Virtual Bank Accounts: Why Businesses Should Own One

Virtual Bank Accounts: Why Businesses Should Own One

Atel Treasurer’s recent publication of their magazine, Issue #107, highlighted some key trends and insights for 2022. One article in particle caught our eye – HOW VIRTUAL COULD THE BANK ACCOUNTS BE? (Pages 10 – 11)

Below we highlight some key takeaways from Atel Treasurer regarding Virtual Accounts.

What are Virtual Accounts?

Virtual Accounts are accounts that a third party holds. These accounts have very little to do with real currency, and the only money in the virtual account is what’s been deposited into them from a person. Multinational organisations make use of multiple real-world bank accounts globally. As a result, managing their treasury become a time consuming and tedious task prone to error. 

Organisations may use virtual accounts because they help them manage their treasury better. For example, suppose an organisation has five separate bank accounts in different countries. In that case, they will have to log into all of those accounts separately online or check their relevant banks’ websites for new updates. You only need one physical bank account with virtual accounts and can create multiple “virtual” bank accounts in those respective countries. These “virtual” accounts are linked to your physical bank account. Consequently, you can view all your treasury operations and financial data in one place, on one platform, and in real-time.

Benefits to having a Virtual Account

Treasury departments can harmonise all their virtual account irrespective of the number and capabilities of physical bank accounts. Above all, the key benefits to having a virtual account lie in its simplicity and efficiency. Some other key benefits to having a virtual account include:

  • Management of virtual accounts in one place
  • Viewing virtual account data in real-time
  • Lower operational costs associated with virtual accounts
  • Reduction in the number of physical bank accounts required
  • Function as a substitute to liquidity management tools
  • Improvement in Straight-Through Processing (STP) reconciliation process

In-House Virtual Bank

The virtualisation of bank accounts allows companies to control and manage bank accounts in a simple way. So by virtualising bank accounts, companies can rationalise their accounting department by closing all obsolete bank accounts opened over the years for accounting or segregation purposes. At a higher level, virtualised bank accounts within a group of companies will allow them to build a new type of liquidity management system called “virtual cash pooling”. Liquidity is natively held on master accounts, and virtual accounts represent various balances related to subsidiaries or businesses. There is no need to sweep cash physically anymore because a virtualised bank account will take care of this matter by booking, interest calculation, and distributing; it will also take care of thin capitalisation monitoring and risk and credit control. Companies will avoid complicated and useless processes with virtualised bank accounts and therefore benefit from better trading conditions.

At Fennech, Our Platform enables medium to large corporations to create an In-House Corporate Virtual Bank. This solution will empower corporations and commoditise the banks. Our Platform uses a robust and easy to use self-administered single Platform-as-a-Service (PaaS). It interacts with Corporate Banks based on correspondent banking principles. As a result, it allows you to exercise complete control of account maintenance for your subsidiaries. In addition, it is a cost-effective solution materialising ROI in months and not years. Manage Multiple Accounts with One Bank on One Platform.

Virtual Accounts - Atel Treasurer

Source: Atel Treasurer

Virtualisation is just one of the paths to achieving efficiency

The virtual bank account solution can be scalable and flexible depending on the type of virtualisation chosen by the organisation, whether a legal entity or virtual business unit. In either case, virtual accounts can be created in a matter of seconds and cost little to maintain.

The virtual bank account solution is just one of the many virtual banking solutions that are available on the market today. Virtual accounts have also been utilised in countries where currency control has made it difficult to move money out of the country or when there is a need for increased security. While virtual banks may not replace a local bank, virtual accounts offer a quick and easy alternative.

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