A joint venture that was supposed to secure a place for the banking industry in a strategically important wholesale payments business is struggling to stay alive.

The network, known as Edibanx and organized in 1994 by the Chicago Clearing House Association, has had trouble building transaction volume.

Despite its concentration on electronic data interchange-a technology that automates the exchange of documentation and related payments among banks and their corporate customers-it has lost seven of its 15 dues-paying bank members.

The defectors include Chase Manhattan Corp. and U.S. Bancorp.

"They are in big danger right now of folding if they cannot fund themselves and get participants," said an executive at one of the banks that withdrew. "If you do not have any banks connected, you have no end points, no originators, and no volume."

Robert M. Fitzgerald, president of the Chicago Clearing House Association, conceded that Edibanx "is not without its difficulties from a financial point of view."

But he said the venture's best days are still ahead of it. An Intranet- based EDI service being developed with Electronic Data Systems Corp. should help its fortunes, he said.

"We have not had any growth in the past year mainly because we have been working very hard on this EDS development," Mr. Fitzgerald said.

"We have executed the agreement with EDS that called for a very significant payment, which we made," Mr. Fitzgerald added. "We are confident that we can increase our membership significantly in 1998."

Edibanx-formally the EDI Bank Alliance Network Exchange-was formed as a defensive maneuver by wholesale banks fearing a loss of control over their lockbox operations. As corporations exchanged more documents and payments electronically, banks wanted to protect their cash management income streams by remaining at the center of the transactions.

There was also some impatience within the banking industry to make EDI capabilities available. But Edibanx ran up against the view that the national automated clearing house network was adequate to the task.

"I have never seen the benefit to joining" Edibanx, said Barbara Utendorf, vice president of Fifth Third Bancorp, Cincinnati, and a member of the National Automated Clearing House Association's rules and operations committee. "There is not enough breadth of coverage in there for me."

Nacha, the automated clearing house's rulemaking body, has maintained an EDI council for nine years and recently has made some headway in promoting and supporting bank-run EDI services.

The Herndon, Va.-based association passed a rule change last year requiring all banks receiving ACH payments to present corporations with any accompanying EDI information.

As the ACH becomes increasingly viable, Edibanx's future looks more cloudy, observers said.

Edibanx has held on to many of its supporters. They say the Intranet- based system under development should help EDI services appeal to about six million small and midsized corporations.

Greater demand from corporate clients "will help a lot of banks that have been struggling with joining," said Rick Leander, senior vice president of NationsBank Corp. and chairman of Edibanx' management committee.

Mr. Leander said Edibanx has formed a strategic review board consisting of senior-level bankers from member institutions. The board will evaluate the network's initiatives and relate them to the market's readiness.

"At some point you need to make sure you have the credibility in the marketplace and to convince yourself that the investment you are making is worthwhile," Mr. Leander said.

He added, "All in all, this has been a cheap research and development effort compared to the money that banks poured into services that are much more esoteric."

Fred Wayland, vice president and EDI product director at BankAmerica Corp., one of the remaining Edibanx members, said, "Technically it works. There is value in having an EDI payment system."

But he added that BankAmerica's commitment to Edibanx is on a year-to- year basis.

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