Abstract: A system and method are disclosed for optical scanning and recognition of bar-coded characters (e.g., CMC7 type characters having a pattern of bars and intervals) recorded on documents such as bank drafts and checks. The system comprises an optical scanner, a microprocessor, a read-only-memory (ROM), a random-access-memory (RAM, with a stored program) for storing data and a plurality of pre-determined character-identifying binary codes. The scanner optically scans each document and produces a plurality of grey-scale pixel values corresponding to the bars and intervals of the characters. The grey-scale pixel values are then stored in the RAM under control of the microprocessor. The microprocessor processes the stored pixel values, and effectively locates, and segments each character on the document by taking one or more slices (segments) of each character. Each segment includes a plurality of grey-scale pixel values representing a horizontal slice of a character.