Overview of EDI Payments Processing

EDI payments processing encompasses both collection and disbursement transactions. The exchange of funds is accomplished by means of credit and debit transfers. Transfers can also include a related bank balances, as well as transactions and account-analysis reporting mechanisms.

Most nonmonetary EDI TP communications are handled either directly between the parties or indirectly through their respective value-added networks (VANs). However, the exchange of funds requires a financial intermediary. This “third party” is normally the bank or banks that hold deposit accounts of the two parties.

The EDI operations involve the exchange of remittance information along with the order to pay. The remittance information, which acts as an electronic check stub, can be sent in any of the following ways:

• Directly between TPs or through their respective EDI VAN mailboxes

• Through the banking system, with the beneficiary’s bank sending notice of payment to the beneficiary

• By the originator to the originator’s bank as an order to pay, with the originator’s bank notifying the beneficiary

The TPs and the capabilities of their respective banks determine:

• Routing of the electronic check stub

• Whether payment is of the type:

• Debit authorized by the payor and originated by the beneficiary

• Credit transfer originated by the payor