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EDI (or Electronic Data Exchange) payments involve the transfer of payment information between businesses. EDI payments are one of the best solutions for secure payment orders due to their built-in security. It’s the industry standard for sending bills of lading, account information, and a variety of other payment related documents. EDI payments are common, and you may have seen an EDI payment on your company’s bank statement.

EDI payments are often confused with ACH (automated clearing house) or EFT (electronic funds transfer) processes. ACH and EFT describe electronic payment methods, whereas EDI payments denote the secure transfer of documents related to payments, rather than payments themselves. 

In this article, we’ll explain in greater detail what EDI payments are, their benefits and drawbacks, and EDI alternatives like virtual credit cards for small businesses. We’ll also delve more deeply into how they differ from ACH and EFT payments. 

What is an EDI payment?

EDI, which stands for Electronic Data Interchange, is a method for exchanging business documents between different companies using electronic systems. EDI payments refer to the electronic transmission of payment-related information between businesses using the EDI standard. 

It’s important to note that the term does not refer to money transfers. Instead, it describes the process of securely exchanging information related to payments.

Companies use EDI payments to trade transaction data such as:

  • Bills of lading 
  • Purchase order numbers
  • Bank account information
  • Payer bank account details

EDI payments help exchange this information electronically, eliminating the need for paper-based documents.

EDI payment automation is efficient when conducting international or otherwise complex B2B payments. For example, export-import payments usually involve three parties. EDI payments make sure each stakeholder receives relevant information while maintaining data security.

Here are some of the types of EDI transactions:

  • EDI 139: Student loan guarantee. Used by lenders to convey loan information to students and educational institutions.
  • EDI 812: Credit/debit adjustments. This notification lets all transaction parties know of credit or debit adjustments.
  • EDI 828: Debit authorization. This is when a payer’s bank transmits debit authorization messages to other financial institutions when processing electronic transactions, such as automated clearinghouse (ACH) payments.
  • EDI 820: Payment orders. Also known as remittance advice, these are used to send payment information between customers and merchants when a payment is made via electronic transfer.

Note that EDIs are closed networks. Only the parties you add to your EDI network can exchange data. A single EDI network can be limited to two parties or contain several.

How do EDI payments differ from ACH and EFT?

EDI, ACH, and EFT solutions are often used interchangeably. While all of these methods are electronic, there are some key differences between them.


EDI is a system for exchanging business documents and payment information electronically using standardized formats, while ACH payments are electronic bank transfers made through the Automated Clearing House network.

The reason ACH and EDI are sometimes confused is because they both include remittance information in EDI format. That said, an ACH is a type of electronic fund transfer, while EDI is not a type of payment. It’s only the digital language that businesses use to send payment information.

Here are some of the differences between ACH and EDI:


  • Executed on the ACH network maintained by NACHA
  • Not always instantaneous
  • Requires manual approval from banks
  • Confined to the United States


  • Executed on private networks maintained by a company or its third-party service provider
  • Instantaneous
  • Automates common payment processes
  • Has no geographical limits


EFT (Electronic Funds Transfer) is a broad term for all forms of electronic payment options, while ACH (Automated Clearing House) is a specific type of EFT that moves funds between banks in a batch process.

The types of EFT payments include EDI, ACH, wire transfers, credit card and debit card payments.‍


EFT (Electronic Funds Transfer) is a broad term for all forms of electronic payment options, of which ACH is one specific type. EDI payments, as we’ve alluded to, is part of a broader set of electronic data interchange processes that include non-financial and financial data. 

Here’s how EDI and EFT processes differ: 


  • Strictly involves the electronic transfer of funds
  • Focused on the fund transfer itself, with limited transaction details
  • Used for both personal and business financial transactions where the goal is to transfer funds efficiently


  • Part of a broader set of electronic data interchange processes
  • Carry detailed information about the related business transaction along with the payment instruction, facilitating automatic reconciliation
  • Commonly used in B2B environments where detailed transaction information alongside payments is crucial

What are the 2 main types of EDI payments?

There are two types of EDI payments: direct and web.

Direct or point-to-point EDI

Direct EDI is a closed network that connects two trading partners—you can’t add a third party to this network. Large organizations use direct EDI when transmitting payment data to their partners.


Web EDI is a more accessible version of the EDI framework. It runs on an internet browser (via the secure HTTPS protocol) and you can include several parties on the network. Web EDI is useful if your company lacks EDI development resources.

How do EDI payments work?

EDI payments digitize the payment data exchange that traditionally uses paper documents. Here's how the process works for a large retailer when it places an order with its suppliers:

  • The procurement team generates a PO and uploads it to the EDI software.
  • The EDI software translates all information into the secure EDI format and transmits the PO to the vendor's system.
  • The vendor receives the EDI message and ships the goods.
  • The vendor generates an invoice, translates it to the EDI format, and securely sends it to the retailer's AP system.

Are EDI payments right for your business?

If you routinely send and receive payments from customers and vendors, EDI payments can streamline your accounts receivable and accounts payable processes.

By eliminating manual payment processes like mailing invoices, EDI solutions could substantially increase your efficiency.‍

As a B2C business, EDI payments make sense when paying your suppliers. B2B companies will benefit by implementing EDI payments with customers and suppliers. Large companies almost always require you to follow EDI payment processes.

5 key benefits of EDI payments

Here are five of the benefits of EDI payments.

1. Stronger business partner relationships

EDI payments help you verify payment request information quickly, letting you clear invoices faster. For instance, a manual verification process depends on your AP team receiving documents via snail mail from your vendors.

The result is lengthy payment timelines and potential delays. If the documents get lost or damaged in transit, your suppliers must wait for payment for a while. Your B2B customers will also appreciate EDI payments because it helps them maintain a standard format for vendor payment information and simplify their ERP uploads.

EDI payments simplify the payment lifecycle and lead to stronger business relationships.

2. Greater data security

EDI runs on the ANSI X12 standard and uses the Value Added Network (VAN) transmission protocol. Most importantly, EDI is a closed network that you can control.

For instance, you can create an EDI network between you and another party, excluding everyone else. You can control who has access to your network and make sure the right stakeholders receive payment data.

Compared to other protocols, such as ACH (which uses a proprietary network), EDI networks are more secure.

3. Faster processing times

EDI networks use the internet to transfer information between stakeholders. So, communication is almost instantaneous, and you can execute transactions in real time. More importantly, EDI is a fully automated process compared to other methods.

For instance, ACH processes require banks to exchange information and are processed in batches. If you miss the batch cut-off time for that day, you'll have to wait until the next business day for payments to clear.

EDI payments establish a one-to-one relationship between all parties, eliminating the need for batch processing. All transactions clear in real time, speeding up processing times.

4. Cost-effective payments at scale

You can create direct or web EDI payment networks to simplify your payment processes. Critically, you can automate these processes within the EDI network. The result is cutting manual data entry and delays that create opportunity costs.

For instance, you can verify payment requests instantly by matching documents and transferring payments to your vendors, streamlining your business transactions. You can also receive funds quickly from your customers, reducing cash application times. This lets you create predictable cash flows cost-effectively.

5. Increased productivity

EDI payments eliminate tedious manual paperwork in the payment process. Your employees can spend more time identifying causes of cash flow hiccups instead of manually matching documents and mailing them.

What to watch out for when using EDI payments

EDI payments are an excellent option for many businesses. That said, you should watch out for a few issues when setting them up.

Infrastructure security

EDI solutions rely on a robust technical infrastructure, so you'll have to onboard your business partners onto your closed network before exchanging information. You’ll also have to install cybersecurity protocols.

Maintenance costs connected to EDI payments can be significant. One option small businesses can choose is a third-party service provider. Like cloud service providers, an EDI provider reduces costs through economies of scale.

Staff training

EDI software has a learning curve. You’ll have to invest in training your staff, given the sensitivity of the data being transmitted.

Third-party service providers will typically offer training programs and ongoing support.


Setting up and maintaining an EDI network is costly. More importantly, costs can get out of control if you don't establish the right maintenance processes. Managing an EDI network doesn't make financial sense for some small businesses.

In fact, it can turn into one of the many spend management issues for your business. While third-party service providers are an option, consider whether your business really needs EDI payments.

Data backups

Backups are critical in your EDI infrastructure setup. They also play a critical role in cybersecurity. Make sure your payment data is backed up to an off-site location that you can easily access. Review user access rules and make sure only the right roles in your organization have visibility into these datasets.

Why virtual cards are a great alternative to EDI payments

EDI payments are a great option for securing payment data. However, they make more sense for large businesses that handle several documents during the payment and invoice reconciliation process.

If your business sends less complex data, such as payee and payer information along with invoice and PO details, virtual credit cards are a much better option. Here's how they help.

Accounting integrations

Integrating reconciled payments with accounting platforms is a tough task. Once an EDI payment clears, you'll have to manually import data into your accounting platform.

Virtual cards integrate with popular accounting software and automate routine tasks. The result is quick and accurate monthly closes and deep insights into spending patterns.

Digitized expense policies

EDI payments automate tasks in invoice approval processes but don’t help you integrate them with your expense policies. For instance, you may incur duplicate spending thanks to employees subscribing to similar apps.

Virtual cards can help you streamline expense analysis and automate approvals. You can automate multi-level approval workflows easily and digitize your expense policies.

Increased data security

With virtual cards like Ramp, your data is encrypted at rest and in motion using the highest security standards. You can also simplify fraud monitoring by creating spend management categories and restrictions.

The result is full visibility into your expense payments and precise controls on spending.

The bottom line

EDI payments are a great way of keeping payment data secure and eliminating manual processes in the payment approval workflow. ‍

If your business is dealing with simple transaction data, though, virtual cards may be a better option. Learn how Ramp’s virtual cards can simplify your expense management and keep your payment data secure.

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Content Lead, Ramp
Fiona writes about B2B growth strategies and digital marketing. Prior to Ramp, she led content teams at Google and Intercom. Fiona graduated from UC Berkeley with a degree in English. Outside of work, she spends time dreaming about hiking the Pacific Crest Trail one day.
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