What is Magnetic Ink Character Recognition (MICR)?
Magnetic Ink Character Recognition (MICR) is a technology used primarily for processing and identifying checks. The MICR line on a check is located at the bottom left and consists of three groups of numbers: the bank routing number, the customer account number, and the check number.
Anatomy of MICR Line
The MICR line typically includes:
- Nine-digit routing number: Identifies the bank branch.
- Twelve-digit account number: Identifies the customer’s account.
- Four-digit check number: Indicates the check’s sequence in the account.
Reading MICR with Computer Systems
The term “magnetic ink character recognition” refers to the technology that enables machines to read, process, and record this information due to the use of magnetic ink. This technology was pioneered by the American Bankers Association (ABA) in the late 1950s and is recognized internationally as a standard.
Key Advantages of MICR
- Readable by machines and humans: Ensures data can be accurately and quickly processed even if covered with markings.
- Increased fraud prevention: Uses special magnetic ink and fonts that are difficult to replicate.
- Global standard: Accepted worldwide, ensuring uniform data processing.
Applications Beyond Checks
Although originally designed for checks, MICR technology has wider applications, including credit card invoices and negotiable orders of withdrawal (NOWs), adding efficiencies to a range of financial documents.
Using MICR to Safeguard Against Fraud
- Enhanced security: The unique fonts and magnetic properties make the MICR line difficult to alter, thereby reducing the chance of fraud.
- Quick validation: Banks can verify checks rapidly to identify and manage fraudulent activities more effectively.
An Example Using MICR in Action
Consider a fictitious check with the following MICR line encoded with magnetic ink:
012345678 123456789012 3456
- 012345678: Routing number, identifying the specific bank branch
- 123456789012: Account number of the payer
- 3456: Check number, identifying which check in the payer’s sequence
This check’s MICR enhances the accuracy and speed of transaction processing while minimizing the risk of fraud.
Frequently Asked Questions (FAQs)
What is a MICR Number?
A MICR number refers to the series of digits (routing number, account number, and check number) imprinted with magnetic ink and readable by both people and machines. This unique identifier aids in automated check processing and fraud prevention.
How is MICR Used in Banks?
Since the late 1950s, MICR has facilitated faster, more secure check processing. It employs a uniform format that allows banks globally to quickly and accurately process checks.
What Data Does MICR Include?
The MICR line on a check typically includes three fields:
- Routing number (9 digits): To identify the banking institution
- Account number (12 digits): To designate the payer’s account
- Check number (4 digits): To specify the particular check within the payer’s sequence
The Bottom Line
Magnetic Ink Character Recognition remains invaluable in modern banking. It offers robust capabilities in automating check processing and fortifying defenses against check fraud. Its consistent use around the globe underscores its utility and reliability in financial transactions.
Related Terms: routing number, account number, check number, banking security, reader-sorter machine.
References
- Troy Group. “MICR Basics Handbook”, Page 6.
- 19th General Court of the Commonwealth of Massachusetts. “Section 3-407: Alteration”.
- Relyco. “History of MICR - Magnetic Ink Character Recognition”.
