ADVANCES IN TECHNOLOGICAL ALTERNATIVES TO MAIL: THE FUTURE OF OCR FOR ONLINE POSTAL SERVICES

The following is a contribution to the PostCom Bulletin by Dr. Tatiana Vazioulina, Parascript, LLC., an image analysis and pattern recognition company She can be reached a tatyana.vazulina@parascript.com <mailto:Tatyana.vazulina@parascript.com> or (303)-381-3106.  Parascript can be found online at http://www.parascript.com <http://www.parascript.com/> . The views expressed are solely the author's.

For the past few years analysts have warned about the increasing threat of modern market trends to traditional postal services and questioned their viability in the new economic environment.

Indeed, the postal industry has been affected by forces such as globalization, liberalization, deregulation, the opening-up of competition and technological advances. These forces influence the structure of the industry, altering the position of national posts as the sole providers of postal services and depriving them of a monopoly over postal operations. Moreover, these changes challenge the role of the postal industry in supporting commerce and economic development.

However, recent experience has shown that market changes are not necessarily negative and that the future of posts can be more optimistic.

The increase of competition in the world opened a great opportunity for entrepreneurial subjects to improve their efficiency, resulting in even greater competitiveness. Thus, changing conditions and market structures encouraged many posts to devise more efficient strategies, as they searched for a competitive place in their home markets and took advantage of emerging market opportunities. In response to the new challenges, postal operators have looked to opportunities that go beyond their central activities and traditional geographical markets. Quite a few posts have reorganized their businesses, made strategic mergers and alliances, updated operations and diversified activities and products.

Even though the recession, coupled with the vulnerability of letter mail to electronic alternatives, played a large role in the ongoing reduction of mail volume and revenue losses experienced by posts, statistics for the last few years show that the steep decline of total mail volume due to electronic alternatives predicted by some market analysts for over a decade has not happened[1] <#_ftn1> . The volume of mail and its share in the market is evolving differently depending on the range of available alternatives in each segment. Consumers still perceive paper to be a much more effective medium for many applications including books, promotional signage, magazines and periodicals, direct mail, brochures and marketing. Polls showed that 82% of consumers do not plan to pay bills online, explaining why household payments made by mail are declining slower than anticipated[2] <#_ftn2> . Other research confirms that transactional mail volumes have been almost flat over the last few years and direct mail volumes have even increased slightly. Due to the growth of online shopping and internet auctions, market observers also expect an increase of 3-5% per year in small parcel residential delivery, which will result in a cumulative growth of 20-25% through 2015[3] <#_ftn3> .

All of these facts show that the impact of new technologies on traditional mail is often interpreted inadequately; moreover the potential positive impact of technology is often ignored or underestimated. Today the emerging landscape raises the bar for the performance and efficiency standards of mail sorting as well as for the quality and variety of services offered. Postal service providers are in a position where they can and should take advantage of new technologies to improve existing products and services, and offer unique and modernized ones, to customers. To determine potential areas of improvement, posts have to understand the existing level of satisfaction of customers when it comes to the quality of services and products provided to them by the traditional post, as well as the benefits of obtaining the most advanced, competitive means of communication. An understanding of this information will help both the postal industry and its customers to better benefit from the opportunities that technological progress is creating in the communications market (the Internet, for example) and the trend towards the convergence of e-commerce and communications (home shopping, hybrid mail).

There are already a few successful services based on this convergence that are aimed at bridging the gap between traditional mail and electronic communications.  One of the most innovative services, promising significant benefits to both customers and posts, is the opportunity to digitize consumer mail. This service is an answer to the urgent needs of our modern and dynamic society, where individuals and corporations work efficiently in a remote mode. Thanks to the most recent achievements in intelligent recognition technology, digitization is becoming a reality today. The exterior of a mailpiece can be scanned and its digitized image be presented to a service subscriber via a web interface, while the physical mail stays stored at a postal location until the recipient makes a decision about its further processing (open and process, forward to a certain destination, trash, etc.).  Recognition technology is used to locate and read areas of interest on mailpieces (including the recipientís name and address, senderís name and address, barcodes, labels, logos, and other data). This service lets subscribers receive text-based information via computer or cell phone for easy access and fast downloads. Based on data captured from the mailpiece it may be processed according to the customerís requirements. Thus, unimportant envelopes can be trashed and recycled; solicitorsí offers, that may contain confidential information that can be subject to identity theft, can be shredded, while important mail may be re-directed to another recipient, shipped to a customer or have its content scanned and made available for download. One of the most important advantages of this service is the reduction of time until action can be taken about a piece of mail, for example, the time it takes to process incoming payments can be greatly reduced. Mailpieces that contain bills can be determined based on information captured from an envelope, allowing them to be opened, scanned, automatically recognized, presented to the customer to approve via a webform, and paid either via ECN or by generating a paper check against a customerís checking account.

The last decade has witnessed rapid growth in technology, including such areas as computers, IT, Internet, e-commerce. Many forecasts predicted a decline of traditional products and services in the new environment. Apparently, technological advances influenced production, distribution and consumption patterns. However, many expectations were overinflated.

Progress in technology has always had a dual effect, and the example of the postal services industry confirms this rule.  On the one hand technology created significant opportunities for posts allowing them to improve the efficiency of operations. Thus, a decade of intensive investment in Optical Character Recognition (OCR) systems applied to mail sorting equipment resulted in unparalleled success in the speeding up of mail sorting, the increase of OCR reading quality, and the reduction of manual data entry costs. The cost of processing mail dropped from an estimated $55 per 1,000 letters manually to less than $5 per 1,000 letters with automated sorting
[4] <#_ftn4> . On the other hand, it would be wrong to imply that the threat of substitution from digital means of communication is neither real nor significant. This trend is taking place: in some areas mail volume is decreasing, or continues to grow at a slower pace. However, the apprehension of the negative impact of new technology on the demand of letter services is often exaggerated, while the positive opportunities for technology to improve postal services are ignored. In particular, the same recognition technology that has revolutionized the efficiency of mail sorting operations has the potential to support postal products and services that did not previously exist and may provide a competitive advantage over other means of communication.

It is vital not to underestimate the positive impact of new technologies. Technology should be analyzed, understood and its potential scrutinized to enable postal services to take advantage of progress and seize any opportunities available.

 


[1] European Postal Perspective. Facing the challenge from low-cost posts. ©2007 Capgemini.

[2] Is There a Future for Mail? By Luis Jimenez, Senior Vice President and Chief Strategy Officer, Pitney  Bowes. Postal Rate Commission, Washington, D.C. Ė 2006

[3] European Postal Perspective. Facing the challenge from low-cost posts. ©2007 Capgemini.


[4] Arthur D Little, Technology and Innovation in the Postal Sector, A Competitive Market Review, Report to Postcomm, 25 June 2004, p.17