Note you will need to create a checkerboard pattern such as in my ps_checks.gif which is 8x8 pixel squares alternating white and #cdcdcd (which tries to match that of the checkerboard background from Photoshop's transparency selector).
You can also use the IM internal pattern: checkerboard, but it looks different.
Here is the command for ps_checks.gif:
convert -size 8x8 xc:white xc:"#cdcdcd" +append \
\( +clone -flop \) -append ps_checks.gif
Now, try this if on Linux or Mac:
bgcolor=`convert source.png -format "%[pixel:s.p{0,0}]" info:`
convert source.png \( -clone 0 -tile ps_checks.gif -draw "color 0,0 reset" \) \
\( -clone 0 -fill "$bgcolor" -colorize 100% \) \
\( source.png -channel r -separate +channel -threshold 0 -negate -blur 0x12 -level 40x100% \) \
-delete 0 -compose over -composite source_result.png
You can adjust it with the blur amount and the first value in -level.
This works without having to create a constant green image:
bgcolor=`convert source.png -format "%[pixel:s.p{0,0}]" info:`
convert source.png \( -clone 0 -tile ps_checks.gif -draw "color 0,0 reset" \) \
\( source.png -channel r -separate +channel -threshold 0 -negate -blur 0x12 -level 40x100% -negate \) \
-delete 0 -alpha off -compose copy_opacity -composite -compose over -background "$bgcolor" -flatten source_result.png
This works without having to get the color first, but is a bit more awkward as it has to specify the input image again:
convert source.png \( -clone 0 -tile ps_checks.gif -draw "color 0,0 reset" \) \
\( -clone 0 -tile source.png[1x1+0+0] -draw "color 0,0 reset" \) \
\( source.png -channel r -separate +channel -threshold 0 -negate -blur 0x12 -level 40x100% \) \
-delete 0 -compose over -composite ssource_result.png
Alternately (and simplest), try
convert source.png \
\( -clone 0 -tile ps_checks.gif -draw "color 0,0 reset" \) \
\( -clone 0 -channel r -separate +channel -threshold 0 -negate -blur 0x12 -level 60x100% \) \
-swap 0,1 -compose over -composite source_result2.png
But if you lower the -level 60x100% too much below 60, you will start seeing the yellow.
If on windows, then see
http://www.imagemagick.org/Usage/windows