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Corporate interest in financial electronic data interchange (EDI) is growing very rapidly, but financial EDI is still a topic that is more discussed than practiced. While understanding the mechanics and issues of financial EDI (also known as EDI/EFT (electronic funds transfer) is vital, corporations need to have the benefit of examining the "hands on" experiences of those companies that are already using financial EDI.
This article examines two very different EDI/EFT practitioners: a major U.S. corporation that developed a proactive EDI/EFT strategy, and a middle-market company that responded to client needs. While the approaches taken by these companies are certainly not the only two ways to become active in financial EDI, they may well be the most common.
Before we discuss the efforts of the two companies, we need to define both EDI and financial EDI. EDI is the computer-to-computer exchange of information that is both computer-readable and computer-processable. The system receiving the data must be able to act on the information directly, without the need to rekey or manually reformat files.
Financial EDI includes payments and payment-related information, such as remittance advices and acknowledgments. Consequently, it involves banks as intermediaries for part, if not all, of the transaction.
As you review these two case studies, note the differences and similarities in how these companies approached and implemented financial EDI. The objective here is to focus on specific application examples, with their rough edges intact. Although your company is probably more similar to one of these than the other, both offer interesting ideas and lessons.
Case Study #1: AT&T
BACKGROUND AT&T has relatively autonomous operating business units. As a result of this decentralized structure, there are relatively divergent and autonomous information systems supporting each business unit.
All of these business units wanted to find a way to use technology to streamline operations without sacrificing the benefits of autonomy. Motivated by a desire to achieve operating efficiencies and gain marketing advantages with technology, as well as to make doing business with AT&T easier, the company set out to find a solution.
That solution was EDI; the natural application of EDI to the routine cycles of billing and remittance processing led to the beginning of the project.
With the banks that offered collections services to support...