EDI on the Internet


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As the Internet gained prominence as a tool for conducting business, trading partners using EDI began to view the Internet as a potential replacement for the expensive leased lines and dial-up connections required to support both direct and VAN-aided EDI. Companies that had been unable to afford EDI began to look at the Internet as an enabling technology that might get them back in the game of selling to large customers that demanded EDI capabilities from their suppliers.

 

Financial EDI

Although Internet EDI is growing and offering new, flexible information interchange solutions for many trading partners, some elements of EDI remain difficult to transfer to the Internet. The EDI transaction sets that provide instructions to a trading partner’s bank are called financial EDI (FEDI). All banks have the ability to perform electronic funds transfers (EFTs), which are the movement of money from one bank account to another. The bank accounts involved in EFTs may be customer accounts or the accounts that banks keep on their own behalf with each other.

When EFTs involve two banks, they are executed using an automated clearing house (ACH) system, which is a service that banks use to manage their accounts with each other. In the United States, banks can use the ACH operated by the U.S. Federal Reserve Banks or one of the private ACHs operated by a group of banks or a separate company. EDI-capable banks are banks that are equipped to exchange payment and remittance data through VANs. Some banks also offer VAN services for non-financial transactions. These banks are called value-added banks (VABs). Nonbank VANs that can translate financial transaction sets into ACH formats and transmit them to banks that are not EDI capable are sometimes called financial VANs (FVANs).


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