What Is OCR Technology?

Optical character recognition technology has turned document processing on its head. Bringing benefits that will improve efficiency and productivity. You think your business doesn’t need OCR technology? How are you digitizing documents? Your team punching keyboards? How many errors are corrected? How many are missed? Let’s look OCR benefits and use cases…

Download your free eBook and learn how much manual document processing is costing your business, and how much you could save with automated data workflows.

What is OCR?

Optical character recognition – OCR – also referred to as text recognition, changes printed documents into digital images. It uses automation to transform the scanned document into a machine readable PDF which can then be edited and shared.

An example of OCR technology in action would be when you scan a receipt. The scanned receipt will be saved as an image. This is a static image and you won’t be able to manipulate it. But, OCR software can turn the static image into a text document, which you can then edit.

OCR technologies eliminate the need for manual data entry.

Why is OCR important?

We’re fighting to reduce paper consumption to minimize the negative environmental impact caused by cutting down trees and filling landfills with tons of waste. But, businesses are still using print media. Documents such as receipts, invoices, contracts, legal documents, and more.

Alongside the devastating effect on the environment, paper documents take up a lot of physical space. And they’re a nightmare to manage.

Yes, we live in a digital world, so paperless businesses are emerging. Scanning individual documents and creating images is time consuming, requiring manual intervention. 

OCR technology saves your business time and money by converting images into text. This text can then be understood by your company’s software. 

Automating your document processing with OCR software ensures your workflows are streamlined, manual data entry errors reduced, and productivity increased.

How does OCR technology work?

OCR technology scans a digital image, finding and recognizing letters, numbers, and symbols. Simple OCR exports the text, but it remains an image. 

A more advanced OCR technology can convert the characters into editable text. 

AI OCR technology implements methods such as intelligent character recognition – ICR – that can identify languages and styles of handwriting. And is able to export the size and formatting of the text, along with the layout of the text. Again, providing editable text.

OCR technology steps…

Image analysis

A scanner reads a document and converts it into binary data. OCR software analyzes the scanned file and categorizes the light areas as background and the dark as text.

Pre-processing

The OCR software prepares the image, removing imperfections, before reading. This is done by…

• Fixing alignment issues that may have occurred during the scan
• Smoothing the edges of text images and removing digital image spots
• Script recognition for multilingual OCR technology
• Cleaning boxes and lines in the image

Text recognition

OCR technology uses two algorithms for recognizing text…

• Pattern matching
  A character image – glyph – is compared to a similar stored glyph. Pattern recognition is only successful if the stored glyph has a similar scale and font to the input glyph. Matching works best with images scanned from documents that have been typed in a known font.
  
• Feature extraction
  The glyph is broken down into features such as closed loops, lines, line directions and line intersections. These features are then used to search for the best match among the stored glyphs.

Post processing

Following analysis of the content, the system converts the extracted text data into a computerized file. Some OCR technology can create annotated PDFs that include both before and after versions of the scanned document. 

What are the benefits of OCR technology?

Killing off manual data entry!

Okay, more details. The main benefit of OCR technology software is that it simplifies data entry. Allowing you to store files on your computer, rather than in multiple filing cabinets. Giving your team universal access to all your documentation.

Other OCR software benefits include…

• Reduced costs
• Faster and more efficient workflows
• Searchable text
• Centralized and secured data
• Improved employee satisfaction – no more boring manual tasks
• Improved customer satisfaction as your team has accurate information

The history of OCR

The first use of OCR can be found in telegraph technology and reading tools for the blind. A machine invented by German scientist Emanuel Goldberg read characters and converted them into telegraph code. 

Edmund Fournier d’Albe, at the same time, invented the Optophone, a scanner that used tones that matched specific letters as it scanned a page.

Towards the end of the 1920s, Goldberg created the Statistical Machine, a document search engine that used photoelectric cells and pattern recognition to search microfilm archives using optical code recognition. In 1931, when he patented his invention, IBM bought a license for it.

In 1974, Ray Kurzweil founded Kurzweil Computer Products, Inc. It developed a product with omni-font optical character recognition that could recognize text printed in most fonts. He chose to implement the technology in a machine-learning device for the blind. Creating a reading machine that read text out loud – text-to-speech.

In 1978, the company launched a commercial version of its OCR product. LexisNexis bought the program and used it to upload legal paper documents for its online database.

In 1980, Kurzweil sold his company to Xerox.

The solutions we work with today can deliver near perfect OCR accuracy. With the introduction of artificial intelligence, the automation of complex document processing workflows is a cinch.

What’s the difference between OCR and AI OCR technology

Traditional OCR is used to identify text in documents and convert it into digital text. The text is extracted without any understanding as to what it says, which adds an element of unreliability. 

With the context of the document absent, mistakes in information and formatting will occur. OCR also can’t recognize style changes in documents. Meaning templates have to be built for each new style.

Traditional OCR technology needs humans in the loop, which can increase the chance of data entry errors.

AI OCR technology works without the need for specific rules or templates. It’s an advanced method that means businesses can seriously reduce manual tasks in their document processing workflows, while increasing efficiency and productivity.

Rossum’s AI-powered document processing solution helps business extract data from large volumes of paper based documents. This end-to-end automation of document processing workflows leads to boosted employee productivity and engagement. Our AI OCR software also automatically exports captured data into your business systems for a complete AI document processing solution.

OCR technology real-world use cases

OCR is used as a ‘hidden’ technology in multiple systems in our daily life. This revolutionary technology has helped modernize businesses and improve accessibility for many people. 

OCR technology use cases include…

• Data entry for accounts payable documents – invoices, receipts, POs, bank statements
• Extracting contact details from business cards and documents
• Besting those pesky CAPTCHA tests
• Making electronic documents searchable – PDFs, Google Books
• Passport recognition
• Traffic sign recognition
• License plate scanning
• Tools for the blind
• Archiving of historic newspapers and documents

reCAPTCHA (I’m not a Not Robot) – every time a CAPTCHA is solved, that human input helps digitize text, annotate images, and build machine learning datasets.

Google Translate

Yep, it’s in your pocket. 

Way back in 2012, Google Translate added Google Goggles’ OCR technology. Rather than typing, hand writing, or speaking, the OCR software meant all you had to do was click the camera button at the foot of the translate screen. The viewfinder opens, take your picture, highlight the text you need to translate, and boom!

Velmi dobře, very good, très bien, बहुत अच्छा, Molto bene, Muy bueno, sehr gut, جيد جدًا, Zeer goed, ganz gutt…

This example of OCR software is a no brainer for travelers. For instance, trying to type in words from languages with different script styles is no longer such a pain. Translate street signs, menus, etc., with a quick scan.

Google Translate recognises the text from the image using optical character recognition – OCR – technology and gives the translation.

Blind and visually impaired users

Thanks to OCR software, the mountains of printed material that we still have to deal with is accessible to blind or visually impaired users. OCR includes a speech synthesizer that once the text is scanned, reads it out loud.

There are heaps of OCR software apps that you can upload to your phone. Using the camera to take a photo of the text, the apps then read it back to you. The apps are able to find the edges of the document being scanned and provide a tone that sounds when the text is in focus. 

Relief during the COVID-19 pandemic

During the pandemic, the city of Prague was looking to distribute relief impartially, by scanning people’s ID cards and pairing the ID numbers with the number of packages each person should receive. 

For it to be successful, it needed to work on a device that everyone has in their pocket. A city hall member approached Rossum to discuss AI OCR technology. 

Following an intense weekend, our team developed a mobile app that incorporated our OCR technology into a mobile app.

Accounts payable

Lost invoices, manual data entry error, duplicate invoices, etc., can result in huge financial loss, reputational damage, and dissatisfied customers. 

Here’s how OCR technology in accounting benefits your AP processes…

• Capturing invoices – invoices ares received, then uploaded to an invoice processing system for data capture
• Frictionless approvals – invoices sent automatically to the relevant authority to reduce delays and errors
• Zero manual data entry – AI OCR software scans the paper documents and captures the data

Take a look at our customer case study from This One – an accounting and consulting firm in the Czech Republic – and how it’s saving its customers 75% of time spent document processing.

“Today, we harness Rossum’s capabilities to help accounting departments with digital transformation. It’s about saving the planet with paperless invoicing and embracing the innovation in accounting all at once while saving costs. We help accountants to survive this new era of digitalization.”
Denisa Zdarska, Transition and Innovation Manager at This One

Check out our eBook – Cost Of Doing Nothing | Zero In On Accounting Automation. It explores the impact of persevering with manual document processing in accounts payable. It highlights the benefits of accounting automation, questions to ask an IDP vendor in your RFP, and the true cost of doing nothing. Our goal is to help you devise an action plan for your business’ prospective AP automation strategy.

Types of OCR technology

The various types of OCR software depend on their application and what they’re used for. Examples include…

Simple OCR technology uses templates to store different text and font images. The software has pattern matching algorithms that search out the differences between text images. Analyzing each character against its internal database. This solution is limited due to the sheer volume of fonts and handwriting styles that exist.

Intelligent character recognition – ICR – reads text like a human, thanks to machine learning. A neural network analyzes text and processes images in a loop, looking for image characteristics such as lines, loops, curves, and intersections. 

Intelligent word recognition is similar to ICR technology, but studies whole word images rather than changing the images into characters.

Optical mark recognition identifies logos, watermarks, and other text symbols in documents.

OCR technology in industries

As a business grows, so does its paperwork. While more team members can be recruited, there are many manual tasks that can be automated. Reducing the monotony of your team’s workload and increasing the efficiency and productivity of your business.

Costs will be reduced and because your data will be digital, it’ll be centralized and secure. Teams will have access to a single source of truth, with up-to-date information. 

Here’s how some industries are using OCR technology…

OCR technology in education

OCR is a great tool for students to help with their lessons. Examples of OCR working in education include…

• Note taking – OCR says the words, to transform text to speech
• Text can be formatted – size, color, alignment, spacing, columns
• Text can be highlighted
• Digital bookmarks can mark places in the content
• Tool for students with dyslexia

OCR technology in finance

OCR technology in banking is used to process and verify paperwork – deposit checks, loan agreements, etc. This verification process has reduced fraud and increased transaction security. 

An AI OCR solution like Rossum helps CFOs use automated document processing to extract data from bank statements, handwritten surveys, bank cheques, emails, image files, letters, and more.

Check out our customer case study with The Master Trust Bank of Japan that demonstrates how the bank reduced manual workload by 75%.

“With Rossum, we see impact early on: from reducing overhead costs to increasing the speed of commercial transactions and significantly reducing the risk of exposure. The solution has a positive influence on both internal users and our clients”
Ryo Kawaguchi, Manager at Master Trust Bank of Japan

OCR technology in healthcare

OCR technology in healthcare is used to process patient records – treatments, hospital records, tests, insurance payments. This has streamlined record management, reduced the number of manual tasks and data entry errors.  

OCR technology in logistics

The logistics industry uses OCR technology to track invoices, receipts, delivery receipts, bills of lading, dock receipts, customs clearance documents, package labels, purchase orders. 

Automated data extraction and data entry speeds up the document processing workflow, ensuring…

• Fast transportation of goods – goods manufactured, packed, and shipped on deadline
• Improved accuracy – automated classification of documents eliminates data entry errors that can lead to late payment charges and penalties
• Real-time insights – identify when to optimize business processes with data analysis
• Improved internal communication – centralized logistics communication and documentation in a single platform

Take a look at our customer case study with PortPro, and see how the company saved up to 94% of the time spent on every document process. 

Best OCR technology for document processing

When choosing an OCR solution, there are two overall categories you should take note of – template-based and cognitive. 

A template-based OCR engine captures data from documents using a predefined template. For every document types, the software is trained to understand where to look for data and what kind of data it’s looking for. 

This means you can convert documents into more beneficial data. However, this kind of OCR also needs you to build a template for every format of the document you want to scan. There will also still be some manual work, as the accuracy of each scan will have to be verified. The second kind of OCR scanning is cognitive OCR. 

Cognitive document capture software uses machine learning technology to automatically learn – using different document formats – over time. You won’t need to create custom templates for every document layout and you’ll be able to digitize and automate entire business processes. 

Depending on your needs, the best OCR software uses cognitive OCR. It’s user friendly and you can get up to speed faster. 

When selecting OCR software, make sure it has a robust AI-powered engine. Anything less and you’ll experience issues scanning documents that are less than perfect. 

Rossum is a leading example of a platform with an AI-enabled document processing solution that goes way beyond OCR. We provide intelligent document processing that helps you organize and automatically process documents such as invoices, purchase orders, packing lists, claims, or any other document format. 

Bonus! Integration is fast and simple. Trained out-of-the-box to understand and scan multiple document formats.

OCR technology FAQs

Free eBook: How much does document processing cost your business?

Our free eBook – How much does document processing cost your business – reveals how much manual data entry is costing your business. Financially, and with regard to customer satisfaction, time spent validating data, getting approval, and more. Are you stuck with template-based OCR? How do you tackle hand written invoices?