Agoura Hills Calif., July 30, 2002 –

Electronic Clearing House, Inc. (NASDAQ:ECHO) reported revenue of $8.4 million in the third quarter of fiscal 2002, an increase of 8.5% over the same quarter in fiscal 2001.  

ECHO reported a net loss for the quarter of $168,000, or $(0.03) per share, as compared to net income of $282,000, or $0.05 per share, for the same period last year. The loss reflects a reduction in gross margin, as well as the Company’s investment to develop infrastructure and staff to support the Visa POS check processing platform. Research and development expense increased to $466,000 in the third fiscal quarter, from $307,000 in the same period last year. 

The Company’s total processing and transaction revenue increased 10.6% to $8.3 million for the third quarter this year, up from $7.5 million in the same quarter in 2001.  

Bankcard processing and transaction revenue increased 6.3% to $6.9 million for the quarter, compared to $6.5 million in the third quarter of 2001. 

Check-related revenues increased over 23% to $1.48 million, as compared to $1.20 million in the prior year quarter. 

Gross margins from processing and transaction revenue decreased from 34.2% in the third quarter of fiscal 2001 to 30.5% for the quarter ended June 30, 2002 due to the departure of several large high margin merchants combined with a rate reduction offered to a major client, U-Haul International. 

“ECHO continues to make progress in developing our check services business, which we believe will be the major engine of our future growth and profitability,” said Joel M. Barry, Chairman and CEO of Electronic Clearing House. “At the same time, our credit card processing business continues to be profitable and generate solid organic growth.   

“The process of developing and bringing to market the Visa POS Check Service has been more time and resource intensive than initially anticipated. However, we are the preferred third-party acquiring processor for a majority of the financial institutions currently piloting the Visa POS Check Services program. While the speed of these programs has been slower than expected, the progress is very encouraging, and we believe we are on track to complete development by the end of this fiscal year.” 

Mr. Barry said that the Company is focusing on three important initiatives to increase growth and profitability: 

1. Grow ECHO’s private-label check services business by focusing on mid-sized retail chains that can benefit most from automating check processing and verification,

2. Complete development and beta-testing of Visa’s POS Check Service so as to leverage ECHO’s check services assets through Visa member banks,

3. Generate new revenue streams for smaller regional and community banks through ECHO’s turnkey MerchantAmerica bank program.

Mr. Barry said that the Company has made good progress in executing these strategies. 

“We have recently entered into an agreement to provide a complete check management solution to a leading multimedia entertainment retailer. Our solution streamlines and automates the process of receiving checks from customers, significantly reducing both the time it takes to know the status of the checks (returned or cleared) and the cost of returned item bank fees. As a result, the company will be able to successfully collect a much higher number of checks and reduce the amount of employee time spent managing the check collection process. This service has compelling economic return and our pipeline of prospective customers is growing.  

“Additionally, we anticipate completing beta testing of the Visa POS platform for two major banks in the upcoming quarter, at which point we expect the Visa POS program will be actively promoted to those banks’ merchants.  We continue to view this as a very significant growth opportunity. Under the program, our ACH processing system and the NCN database will provide the critical infrastructure to enable electronic conversion, verification and guarantee of checks. 

“Finally, we are excited about the growth of our MerchantAmerica service to merchants.  This fully integrated processing service is being enhanced so it can be co-branded with local banks.  MerchantAmerica is a turnkey solution that allows smaller banks to provide their customers with credit card and check processing services with full Internet reporting capability, using ECHO’s back-end infrastructure. This is an attractive incremental revenue stream for these banks, which have not been able to offer these services up until now.” 

Excluding cash used in a legal settlement of $1.3 million, the Company generated $993,000 net cash from operating activities for the nine-month period ended June 30, 2002, as compared to $1.3 million for the same period in the prior year. 

About ECHO:

Electronic Clearing House, Inc. provides a complete solution to the payment processing needs of merchants, banks and collection agencies. ECHO’s services include debit and credit card processing, check guarantee, check verification, check conversion, check re-presentment, check collection, and inventory tracking. Customers include over 60,000 retail merchants and U-Haul dealers across the nation.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts re forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include, but are not limited to, such factors as fluctuations in demand for the Company’s products and services, the introduction of new products and services, the Company’s ability to maintain customer and strategic business relationships, technological advancements, impact of competitive products and services and pricing, growth in targeted markets, the adequacy of the Company’s liquidity and financial strength to support its growth, and other information detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission.

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Investor Contacts:

Donna Rehman, Corporate Secretary 
Electronic Clearing House, Inc.
818-706-8999, ext. 3033 
Agoura Hills, Calif. 
E-MAIL: corp@ECHO-inc.com
URL: http://www.ECHO-inc.com

Crocker Coulson, Partner
Coffin Communications Group
818-789-0100
E-MAIL: crocker.coulson@coffincg.com

Press Releases are also available by calling (800) 233-0406 ext. 3033, or by email to corp@echo-inc.com

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Electronic Clearing House, Inc. (ECHO)
28001 Dorothy Drive
Agoura Hills, CA 91301

Phone: (800) 233-0406
Fax: (818) 991-5973
E-Mail: echo@echo-inc.com
URL: http://www.echo-inc.com