More than a dozen years after the advent of electronic data interchange, advocates of the technology are growing comfortable in claiming it is helping banks turn profits.
But the claims are tempered by the fact that profits from one highly touted aspect of the technology - financial EDI - have largely failed to materialize.
Instead has come the realization that this function - the automated exchange of payments-related information in standard computer formats - is just another "utility" that corporations demand as part of their overall banking relationship.
"I'm not making money necessarily on the EDI, but the way I look at it is, I make money on the (automated clearing house) translations," said Nick Alex, senior vice president at NationsBank Corp.
The automated clearing house system has several different types of message formats, among them corporate trade exchange, which accommodates elecronic data interchange information.
The first banks to consider the technology's business potential were the major lockbox providers, who realized that their revenues could erode as commercial customers converted from paper to electronics.
But only 50 or so banks have developed full-service electronic data interchange systems since 1983, when the first corporate trade payment occurred between Mellon Bank and Pittsburgh National Bank, now PNC Bank.
"EDI was a necessary transportation infrastructure I had to build in order to do business with corporate America," Mr. Alex said.
Mary Anne Francis, vice president at National City Corp., put it another way: "If you are driven by the customer relationship, then you will say EDI is highly profitable."
"What EDI brings you is more ACH, wire transfer, lockbox, and check printing business," she continued.
Although corporations like the financial EDI services their banks provide, they do not necessarily need them, or want to pay for them. That's because most businesses discovered the benefits of "electronifying" the way they do business more than 20 years ago, before banks even heard of electronic data interchange.
Since that time, an entire EDI-telecommunications industry has developed around the exchange of business documents, using software-enabled private networks.
The largest such network, General Electric Information Services, "has 44,000 mainframes, not telephones, connected to its service," Forrester Research Inc. analyst Blane Irwin noted in a recent report.
"The industry as a whole has not been successful yet in integrating itself into the nonfinancial or nonpayment EDI food chain," Mr. Alex said. "I think it ought to be."
Underscoring corporate demand for the technology, Charles Barnett, senior EDI product manager at Harris Trust and Savings Bank, Chicago, described one corporate customer's attempts to modernize its accounts payable and receivable department.
Minnesota Mining and Manufacturing in St. Paul recently announced plans to disburse at least 25% of its payments using financial EDI by the end of 1996. In dollar terms, that 25% represents "the vast majority of payments 3M makes," Mr. Barnett said.
Harris processes transactions that come via automated clearing house as well as from EDI Bank Alliance Network, or Edibanx, a bank-run system operated by the Chicago Clearing House Association.
Largely in response to the growing demand - and in a defensive maneuver to retain corporate relationships - about 1,030 banks have obtained software allowing them to pass along remittance information to their corporate customers, according to William Nelson, a senior vice president at the National Automated Clearing House Association, Herndon, Va.
But for most banks, the costs of full-scale electronic data interchange services are too high to justify. The initial technology investment ranges between $100,000 and $250,000.
And that's just the beginning. It takes three to five years to develop such a business, and those costs - along with the tab for the requisite technological expertise - can amount to between $100,000 and to $200,000 a year.
Bankers do see bright spots on the horizon, especially through several Internet-based initiatives that could point the way to future banking opportunities.
Some believe private business networks like Sterling Commerce and General Electric will evolve into "trusted third party" intermediaries.
But Mr. Alex said banks would have more "credibility with the corporate customers that I deal with.
"These folks, who borrow from us and have deposited money with us, will want that trusted party to be a broker or underwriter or a trade-finance equivalent in this open network."
