Optical Character Recognition (OCR): What Is It and How Does It Work?

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Optical Character Recognition (OCR) technology is the conversion of scanned images that are handwritten, printed text, or typed into machine-encoded text. Sounds too technical? Don’t worry; you don’t need to be an experienced developer to learn about it and how it works. In this post, we’ll discuss the basics of OCR technology. 

All About OCR

OCR can turn analog files into digital ones—that is, if we put it simply. It can recognize different characters, whether handwritten or printed, and convert them into machine-readable formats. It will let you transform codes into digital forms through various techniques. 

What you should know is that OCR doesn’t recognize the actual nature of the object you want to scan because it only “looks” at the characters, and that’s it. 

The technology isn’t only used to identify words, but it can also read codes and numbers. With that, it is useful to identify long strings of letters and numbers. 

Some providers develop specific OCR systems so they can deal better with different inputs. Such systems can deal with special images and improve recognition accuracy through a combination of optimization techniques. 

How It Works

There are three steps that OCR goes through to provide the desired outcome. The first one is image pre-processing. This step helps increase the chances of successful recognition; in turn, it will help improve the actual image data. Doing so will help enhance any distortions. 

The next step is character recognition, in which the feature extraction plays a significant role. This is when the data is too large to be processed; therefore, it’s reduced to only a set of features. The selected features are the critical ones. Through this process, it guarantees better performance. 

The final step of the process is post-processing, which is an error-correction technique. This step helps maintain the high accuracy of OCR. However, the accuracy can be improved further if the output is restricted by a lexicon. 

OCR in Business

OCR helps companies get a much better handle on the information they store digitally. That’s why it’s used in different types of businesses as it’s used in data entry and automatic recognition. 

Here are some of the industries where OCR is used: 

  • Banking: OCR helps improve transaction security and risk management. 
  • Insurance: OCR is used to improve customer service. Moreover, OCR helps drive performance in the industry. 
  • Healthcare: OCR makes it possible for healthcare facilities to scan, search, and store the medical histories of patients easily. Hospital records can be digitized and accessed through OCR; hence, this helps streamline workflows and makes healthcare services more efficient. 
  • Legal: OCR in the legal industry helps a lot with paperwork as it allows them to digitize documents. 
  • Tourism and Hospitality: OCR helps guests self-check-in by scanning their passports on an app or website. 
  • Retail: OCR can capture data from packing lists, purchase orders, invoices, and many more. It also helps improve customer experience. 

Final Thoughts

Now that you know the basics of OCR, implementing it in your business is the next step. OCR can make your processes and workflows run more smoothly and efficiently. More importantly, it will help save you a lot of time and money in the long run. 

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- About the Author

Picture of Louis Balla
Louis Balla
Louis is the Co-Founder of Anapact and partner at Nuage, a top rated ERP consulting firm based in Venice Beach, California.