General Electric Information Services recently announced it will provide electronic data interchange services on the Microsoft Network, an on-line service due to begin operating this summer.

Electronic data interchange is the exchange of business documents such as purchase orders and invoices in standard computer formats. Financial institutions view EDI as a way to attract new cash management revenues.

GE Information Services, Rockville, Md., provides electronic data interchange services to about 35,000 businesses. It is the largest value- added EDI network in the nation.

The new service is not expected to compete head to head with those offered by banks, because its users will be small businesses that most banks do not currently target as electronic data interchange customers.

Bob Plumb, a spokesman for GE Information, said the service is "specifically designed for small businesses that are just getting started but do not have the sophisticated EDI requirements that major corporations have."

The new service will also differ from those offered by banks in that it will not allow for corporations to send payments with their invoices. Such services are known as financial EDI.

Despite the current differences, observers said the banking industry is concerned with the interest of GE and others in carrying corporate payments.

In addition, the banking industry remains sensitive to the potential competitive threat posed by Microsoft.

Several pointed out that a day may come when a GE or a Microsoft may buy a bank, paving the way for increased competition in financial EDI.

"The next evolutionary step is to allow the Microsoft Network to put someone like a bank out on the network to allow payment with data," said an observer, who requested anonymity.

"I wouldn't be surprised to someday see the equivalent of this (EDI capability) out on the Microsoft Network that includes payment with data,"

Richard Crone, a consultant with KPMG Peat Marwick's Center for Electronic Banking, Los Angeles, noted the latest news regarding the Microsoft Network was the first indication that it will be something more than just a retail-based service.

"It sounds like they've been positioning for the more lucrative end. . . . and that's business-to-business or consumer-to-business," Mr. Crone said.

The GE/Microsoft electronic data interchange service is designed for light duty transactions, and uses American National Standards Institute formats. The on-line service will be available as a fee-based option on the Microsoft Windows 95 operating system, scheduled for launch in August. Observers note the software is expected to penetrate the market quickly.

GE's service will not require companies to purchase costly translators for electronic data interchange, which can run as high as $8,000 to $10,000.

Experts said such systems investments are beyond the reach of a vast majority of the nation's approximately 10.5 million companies.

For years, banks have invested resources to expand their financial EDI businesses. The investments, for the most part, have yet to pay off, experts said.

Nevertheless, some bankers are not particularly troubled by the prospect of more competition for such business.

"From a banking perspective, all I'll do is throw it onto the pile of others competing to get into electronic commerce and trying to find a way to be a part of the financial trade cycle," said Nick Alex, a senior vice president with NationsBank Corp., Charlotte, N.C.

"I certainly respect GE in the VAN (value-added network) business," he added.

Last year, Mr. Alex's institution was among several combining to found the EDI Bank Alliance Network Exchange, or Edibanx, a wholesale payment system devoted exclusively to financial EDI.

Mr. Alex said the Microsoft/GE effort was a "good thing" because it helped promote "the understanding of electronic commerce and EDI."

"This looks to be a fairly low-tech solution for EDI-capable trading partners of large corporations to do purchase orders and invoices," Mr. Alex said.

"This is just another way to do it electronically, and not a particularly innovative, nor integrated way for small businesses."

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