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How Optical Character Recognition has revolutionized the World of Banking?

optical character recognition for banking industry

Optical Character Recognition, or simply OCR, is the process of converting scanned documents and image-based information like handwritten, typed, or printed text into a digital, machine-readable text format. The entire technology of OCR is centered on converting analog text into digital, in other words, a format that can be encoded by a computer. OCR is a simple but effective technology that uses a basic concept to deliver results with widespread industrial applications that help save companies millions of dollars and man-hours. 

OCR: A revolutionary concept

OCR has truly been a game-changing innovation. The myriad applications and functions of OCR cannot be overstated. From government documents like passports to license plate identification, OCR makes life easier by digitizing everything. Even smartphone applications make the most of OCR by helping people carry out simple day-to-day tasks. Apps that convert tourist signs in foreign languages to your native ones while you are out enjoying a vacation abroad are a great example of how OCR has been revolutionary not just for corporations and governments, but also for the common population.

There is simply no end to OCR’s benefits, and one can go on and on while listing them. Still, one specific industry is arguably the biggest benefactor of this technology, and that is BANKING.

OCR and Banking, the perfect match

Ever wonder how only till a few years back, even basic bank transactions took at least 5 to 7 business days, and now everything is just instant. Well, OCR has played a vital role in making everything lightning fast. OCR, along with other digital tools, have paved the way for modern banking, and we certainly cannot thank them enough.

The 25-35 age bracket of today who saw traditional banking as a tedious, time-taking and agonizing process while tagging along with their parents to a bank in their childhoods, can now do wonders with just a few clicks on their smartphones.

Before OCR, manual backlogs and mountainous piles of paper-based transactions slowed everything down. As a result, resources were kept busy while the bank lost valuable hours performing simple tasks like cashing a cheque or processing a bank statement.

Paving the way for modern banking

Fast-forward to 2022 and now you do not need a specially designated employee to enter details from a cheque into a digital system. OCR can scan the cheque from top to bottom, identify different sections like serial code of a cheque, account number of the person, IFSC Code, the amount entered and the signature. After recognizing these sections, it will automatically input the data into their allocated column in the designated account located in the bank’s system. And the best part, all of this will happen even before you can read this sentence. But before we get into the applications OCR serves in the world of banking, let us understand the simple concept of this technology. 

The three pillars of OCR

OCR is based on the three fundamental principles that are Pre-Processing, Character Recognition and Post-Processing

  1. Pre-Processing: Before the all-important Machine Learning programs step in with their character recognition and text identification prowess, OCR makes sure that the scanned document or image is optimized. This step removes flaws, enhances the image and removes distortions to improve the accuracy of recognition.
  2. Character Recognition: The first part of this process is to establish a fixed set of data that will be extracted. This is called ‘Feature Extraction’, a method that ignores unwanted information and extracts only valuable data before actually converting them with ML and Deep Learning engines into a machine-readable text.
  3. Post-Processing: Post-processing is used to correct errors and increase accuracy. A lot of OCR programs are guarded by a lexicon. This makes the algorithm verify and cross-reference the result from a list of customized words designed for a specific industry or application.

If banking moves fast, the whole world goes faster, and it is the simple amalgamation of these three basic principles that contribute highly towards expediting financial operations across the globe.

Manual vs OCR processing in Banks

OCR is not just about speed. The efficiency and accuracy of OCR based processing in banks is simply incomparable to manual processing. Be it cheque processing, statement processing, system security or the cost of operations, OCR processing is the answer.

Manual ProcessingOCR Processing
Requires manual entry of account and transaction details. Time consuming and subjected only  to the working hours of employeesData is automatically scanned, recognized and entered in the system. Extremely fast and round the clock service seven days a week
Prone to human error. This increases delays, backlogs and subsequently costs which are incurred by the bankHighly accurate and efficient. No margin for errors
Hiring employees results in higher overall costsInitial costs of software installation are high but long-term, overall costs are less
Chances of identity theft and fraudFull-proof system against fraud and identity theft
Cannot convert bank statements intodifferent formatsOCR can convert bank statements to Excel, JSON, and a variety of other formats

Cost-effectiveness

Statistics have shown that almost 35% of financial institutions have witnessed an increase of 2 to 5% in revenues after incorporating automated solutions into their bank processing workflows while reducing 70% of total costs incurred during manual processing.

Cloud Support

The data extracted from cheque and statement processing can be stored in an OCR program’s cloud-based feature. This information is encrypted and can only be seen by authorized users. 

Reduces paper-based storage

The in-built cloud storage feature reduces paper-based storage while structuring and organizing the data retrieved for easy analysis. This even reduces the loss of data.

Bulk Processing and accuracy

There is no limit to a machine. OCR systems can process bank statements and cheques in bulk. The time required to process a document is significantly less, and accuracy is 99%. On the other hand, humanized processing has too many limitations. It is susceptible to fraud and errors while being extremely slow.

To sum it up, our entire economic systems depend on banks, and banks rely on OCR for proper functioning. The most brilliant thing about OCR is the simplicity of its concept, which is Capture, Analyze and Automate. A simple technology that is revolutionizing the world in ways many are unaware of.

To win you need an OCR expert

Visionify.ai has a plethora of AI-powered OCR applications that have been specially developed and deployed for our clients across industries. Our team of ML and Computer Vision experts works round the clock to optimize businesses with the help of OCR. Chat with our team to know more about our OCR and Document Parsing Solutions and how it can benefit your business.

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