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Making Sense of the Alphabet Soup of EDI, EFT, FEDI, and ACH

Posted by Brooke Lester on Apr 16, 2019 11:07 AM

Making Sense of the Alphabet Soup of EDI, EFT, FEDI, and ACH

When it comes to electronic payments, there is a virtual alphabet soup: EDI, EFT, FEDI, and ACH. What do they stand for? Are they interchangeable?

EDI, FEDI, EFT, and ACH are not the same. This post clarifies the similarities and differences between them. Here are the details.

EDI

EDI stands for Electronic Data Interchange. This technology allows organizations to electronically transmit data back and forth in a standard, structured format.

EDI stands for Electronic Data Interchange. This technology allows organizations to electronically transmit data back and forth in a standard, structured format.

What kind of information is transmitted through EDI? Companies use EDI to send orders and invoices. Because these documents are sent electronically, firms save time and money. There is no need for human intervention, which reduces any errors. EDI is used in a variety of industries, including financial services.

FEDI

EDI stands for Electronic Data Interchange. This technology allows organizations to electronically transmit data back and forth in a standard, structured format.

FEDI stands for financial EDI. It is a subset of EDI technology that deals specifically with financial transactions. FEDI has a wide cross-section of users; companies, banks, and governments at the state and federal level utilize this technology.

What are some examples of FEDI transactions? Clearing data, cross-payments, debits, and credits are some of the information that travels across networks. FEDI is used by a wide variety of industries to ensure that payments reach their destination securely and quickly.

EFT

EFT stands for Electronic Funds Transfer. This is an FEDI transaction in which financial institutions transmit funds between one another.

Because EFTs are so common, they are the most well-known type of FEDI transactions (although most people have no idea what FEDI, let alone what EDI, is). Advances in EDI technology, coupled with the growing popularity of the Internet, have fueled that usage. EFTs are probably one of the more recent types of FEDI transactions to hit the scene; the late 1990s saw the rollout the electronic commerce, corporate extranets linking suppliers and customers, and related network-based technologies.

ACH

ACH is short for Automated Clearing House payments. These type of payments are all EFTs.

While the terms “EFT” and “ACH” are used interchangeably, they are not the same things. In the banking industry, ACH refers specifically to the ACH Network, the U.S. electronic payment network that features Direct Deposit and facilitates over 20 billion consumer, business, and government transactions worth over $40 trillion. The ACH Network is backed by NACHA, the organization that oversees payments in the US.

That last bit is very important. There is more than one type of EFT transaction. There are EFTs for credit cards, debit cards, and those for virtual or digital currencies. ACH is the only type of transaction governed by NACHA, and NACHA rules are designed to protect both banks and consumers.

The alphabet soup of payment terms does not have to be confusing. While EDI, FEDI, EFT, and ACH are all inter-related, they are not the same thing. They are each a part of a larger mechanism that enables the fast, smooth, and efficient transmission of information (especially payment data).

Would you like to learn how to utilize EDI to benefit your organization? Calculate your cost today by downloading our free EDI Calculator to see how much you can save.

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