With First Union's acquisition of Philadelphia's CoreStates Bank came a perk that should help First Union in the wars for corporate and international business: an electronic data interchange (EDI) link between CoreStates and the RoyalBank of Scotland. "That was one of the reasons they paid up for CoreStates-things like the international and corporate businesses," says Nancy Bush, a banking analyst with Brown Brothers Harriman. "(And) to the degree that you serve a corporate base, you need to be able to serve that base internationally, especially in payment systems."
The link gives First Union an electronic payments conduit with Great Britain, in turn, providing it a potential opening in the business of financing trade in goods and services between Europe and the United States, which accounted for $271 billion in 1996, the last full year such statistics were available from the U.S. Department of Commerce.
EDI is used extensively in the international trade business, and the CoreStates product was intended to be part of an offering it called Gateway, a network and product suite aimed at their corporate and multinational customers that bundled card, imaging, funds transfer, SWIFT and Internet applications.
The system is being billed as the first ever, end-to-end EDI capability between the European UN/EDIFACT and the American ASC X12 ANSI standards- both EDI formats-as well as the first time that funds and remittance details can be transmitted together as part of the payments transaction, whereas more commonly, funds and information are transmitted separately and later reassociated. Experts in electronic commerce couldn't confirm that assertion, and both CoreStates and Royal Bank of Scotland declined to comment.
EDI eliminates massive paperwork generated by major trading partners by creating standard file formats for each trade document, including financial documents. But it has yet to achieve mass adoption because it's so expensive and taxing to set up. "There's a critical mass problem, says David Madieros, an analyst with Newton, MA-based The Tower Group. "Only very large corporations have EDI capabilities, and (so) only between 170 and 200 banks in the country are (financial EDI) capable." Technical issues, he says, raise the costs even further.