August 23, 2022

What are EDI payments and how do they differ from ACH and EFT?

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Payment data security is paramount for modern businesses. The average payment dataset contains enough information to jeopardize a business if exposed by malicious actors. Thankfully, they can use electronic processes to secure data when using different B2B payment methods.

EDI payments are one of the best secure payment order solutions. In this guide, you'll learn the following:

What is an EDI payment?

An Electronic Data Interchange or EDI payment is a way for businesses to exchange payment transaction information electronically. The term EDI payments does not refer to money transfers. Instead, it refers to companies securely exchanging information related to payments.

For instance, companies routinely trade transaction data such as bills of lading, purchase order numbers, bank account information, payer bank account details, etc. EDI payments help companies exchange this information electronically, eliminating the need for paper documents.

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


Here are some other situations where EDI payments are used:

  • 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 - payer banks transmit debit authorization messages to other financial institutions when processing electronic transactions, such as automated clearinghouse (ACH) payments.
  • EDI 820: Payment receipt - 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 ones.

Types of EDI payments

There are two types of EDI payment solutions for businesses.

Direct or point-to-point EDI 

Direct EDI is a closed network that connects two trading partners. You cannot add a third party to this network. Large organizations use Direct EDI when transmitting payment data to their partners.

Web EDI 

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 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 you?

EDI payments suit almost every type of business. If you routinely send and receive payments from customers and vendors, EDI payments will streamline your accounts receivable and accounts payable processes. You'll realize substantial efficiency gains because EDI solutions automate payments eliminating manual payment processes such as mailing invoices and other documents.

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 benefits of EDI payments

Here are some of the biggest benefits of EDI payments.

Stronger business partner relationships

EDI payments help you verify payment request information quickly, helping 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.


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

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 ensure the right stakeholders receive payment data. 

Compared to other protocols, such as ACH (which uses a proprietary network,) EDI networks are more secure. We explore the differences between EDI, ACH, and EFT in the section below.

Faster processing times

EDI networks use the internet to transfer information between stakeholders. Thus, 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.

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 eliminating costly manual work 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. Thus, you can create predictable cash flow cost-effectively.

Increased productivity

EDI payments eliminate tedious manual paperwork in the payments process. Your employees can spend more time identifying causes of cash flow hiccups instead of manually matching documents and mailing them. You'll therefore identify potential cash flow issues ahead of time, leading to a more resilient financial position.

What to watch out for when using EDI payments

EDI payments are an excellent option for your business. However, you must watch out for a few issues when setting it up.

Infrastructure security

EDI solutions rely on robust technical infrastructure; you'll have to onboard your business partners onto your closed network before exchanging information. You must also 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. Therefore, you must invest in training your staff, given the sensitivity of the data you'll be transmitting.

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


Setting up and maintaining an EDI network is costly. More importantly, costs can get out of control if you don't install the right maintenance processes. Establishing and 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 such businesses encounter. While third-party service providers are an option, consider whether your business 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 ensure only the right roles in your organization have visibility into these datasets.

Comparing EDI payments to ACH and EFT payments 

EDI, ACH, and EFT solutions are often used interchangeably. While all of these methods are electronic, you must understand the key differences between them.

EDI versus ACH

ACH payments are popular in the United States. However, they differ from EDI payments per the points noted below.


  • 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

EDI versus EFT

EFT (electronic funds transfer) is a blanket term or category that covers all forms of electronic payment options. In practical terms, EFT is a set of laws and regulations that defines consumer rights and standards for electronic payment enablers to follow.

Thus, EDI refers to a form of EFT payments, while the latter encompasses everything from ACH and wire transfers to credit card/debit card payments.

Why virtual cards are a great alternative to EDI payments

EDI payments are a great option to secure payment data. However, they make 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 cards are a much better option. Here's how they help.

Accounting integration

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. Ramp's 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 do not help you integrate them with your expense policies. For instance, you may incur duplicate spending thanks to employees subscribing to similar apps.

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

Ensure data security

Ramp's virtual cards are built with security in mind. Your data is encrypted at rest and in motion per the highest security standards. Ramp also simplifies fraud monitoring by helping you create spend management categories and restrictions.

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

EDI payments are a great way of ensuring payment data security. They eliminate manual processes in the payment approval workflow. Make sure you install the right infrastructure to realize all the benefits. For some businesses, virtual cards offer a better solution.

Learn how Ramp’s virtual cards simplify business expense management and help you secure payment data.

Head of Content, Ramp

Fiona Lee is the Head of Content at Ramp, overseeing content marketing, customer education, and customer marketing. She brings over a decade of editorial experience developing high-quality B2B marketing and customer support content. Prior to Ramp, she led content teams at companies large and small, including Google and Intercom, where she developed a strong interest in small businesses growth topics. 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.

Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.


What information is necessary to process an EDI payment?

EDI payments typically consist of the following information at a minimum:

  • Payer information
  • Payee information
  • Payment amount
  • All bank details including account numbers and addresses
  • Any other remittance information or remittance advice
  • Any documents connected to the payment workflow, such as bills of lading, invoice numbers, or purchase orders.

Is EDI payment a direct deposit?

Direct deposits are a form of ACH payments. EDI payments and ACH payments are different forms of electronic payments.

Who uses EDI payments?

Businesses of all sizes use EDI payments. Typically, large companies use it to secure payments made to suppliers.

When should I use EDI payments?

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

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