The Complete Guide to OCR Technology

by Sathya Jameson 11 min read

Published: Dec 30, 2021 ● Updated: Mar 21, 2024

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Nanonets™ AI-based OCR technology solves many interesting use cases that could optimize your business performance, save costs, and boost growth. Find out how Nanonets™ can apply to your needs.

Many businesses today look at improving their organizational data to make it available and accessible for optimized business efficiency. Access to quick and accurate data can provide businesses with a considerable competitive edge. And nothing works better than the most popular OCR technology that has revolutionized the way businesses function with optimized document workflows and instantaneous data. OCR technology has churned out software solutions that automatically extract data which in turn help in streamlining organizational processes.

Sounds interesting! This article aims to provide a thorough insight into the OCR technology, its evolution, the way it works, benefits, and much more!

What is OCR Technology?
The OCR Technology and Design
Evolution of OCR Technology
The Working Methodology of OCR Technology
Some Use Cases of OCR Technology
ICR vs OCR Technology
Benefits of Using OCR Technology
OCR Technology Software
OCR Scanning Technology
OCR Technology Companies
Nanonets as a Best OCR Technology Software
Conclusion

What is OCR Technology?

OCR Technology or Optical Character Recognition technology is a widely popular technology that has managed to take the digital world by storm. It is designed to recognize text or other information from documents into data that can be deciphered and used by machines.

OCR is capable of extracting text from any kind of document, be it scanned documents, PDFs, handwritten letters, images, printed invoices, and more with ease and accuracy. It then converts that information into a machine-readable format for easy data processing and editing.

OCR tools are a necessity today for any kind of organization and work as a perfect business solution. The technology has inbuilt capabilities to process data just the way humans do and can be used to automatically extract data from machine-printed or written documents.

Nanonets™ AI-based OCR technology solves many interesting use cases that could optimize your business performance, save costs, and boost growth. Find out how Nanonets™ can apply to your needs.

The OCR Technology and Design

The OCR design is adaptive, easy, and effective which is one of the reasons it is popular and suitable for different kinds of businesses. OCR technology is generally used where there is a need to extract text from images or other files into a machine-interpretable language for further processing of data. This means that an OCR design and technology-based software can be used to read invoices, goods receipts, contracts, number plates, patient IDs, or any other important information important to different businesses.

Any extracted information can be stored, indexed, edited, and retrieved by computers as required, reducing the need for physical files and ensuring smooth progression to paperless offices. The technology also comes in handy when there is a need to convert important data into specific file formats such as XML, JSON, etc. that businesses may use in their processes.

Evolution of OCR Technology

OCR is said to be an age-old data entry technique that was used after keypunching (a device used to punch holes on hard paper cards, in line with a code relating to alphanumeric characters).

In the 1970s it attained commercial viability when businesses started recognizing its capability to convert basic text from digital documents into data that can be read and interpreted by machines. As time progressed, OCR technology gained steady popularity adding value and cost-effectiveness to various businesses.

By the 1990s, OCR technology was the main tool used to digitize historical newspapers and index them as a database for easy access. Since then, the OCR design and technology have been constantly evolving to suit the needs of modern businesses.

From printed images and documents that were stored only as PDF files, OCR software helped scan, recognize, and capture text and save them as further retrievable and editable files. The speed and accuracy at which they performed all these tasks have brought OCR technology to the forefront of digital technologies.

Today OCR technology is offered as an API and/or as a cloud-based service to integrate seamlessly with applications. OCR wands and scanners have enhanced data capture to the next level. Modernized OCR technology software has inbuilt AI-based processing capabilities that allow recognition of various handwritten text in multiple languages, facilitate cognitive capture of data within images, processing them with high speed and accuracy like never before.

The Working Methodology of OCR Technology

Though OCR technology software is used by many industries and can vary according to purpose, they are primarily designed to work using certain standard principles.

The common phases of OCR technology are as follows:

Pre-processing phase

The first stage of the OCR technology, this phase consists of scanning required data to make it free from ‘noise’ and imperfections for better clarity. This may involve removing a few constraints such as speckles or spots, deskewing or aligning texts by tilting them, spacing or isolating characters, removing overlapping lines, and identifying character layouts for accurate processing. These techniques help to improve the overall outcome of images with better quality outputs.

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Character recognition phase

This phase involves recognizing the text with characters or patterns. OCR technology software can use different methods to segregate the images into smaller sections to decipher the character in them. This may be performed using mainly:

Matrix matching - Also referred to as pattern matching, the image of a character is first isolated and then compared to a template of fonts. Done in a pixel-by-pixel format, the font and size need to be specified and included for the software to perform this kind of matching and is generally not used to recognize handwritten documents.
Feature extraction - This type focuses on breaking down a single character into various features namely lines, line intersections, and curves. Since it follows a certain algorithm it has more recognition capability than matrix matching and can be conveniently used with new fonts and even with handwritten fonts. This sort of character recognition not only helps with recognizing each character but a full character group to make a sensible word.

Photo by Jon Tyson on Unsplash

Post-processing Phase

The final and important stage that can differ in basic and advanced OCR technology software is the post-processing stage. This stage checks for the accuracy of the extracted text by comparing it against an established vocabulary. Sophisticated software can perform near-neighbor analysis to arrive at commonly-used words. For example, a phrase such as ‘clout-based’ will still be recognized correctly as ‘cloud-based’ as it is more common in occurrence.

Raw image source: https://www.ktoo.org

Some Use Cases of OCR Technology

OCR technology is used globally by various industries in many different applications for different business processes. It turns out to be the main technology that powers so many services in the world today. Listed below are some of the most common use cases of OCR technology:

Data Entry Automation - Data entry is a crucial task in many businesses that involve a lot of documentation. Invoice processing, inventory checking, sales or purchase order activities have a lot of documentation involved and data has to be constantly extracted and pooled for a smooth workflow. OCR technology often comes in handy in making these processes easier through automatic extraction of relevant data, minimizing human effort and errors in the process.

Human Resources (HR) - Tasked with the most repetitive and laborious payroll and payslip processing, OCR technology is a boon for the HR department in any medium to large organization. OCR technology solutions can handle tasks such as:
Filtering resumes of prospective candidates
Data entry during the onboarding process
Validation of timesheets
Processing payments to employees
Filing reports
Processing tax payments
Filtering resumes of prospective candidates
Data entry during the onboarding process
Validation of timesheets
Processing payments to employees
Filing reports
Processing tax payments

Assisting the visually-impaired - OCR technology has been used for many years since its inception to help visually-impaired people. It involves 3 main elements namely, scanning the text, recognizing characters, and converting the text into useful audio files or digital files that can be accessed through computers or as braille outputs.

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Automatic number plate recognition - Detection of number plates of vehicles is done today through specialized OCR technology. This vehicle identification method helps track down vehicles in traffic, parking areas of buildings or malls, identify stolen vehicles, or for other purposes such as insurance, emission checks, etc.

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Passport recognition at airports - Advanced OCR technology is used at many government offices to identify people based on identification cards, driver’s licenses, etc. Passport offices and airports are no different and rely heavily on sophisticated OCR technology to digitally recognize passports. Scanning, extraction, and recognition aspects of OCR are used for this purpose. This technology helps identify people by capturing the MRZ region, an encoded field that contains 30 or 44 characters which includes information on passport ID, name, country, nationality, date of birth, validity date, and more.

Banking services - Banks were one of the first institutions to use OCR technology and continue to use it till today. This technology is used to perform various functions at banks such as updating KYCs, cheques analysis, loan applications, scanning and updating passbooks, performing customer account information checks, enabling online banking services, and more.

Enabling menus for online food delivery apps - OCR is part of many apps on devices such as mobile phones, laptops, etc. OCR technology is crucial in putting together menus of various restaurants for people to choose from food delivery apps. Apps such as Uber Eats, Grubhub, and more depend on OCR technology for their seamless business functioning.

Healthcare - OCR technology plays a massive role in capturing, extracting, storing, and retrieving any patient’s records in respective hospitals. Healthcare is a huge domain and integration of data to various departments is made feasible through the use of OCR technology. Details such as general patient information, medical history, referral doctors, consultations, medications, etc. are all digitized and accessible through OCR.

source: www.freepik.com

Invoice processing - Most businesses have the routine work of invoices that appear frequently. Invoice processing is cumbersome and automated solutions with OCR technology can make work life much easier for those involved. They can also help make invoice processing faster and error-free to increase business efficiency. OCR technology can be used to capture invoices, match with supporting documents, and initiate approvals in a matter of minutes. It can also be used for extracting product information and updating other related systems with real-time data efficiently.

source: www.freepik.com

ICR vs OCR Technology

Data capture is vital for ensuring smooth workflows in any business. Though many types of data capture such as barcodes, QR codes, OMR, magnetic stripe cards are used, OCR and ICR have gained a quick reputation in this space. Sometimes the simple OCR design and technology were not sufficient to handle the different document requirements in many businesses.

While OCR technology software can scan printed documents and extract texts from them for businesses, it cannot help with handwritten documents. ICR technology software is specially designed to read handwritten or unstructured documents which are useful in many types of businesses.

For a business that deals with only structured or printed documents, OCR technology software will be suitable to get the job done. But for big businesses that handle both printed and handwritten documents, the more sophisticated ICR technology may be the ideal solution. This is more so because ICR technology software can not only handle existing handwriting patterns but also familiarize and recognize new patterns for enhanced document data capture.

Benefits of Using OCR Technology

OCR technology can help businesses overcome limitations and enable faster and immediate access to data. Here is a list of some of the biggest benefits a company can derive through OCR technology:

Eliminates the need for manual data entry process
Reduces dependency on human effort
Lower incidence of error
Improved efficiency and productivity
Savings on the cost of labor, printing materials, and physical storage space
Supports multiple document formats
Centralized repository of data for access anytime
Smooth workflow of data ensures faster customer service

OCR Technology Software

OCR software has emerged successful in providing automated data entry, indexing and retrieving documents for various search engines, improving pattern recognition, converting text to speech form, and numerous other applications.

OCR Scanning Technology

Choosing OCR technology software can vary depending on the size and in particular the business needs. Some companies may need only OCR scanning technology while others may need a more robust and complete solution.

OCR scanning technology is useful for companies who need to convert documents into editable formats such as Excel, Word, or PDFs. An OCR scanning technology offers a significant advantage over traditional scanners which were used to scan a document as only an image file as against an editable version.

Some of the popular software available with OCR scanning technology are Adobe Acrobat, ABBY Cloud Reader, Nanonets, Kofax OmniPage Ultimate, and more.

OCR Technology Companies

Many OCR technology providers have come up with software that can replace human effort and dependency, and provide effective and accurate solutions. Companies such as Rossum, Nanonets, Google, Kofax, Adobe, etc. all have specialized OCR software with various capabilities to read different documents, extract relevant text from pictures, PDFs, and other formats.

Some of the best OCR technology software in the market today are Nanonets, Kofax Omnicapture, Klippa, Rossum, ABBY Flexicapture, Docparser, Google Document AI, and more.

Below is a quick reference comparison of some of the OCR features present in the best free and online OCR software that are mentioned in the above paragraph:

‌Nanonets™ AI-based OCR technology solves many interesting use cases that could optimize your business performance, save costs, and boost growth. Find out how Nanonets™ can apply to your needs.

Nanonets as a Best OCR Technology Software

Nanonets is a unique AI-based software solution that uses powerful OCR technology to perform complex document capture tasks. Working in conjunction with machine-learning and deep-learning techniques, it can extract necessary data from any document with a shorter turnaround time. Nanonets is highly customizable and designed to suit the specific business needs of various organizations. Some of its main features are:

Conclusion

OCR technology software has provided many businesses with the capability to churn out data with speed and accuracy like never before. With scanning, extraction, and recognition of text made simple, easy, and accurate, employees can find relief from mundane data entry work and focus on improving productivity. OCR technology can elevate the way business functions to new levels. Adaptive and customizable OCR technology solutions are the biggest need of the hour in today’s fast-paced world!

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