Low-Cost EDI Service under Development for Clearing House Group

By Marjanovic, Steven | American Banker, December 6, 1994 | Go to article overview

Low-Cost EDI Service under Development for Clearing House Group


Marjanovic, Steven, American Banker


In a bid to jump start the stalled use of financial electronic data interchange in banking, the National Automated Clearing House Association has enlisted MCI Communications Corp. to develop a low-cost service.

In April, the Herndon, Va.-based payments trade group asked vendors to develop and market an affordable remittance-handling service for small and medium-sized banks. Of the nearly 11,000 commercial banks in the nation, only a fraction have committed the considerable technical resources required to develop such a service.

Though terms of the deal have not been finalized, association officials characterized it as a multimillion dollar contract.

"There were many outstanding proposals," said Elliot McEntee, president and CEO of the association. "A lot of vendors put forth proposals that provided all the services we were looking for, so it wasn't an easy job."

Financial EDI is the payment-related communication of business documents in standard electronic formats. The cash-management services associated with it are recognized as a potentially lucrative market.

Banks' corporate customers could use the remittance information attached to automated clearing house transfers to update and reconcile accounts receivable when receiving payments.

In providing the service, Washington D.C.-based MCI formed an alliance with Maxxus Inc., a cash-management software developer. The two companies will work in tandem to develop a combined service that has several delivery options for banks and their customers.

As automated clearing house transactions are processed, the service will glean accompanying remittance information which will then be either faxed or sent electronically to the receiving company using MCI's E-mail capabilities.

"The NACHA bid, I personally believe is quite significant," said Martha A. Hanlon, director of electronic commerce product management for San Jose, Calif.-based MCI. She said her company was chosen because of its ability to mass market the new service to both businesses and banks.

But the most significant factor was the joint involvement between the phone company and the banking industry, she added, something that had been "difficult for nonbanks" in the past. …

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Low-Cost EDI Service under Development for Clearing House Group
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