Beginning Friday, August 27, 2004, the banks began exchanging files of checks over the Image Exchange Network operated by SVPCo, a consortium of large banks. The participants concluded that the pilot demonstrated successful receipt and settlement of the images on the basis of images only, with the paper checks themselves successfully truncated. Both banks have continued to exchange image files, still at low volumes but with larger volumes planned over the next few weeks.

J. D. (Denny) Carreker, chairman and chief executive officer of Carreker Corporation, explained the significance of the event. "Processing of physical checks has always been a labor intensive task. Now, with the electronification of the check, and software to support the exchange of electronic information between banks, the process is now primarily automated -- a major milestone for the banking industry. With very little bank personnel interaction, these files were received and processed, and the information fed to downstream systems integrated into the electronic workflow."

He added, "The test volumes exchanged were small, of course, but it is important to point out that since payments processing involves huge volumes, the software has to be compatible with infrastructure and standards already in place for high volume processing. By designing our software to handle large- volume cash letters and subscribing to ANSI standards, we have created the capability for any bank to participate in image exchange as long as its applications are also ANSI compliant."

Mike Barnum, KeyCorp executive vice president, Client Services Group said, "We are proud to have accomplished this payments processing milestone as planned. Carreker's image exchange and image quality software effectively positions Key to provide our clients with faster and increased access to information and provides a more efficient payment process. We see image exchange as a significant component of our overall strategy and the precursor for additional image-based products and services."

ExchgLink(TM) software will enable banks to truncate checks entirely and exchange only images. Image exchange will significantly reduce banks' operations and transportation costs, and their exposure to payments fraud. At the same time, image exchange will enable banks to develop and offer new products that meet consumer and commercial customer demand for deposit flexibility.

Besides the basic functions of image send and receive, ExchgLink(TM) will also support item-level reconciliation; image quality assurance (by interfacing seamlessly with Carreker's Image Inspector software); and back office functions (by interfacing with Carreker's suite of image-enabled back office systems - Inbound Returns Express(TM), Adjustments Express(TM), and Exceptions Express(TM)).

Image Inspector(TM) software is designed to analyze captured check images for business content deficiencies as well as physical flaws and flag and repair suspect items. It is a vital enabling technology for facilitating direct image exchange because with the advent of check truncation, banks will no longer have access to the paper check, making the quality of the captured images critical. Banks that capture check images can deploy Image Inspector(TM) software before the images are archived or transmitted to another bank or a customer. Archive providers can use Image Inspector(TM) software to verify the quality of images they receive from their user banks.