Return to Main Page Go to Order Details
During the period 1988-1995, I directed a Research Programme in Supra-Organisational Systems at the Australian National University. One of the primary focus areas of this Programme was Electronic Commerce, especially EDI. In addition to a long series of project reports and academic papers, two major publications were disseminated widely in industry and government: the GPIEEE report of 1990 (Government Practices and Intentions in relation to EFTS, EFT/POS and EDI), and the GPIE II report of 1992 (Government Practices and Intentions in relation to EDI). This report extends that series, by examining the application of EDI to financial transactions.
The origins of this report were not in Australia but, strangely enough, in Austria. I undertook a Visiting Professorship at the Johannes-Kepler-Universät Linz in 1992, presenting a series of seminars on supra-organisational systems, and running an EDI project comprising 25 postgraduate students. In addition, a Masters candidate, Johannes Braunschmidt, who worked in the Treasury Department of the country's steel company, VOEST Alpina Stahl, undertook a study of financial EDI in Austria.
I was later approached by another Masters degree candidate, Martin Plank, to supervise research on a related topic. Martin is fluent in French and English, as well as his native German, and wanted to undertake his dissertation work, under my supervision, and in Australia. The result of Martin's efforts during 1994-95 is this major study of financial EDI in Australia.
The background is all very interesting; but what justifies the commercial publication of a Masters dissertation? The answer is that Australian industry and government sorely need information on which to base their decisions about investment in financial EDI; and this document provides it.
Many organisations will find the greatest value to lie in the empirical research into what user-organisations, services providers, and accounting software package providers do and do not think about the technology, its costs, and the impediments to its successful adoption. Others will find what they need in the substantial and carefully researched background to the Australian Payments System, the various payments mechanisms, and the trade-offs between documentary and electronic schemes. For others, the primary value will lie in the description and analysis of F-EDI itself, and the straightforward, management-oriented explanation of security risks and the means of addressing them.
I am delighted that this example of international co-operation has been fruitful.
Reader in Information Systems, Department of Commerce, Australian National University, 1984-95
Information technology provides important support to many different payments mechanisms. This report examines one particular payment mechanism, financial electronic data interchange (F-EDI), and assesses the nature and extent of its recent and near-future adoption.
F-EDI involves the electronic transmission of payment instructions and remittance advices. In return for investment in local infrastructure, and charges from services providers, companies and government agencies can avoid many of the costs, errors and delays inherent in documentary-based payment mechanisms like cheques.
EDI generally, and F-EDI in particular, are not particularly new; but they have been adopted more slowly than might have been expected. This report investigates why that has been the case, and whether the inhibiting factors are being overcome.
One particular inhibitor is security concerns. The report provides an analysis of security needs, and of technical features available to address those needs. It concludes that all security risks can be satisfactorily addressed by appropriate application of existing features, and that security should not be an impediment to significantly more widespread usage of F-EDI.
The report also contains the results of a survey of major suppliers to Commonwealth Government agencies. This shows that about half of the respondents have implemented EDI (an apparent increase from about one-third two years earlier), but only 40% of EDI-capable suppliers have implemented F-EDI. The key impediments identified by respondents were lack of EDI-capability in software, too few business partners, low priority, and too few payment transactions to justify the investment. It appears that 200 payments per month may currently be the lower bound for cost-effective implementation. Respondents were generally unwilling to pay significant transaction fees for F-EDI services. Nonetheless, moderate usage growth was foreseen in the near future.
The report also contains information drawn from interviews with the banks that provide F-EDI services, and with suppliers of accounting packages.
The conclusion reached is that all impediments to F-EDI's increased usage are either being addressed, or are capable of being addressed. It identifies those factors which require further attention as being FID legislation, transaction charges, security concerns and inter-operability among the services providers. In addition, F-EDI must be approached in a largely collaborative rather than entirely competitive manner: all participants need to gain something from the implementation of F-EDI.
1. Introduction 1
2. The Australian Payments System 3
3. Financial EDI 28
4. Security for F-EDI 53
5. The Corporate Perspective on F-EDI 67
6. Financial EDI Services in Australia 90
7. Capabilities of Accounting Packages 97
8. Summary and Prognosis 99
List of References 121
This document has provided overviews of the Australian Payments System, the application of EDI to the financial aspects of procurement, and a discussion of the state of play in security, as it relates to financial EDI. The latter chapters reported on the results of three surveys: a questionnaire-based survey of user organisations, and interview-based surveys of services providers and accounting-package suppliers.
The Australian Payments System comprises a diverse array of payment mechanisms, a mature set of financial institutions addressing various market needs, and several clearing systems which reflect the varying priorities of the institutions and their customers.
A significant amount of information technology is already used in support of these payment schemes. Pressures for greater resource-efficiency and security are resulting in still greater investment. As a result, the Payments System is in transition from primarily cash and documentary forms to an as-yet uncertain mix of cash, documentary and electronic forms.
EDI is a long-standing means of transmitting structured business communications in electronic form. F-EDI is a means of replacing inefficient documentary payment mechanisms with an automated electronic equivalent. The technology is proven, and most major financial institutions have services in operation. Several different configurations have been implemented, and two primary document standards exist. Impediments which are slowing down the rate of adoption include transaction taxes, the lack of critical mass, costs, security concerns, and lack of EDI-capability in accounting packages.
Because security is a critical aspect of electronic payment systems, a review was provided of those aspects of IT security which are relevant to F-EDI. It was concluded that all security risks can be satisfactorily addressed by appropriate application of existing features.
The survey of major suppliers to Commonwealth Government agencies showed that about half of the respondents had implemented EDI (an apparent increase from about one-third two years earlier), but only 40% of EDI-capable suppliers had implemented F-EDI. The three key impediments identified by respondents were lack of EDI-capability in software, too few business partners, and low priority; followed by too few payment transactions to justify the investment. It appears that 200 payments per month may currently be the lower bound for cost-effective implementation. Respondents were generally unwilling to pay significant transaction fees for F-EDI services. Nonetheless, moderate growth was foreseen in the near future.
F-EDI services provision is primarily being driven by banks at this stage, rather than by value-added network services providers. Although the services generally use standards-based document formats, they are closed, in the sense that each bank's service requires use of a proprietary software package.
Accounting package suppliers appear to be at last noticing the need for at least minimal interfacing capabilities with EDI services, although few of them have integrated the functionality into their software. Doing so will be challenging, because of the competing standards, and closed proprietary nature of the services.
There is evidence that the usage of F-EDI may increase significantly in the next few years. The Commonwealth Government's electronic commerce initiative includes focus on the use of EDI and F-EDI in dealings between government agencies and their suppliers. Moreover, some degree of direct and indirect support may be provided to stimulate their widespread adoption. In addition, several of the States have programs in place designed to stimulate the usage of EDI.
The major banks already support F-EDI, and most use standardised document formats. Accounting package suppliers are beginning to recognise the need for their accounts payable and accounts receivable modules to include direct, rather than mere file export/import support, for F-EDI.
The key impediments (lack of critical mass, inadequacies in application software, and insufficient ease of use) are therefore in the process of being addressed. Whether and how quickly the growth will occur depends on the extent to which the other factors identified in this report are addressed, in particular FID legislation, transaction charges, security concerns and inter-operability among the services providers.
Financial EDI can provide improved costs, timeliness and effectiveness in the payments and clearance processes. Attempts may be made by some services providers or user-organisations to capture these benefits for themselves. In a collaborative undertaking of this nature, however, the lessons of slow diffusion of ATMs and EFT/POS need to be applied: the approach must be largely collaborative rather than entirely competitive, and all parties need to gain something from the implementation of F-EDI.
Return to Main Page Go to Order Details
Go to Roger's Home Page.
Go to the contents-page for this segment.
Send an email to Roger
Last Amended: 15 September 1996
|These community service pages are a joint offering of the Australian National University (which provides the infrastructure), and Roger Clarke (who provides the content).|
| The Australian National University|
Visiting Fellow, Faculty of
Engineering and Information Technology,
Information Sciences Building Room 211
|Xamax Consultancy Pty
Ltd, ACN: 002 360 456|
78 Sidaway St
Chapman ACT 2611 AUSTRALIA
Tel: +61 6 288 6916 Fax: +61 6 288 1472