printed information. Instead of trying to read the information photo-electrically, the MICR process used special magnetic inks, and technology similar to that found in the wire and tape recorders of the period, to magnetically sense the shape of the printed alphanumeric characters. To enhance MICR accuracy, SRI also designed and implemented a font of specially shaped alphanumeric characters to make it easier for a MICR enabled system to differentiate between the various characters and/or symbols (http://www.sri.com/about/timeline/erma-micr.html).