EDI - It's Not Just for the Big Banks Anymore
Peterson, David L., Independent Banker
Recently, a customer walked into The Bank of Bonifay, a $60 million-asset bank in Bonifay, Florida, with a letter and form from the U.S. Postal Service, which is converting all paper remittances to electronic data interchange (EDI). The form asked the customer to choose between several ACH/EDI options. Unfamiliar with the terms involved, the customer asked the head teller to help determine the best option available to him.
Scenarios like this one are cropping up all across the country, demonstrating the need for banks to be prepared to field customer inquiries about EDI. As Bank of Bonifay Cashier Harry Bell says: "It is important to give the customer a feeling of normalcy, as if we do these all the time. We can't act like deer looking into oncoming headlights."
Has this happened in your bank? Could it happen? Do you have customers who would benefit from your ability to translate electronic data interchange? Would your bank benefit from the fee income generated while providing such translation services? Do you know the differences among EDI, ACH and EFT?
Is EDI for You?
What is EDI and why should your bank be capable of doing it? EDI is simply the payment-related data that accompanies an ACH transaction. The company receiving a payment via ACH needs this information to correctly post the transaction to its accounting system. The data travels with the ACH transaction in records, called addenda records, that follow the payment as part of the regular ACH file.
EDI payments can have a single addenda record or multiple addenda records (up to 9,999 per transaction). Most addenda records are structured according to a predetermined format --usually ANSI X12 standards. The receiving customer must have the ability to interpret the X12 messages, or the information will be useless to them. (See exhibit 1.(Exhibit 1 omitted) This is where the bank comes into play. The bank must be able to detect the existence of addenda records in an ACH file, translate the addenda into a readable statement, and get that statement to the customer in a timely fashion. (See exhibit 2.)(Exhibit 2 omitted)
Most in-house applications and services bureaus do not have the programming available to handle EDI transactions. Often, when the ACH debit or credit posts to an account, the critical addenda data is never remitted to the customer. Since most systems do not handle EDI information, your bank may be receiving this data on behalf of customers today and not even realize it. This data is lost in the computer room, and, along with it, a valuable opportunity to cement customer relationships and generate fee income.
Consider the case of MidSouth National Bank, a $100 million-asset Lafayette, Louisiana, bank. One of its best customers received notification from Chevron Corp. that multiple addenda would be accompanying all future transactions. Only one day after MidSouth had been apprised of the notification, the customer called and alerted MidSouth that Chevron was sending a transaction that day. …