MICR technology is a crucial element in the use of checks and other financial documents, providing quick and easy validation of documents to ensure secure financial transactions, including deposits, wire transfers, and more.
Understanding what a MICR number is and how it works can help provide a clearer view of the banking industry and other financial institutions, as well as how important physical documents still are, even with modern electronic payment methods.
What is a MICR number?
A Magnetic Ink Character Recognition (MICR) number — also called a MICR code — is a unique set of digits that appears at the bottom of checks.
The MICR line is typically located at the bottom left corner of a check, and it is printed in a particular font that is easily recognizable by machines used by banks and other financial institutions.
How does a MICR line work?
MICR technology works by using special ink with magnetic properties to print the MICR line, which is a string of numbers separated into three sets that include the bank routing number, customer account number, and check number.
The MICR reader machines use the MICR line to read and process checks automatically, reducing the risk of errors and speeding up the payment process.
By using the MICR code, banks can quickly and accurately identify the account to which the funds should be credited or debited.
Parts of a MICR Code
A MICR code consists of three number sets, from the left, a nine digit routing number, a 12 character accounting number, and a four digit check number.
The numbers at the bottom not only serve as a security feature to ensure each check has a unique identity — certain numbers within each set also indicate even more details about the check and its holder.
Routing Number
The routing number, also known as the transit number, is a specific set of nine numbers identifying the bank where the check comes from, the branch of that bank, and the city where the bank branch is located.
The first three digits of the routing number indicate the city of the bank branch where the check comes from.
The next three digits are the bank code, indicating which particular bank holds the checking account from which the check was issued.
The final three digits are the bank branch code, which indicates the branch of the particular bank the check comes from.
Together, they form routing numbers allowing a MICR reader to automatically identify where the check originated.
Account Number
The bank account number is the next set of digits in a MICR line. This number identifies the specific account holder associated with the check.
Account numbers identify who the check originally belonged to and ensure funds are available to be deposited into the proper account.
In addition, routing and account numbers guarantee funds are safely transferred from the proper account.
Check Number
The final set of digits in a MICR line is the check number. This number identifies the specific check within the checkbook. The check number is typically four digits long and is printed in the top-right corner of the check.
Though it may not be as vital to financial transactions as routing and account numbers, the check number is vital for helping check-holders keep track of which checks they've used and to ensure that no checks are lost or stolen.
Uses of MICR Numbers
MICR numbers have a wide range of uses in the financial industry. Here are some of the most common uses:
Check Processing
MICR numbers are primarily used to process checks.
The MICR line at the bottom of a check contains the bank routing number, account number, and check number.
A magnetic ink character reader (MICR) reads these numbers and processes the check by debiting the appropriate account.
Fraud Prevention
MICR numbers are also used to prevent check fraud.
By using special magnetic ink that is difficult to replicate, MICR numbers make it harder for criminals to alter checks or create counterfeit checks.
Account Verification
Banks and other financial institutions use MICR numbers to verify account information.
When a customer provides their account number, the bank can use the MICR number to confirm that the account number is correct.
Transaction Tracking and Compliance
MICR numbers are used to track transactions.
By recording the MICR number for each check that is processed, banks and other financial institutions can keep track of all the checks that have been processed and ensure that they are processed correctly.
The national and international banking standards require MICR to be used, which then allows checks to be automatically accepted at all financial institutions.
Overall, MICR numbers are a vital tool in the financial industry.
By using magnetic ink and special characters, MICR numbers help to ensure that checks are processed correctly, prevent check fraud, and provide a way to verify account information and track transactions.
Ensure safe finances with BILL
Along with the MICR code, every financial institution has several methods and tools available to ensure transactions occur safely and securely.
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