CheckFree Introduces e-Check Bridge, a Solution to Mitigate Risk for Corporate Check Conversion Fraud

ATLANTA and SAN ANTONIO – Payments 2005 Booth # 313 — CheckFree Software, a division of CheckFree Corporation (Nasdaq: CKFR), today introduced CheckFree e-Check Bridge™, a software module that links two industry-leading bank operation solutions, CheckFree PEP+® and CheckFree ARP/SMS™, to ensure that converted corporate checks do not bypass the positive pay process. By comparing original check information to the electronic transaction, e-Check Bridge mitigates risk and bridges the gap between the Automated Clearing House (ACH) processing platform, check reconcilement and positive pay fraud detection systems in corporate check conversion.

The conversion of check-based consumer bill payments into ACH transactions, also referred to as accounts receivable conversion (ARC), has experienced unprecedented growth among all ACH transaction codes. In 2004, 1.25 billion ARC transactions were processed, representing 488 percent annual growth, according to NACHA. While corporate checks are not eligible for conversion under current ACH operating rules, many checks drawn off of corporate accounts are physically similar to consumer bill payment checks. Today, corporate checks are often inadvertently converted, and with transaction volumes continuing to climb, the number of converted corporate checks is projected steadily increase.

“One of the reasons why business checks are excluded by ARC rules today is that banks have developed value-added reconcilement and fraud detection services around check processing for their treasury management customers. Positive pay systems in the check environment provide a strong defense against check fraud for corporations that disburse checks to consumers and businesses,” said Breffni McGuire, senior analyst in the Global Payments practice at TowerGroup. “However business checks that are electronically converted to ACH transactions may bypass these protections, reducing the benefits of automation and increasing risk exposure for both banks and their corporate customers. A bridge between the ACH and check processing systems resolves the problem for checks that have been inadvertently converted to ACH items and provides a technical resolution should NACHA rules be amended to allow conversion of business checks.”

“To accommodate check conversion for corporate items, Wachovia needed to deploy a solution that could blend our electronic transactions and paper check processes while maintaining the high level of information, fraud protection, and systems integration our clients expect,” said Suzy Yoder, senior vice president of Integrated Disbursements at Wachovia Corporation. “CheckFree’s e- Check Bridge software was the right solution to help the bank mitigate risk and meet our clients’ demands.”

Solving The Business-to-Business Check Conversion Challenge
CheckFree’s expertise in reconciliation and positive pay enabled the company to design a module that easily integrates into financial institutions’ systems, and provides integration between CheckFree PEP+ and CheckFree ARP/SMS. This solution blends the ACH and ARP processes and offers the following benefits:

• Reducing risk exposure – e-Check Bridge enables financial institutions to tie together Automated Clearing House (ACH) processing platforms with check reconcilement and positive pay fraud detection systems to address industry-wide banking and corporate concerns over corporate check conversion.

• Automating positive pay, exception management and reporting – Converting checks to electronic transactions can generate a significant number of exceptions that need to be manually reconciled. With e-Check Bridge, converted transactions are easily identified and automatically matched to the check issue information on file. Suspect items can then be sent to companies for their approval.

• Improving reconciliation – With e-Check Bridge, electronic checks are uniquely identified in CheckFree ARP/SMS, enabling the bank to provide companies with an accurate statement of their account status and position.

“CheckFree’s bank customers needed a comprehensive solution to bridge the original check information with the electronic transaction and positive pay safeguards,” said Randy McCoy, EVP of CheckFree Software. “With our reconciliation, risk mitigation and positive pay expertise, we created an end- to-end solution by linking CheckFree PEP+ and CheckFree ARP/SMS. This integrated solution assists financial institutions in reducing operational costs, reducing fraud exposure and creating efficiencies for their corporate customers.”