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EDI bankers ticket to electronic commerce


Thursday, April 5, 2012, 8:00 AM
It is true that just a small number of banks have established the use of Electronic data interchange system. However, with developments and improvements in outsourcing, it is becoming inevitable that every bank must install and use this amazing asset. Different kinds of persons have come up with various definitions of electronic commerce. For instance, commercial banks term it an initiative put in place to support retail customers with home banking. Others say its meant to help merchants carry out their secure payments with ease. Then we have those who simply refer to it as a support to corporate customers who transact the businesses of back- office processing. The fact is that all these definitions talk about one thing; electronic commerce. When referring to EDI, we mean a special type of electronic commerce that does not deal with paper business to business transactions. Today, it is estimated that merely 95% of all business transactions are executed on paper. Processing paper data is more expensive in all spheres since Data entry is very slow and it is also prone to numerous errors. For instance, RJR Nabisco estimated that it costs only 93 cents to process an electronic purchase order using EDI while $70 to process the same order on paper. This definitely explains why banks should embrace the use of such an asset. EDI involves computer to computer, business to business interchange of information in standard forms. EDI is known as Financial EDI if financial institutions transact their finance businesses via it. However, the latter has not gained ground like the nonfinancial institutions. In the United States of America, for example, numerous nonfinancial institutions like government agencies have established and are using EDI while less than 50% of Banks in the US use EDI network services. The main reason for this is the high costs required to initiate and operate EDI. As a resulted EDI has only dominated large companies with the financial muscle to access it. Upcoming firms have shied away except for those getting support from their financial endowed customers. This post tells us more about the various perceptions of different people to the electronic data interchange service. In addition, it reveals the statistics of different institutions in terms of their use of EDI services. It analyses the advantages of using EDI compared to processing of data using paper documents.

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