What is the meaning of OCR? And what is it used for? - Image by Elf-Moondance on Pixabay Most people are aware of OCR or Optical Character Recognition but what is it exactly, today. Like many technologies it has improved drastically since the technology first emerged barely a century ago.

What is it used for? It’s time to get a good grasp on the concept of OCR and learn everything you need to know about this amazing technology.

In this blog, we will start by answering the question: what is OCR? We will summarise its advantages and explain how this form of digital automation can become your greatest ally in reducing costs in your company!

But first, what is OCR?

If you have never heard of OCR technology before, it may sound like something complex and difficult to grasp. The funny thing is, it is often used to simplify business processes.

In essence, OCR is a technology that recognizes text in images. Fortunately, it recognizes text and converts the text within an image, whether typed, handwritten, or printed, into machine-readable text data.

This way, OCR technology allows you to convert photos or scanned documents, such as invoices, receipts, and passports, into digital data. Then use that data for further processing.

How does OCR work in practice?

For a better understanding of OCR, it is important to understand how it works. First, you need a device that can store the image and then software that can convert the image to text using character recognition. Most often, a smartphone is used in combination with OCR software.

The entire OCR process involves a series of three main steps, which are:

1. Image Pre-processing

In this first step, OCR software scans and optimizes the quality of an image. It increases the grayscale, optimizes the brightness and detects the document’s edges.

The goal of this step is the enhancement of the image quality. In this way, distortions are eliminated, and image characteristics are improved. It is a crucial step for the following steps because it increases the accuracy rate.

2. Character Recognition

In this step “character extraction” follows (character recognition). The OCR software analyzes the patterns of light and dark that make up the letters and numbers to transform the scanned image into text. OCR software can also identify characters in various fonts, so rules are applied to help the system match what it sees in the image to the letters or numbers correctly.

3. Post-processing

Post-processing is the stage of error correction that ensures high accuracy and quality of the data. The OCR software then converts the recognized data into a structured format, mostly JSON. From this point on, processing the data in your database or other system is really easy.

What are the benefits of OCR?

There are several major benefits when implementing OCR software in your company, so let’s have a look at the main benefits and how it can benefit your company:

Reduced costs

You may save more than you think by using OCR software! Reduced employee hours are one of the reasons for cost savings, as are office rent and costs associated with document storage.

Reduced errors

Repetitive processes that involve processing data manually can result in a higher chance of typing errors or neglecting certain statistics or numbers that are vital in a business process. Using OCR software reduces error rates, eliminates the risk of distractions, typos, and other errors frequently found in manual data entry.

Increased productivity

Repetitive processes that involve manually processing data can take up a lot of the employee’s time. By using OCR software, employees can have more time to focus on tasks that really matter, resulting in increased productivity.

More accurate data

OCR software provides the highest level of accuracy. It helps companies control the quality of their data, leading to more accurate data and better decision making.

What is OCR used for?

The possibilities for using OCR software are very broad. For example, identifying and registering people becomes more efficient with the use of optical character recognition. In this context, OCR is very useful for security authorities, registration processes in banks and companies, and the list goes on.

We will highlight some use cases below to get you inspired to start looking for similar procedures within your organization:

KYC processes

Companies across the rental, insurance and telecommunications sectors are required to verify the identity of customers, and it is part of KYC (Know Your Customer) regulations.

Imagine that you need to go to the physical location of your bank, have to present your passport and sign some documentation. Then the bank employee has to verify and enter all the data into the system. This entire process is time-consuming and can be difficult at times.

The above process can be fully automated. Customers can perform this process from home and only have to scan their passport through the use of a camera, with their smartphone, for example. The OCR engine does the rest of the processing.

Loyalty Programs

Nowadays, customer loyalty campaigns require participants to submit proof of purchase, such as a receipt or invoice. In exchange, participants receive a  reward. How do companies verify that the receipt or invoice is valid?

This is where OCR comes in! By automating tasks, you can perform all kinds of verifications, including duplicate detection, in a matter of seconds. OCR becomes extremely useful to help determine the success of marketing campaigns. The best part is that this process turns out to be the most efficient and cost-effective option for companies.

Accounts Payable

Some companies process hundreds or even thousands of invoices every month. The invoices are usually checked by employees and then manually entered into the system. An employee categorizes each invoice to help identify the correct people to send for further checking and payment authorization.

The invoice is then distributed internally, and each is individually checked for errors or inconsistencies. Someone needs to ensure that the invoices are authorized before paying. Also, the due date is not missed because of a lack of authorization, which can incur penalties. Once this is completed, the payment can be processed, added to the financial overview, and, lastly, archived.

The optimal solution for the case described above is to automate the accounts payable process by extracting data from the invoices in a digital format. With the implementation of OCR software, this process can be simplified. Once the invoices are received, they are automatically categorized and sent to the responsible person who generally authorizes the invoices.

The power of OCR

Are you ready to dive into the OCR world? Now that you know what OCR means, its benefits, and what it is used for, the next step is to find an intelligent software provider that suits your business needs.

We hope that we have answered all your questions about this technology. The power of OCR is limitless, and for that reason, you will be able to transform your business in an extraordinary way.

KlippaFounded in 2015, Klippa’s goal is to digitize & automate administrative processes with modern technologies. Klippa currently has an international team of 50 people, with offices in Groningen, Amsterdam and Brasov.


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