What are virtual accounts and what are the target client segments most likely to be interested in virtual accounts?
Virtual accounts are dummy accounts that are linked to a real account. The virtual accounts act as if they are real and can be used accordingly, therefore having all the advantages that a real account has, but do not have the disadvantages that come with a real account, such as the administrative burden or the costs related to it.
There are many different client segments that virtual accounts can be used for. Particularly, a VAM solution is relevant for the clients of banks who have a large (internal or external) customer base of their own, where VAM allows a client to open an account on behalf of their clients and to actually allow these clients to self-serve themselves. A practical example might be a fund manager with many clients in the form of investors who could all be running virtual accounts in a VAM environment as part of the servicing model of the fund manager. The real funds are aggregated and held in real accounts, in the books of the bank. Or, as another example, a corporate treasurer with many accounts on behalf of their subsidiaries enabling the treasury to manage the company’s cash in an efficient manner. Another customer segment is the payment service providers managing multiple accounts on behalf of the merchants or the merchant’s merchants.
What do you see as the main benefits that banks and corporates can derive from using virtual accounts?
For banks, using virtual accounts drives to increase revenue, helping in retaining existing customer and attracting new ones. Also, this is a way to stand out and differentiate brand and offerings and develop new chargeable services. Furthermore, cost cutting, reducing customer churn and staff time spent on set-up admin also derive from using virtual accounts.
Developing a viable alternative to notional pooling and also establishing a platform to segment the offer and extend the line/reach are some other benefits that can help banks to future proof their business as well.
What`s more, virtual accounts reduce burdens associated with compliance. Banks face huge operational blocks when dealing with KYC procedures and in maintaining these numerous accounts. Hence, they are offering virtual account-based solutions to their clients. An additional benefit of virtual accounts is that they are a convenient alternative for banks to reduce Basel III requirements.
For corporates, virtual accounts enable them to efficiently manage their cash management structures and risk, as well as improve their organisational resilience. Virtual accounts are also addressing corporate`s concerns on banking and account management fees, virtual accounts offerings, enabling corporations to reduce their banking fees and streamline their cash management flows, while reducing staff time spent on payment-related admin/increase back office. Moreover, using virtual accounts helps to improve reporting and decision-making, as well as productivity, offering solutions to automate repetitive tasks.
What are the main considerations for a bank to take into account when offering a Virtual Account Management solution to their corporate customers?
A Virtual Account Management (VAM) platform can help corporates create, manage and monitor virtual accounts better. Tieto’s VAM offer benefits like a self-servicing portal, a dashboard view to account information and a sophisticated reporting module, in addition to payments and liquidity management.
With transaction banking revenues under pressure and the compliance burden bringing higher costs to a bank, we believe that virtual account management have a positive and transformative impact across transaction banks` operating model. Virtual account management can greatly help corporates to centralise and handle bank accounts in an easy way, through a self-servicing portal, offering considerable savings in term of time spent managing bank accounts.
What are Tieto`s lessons learned and challenges while working with customers on VAM proof-of-concepts? Can you mention some success stories?
Tieto’s typical implementation is between 6-8 months simply because our VAM solution works in between the banks core systems and the customer channel, requiring no in-depth integration project. Integration is done by using a combination of a front-end overlay with standard formats and protocols on the back-end to implement VAM. This leaves legacy systems largely untouched for quicker time-to-market.
For banks who would like to get acquainted with VAM, Tieto has a sandbox environment to demonstrate the VAM set-up to banks’ customers, and proven methodologies for prototyping and fast-tracking use cases.
About Sheri Brandon
Sheri Brandon currently is head of Transaction Banking for Financial Services at Tieto, a global leader in payment solutions. Sheri has been in the Payments & Cards industry for more than 2 decades, having worked in the banking industry and in payment technology companies. Sheri is a thought leader in the corporate payments, retail payments, cards business as well as in mobile payments.
About Tieto
Tieto aims to capture the significant opportunities of the data-driven world and turn them into life-long value for people, businesses and society. We aim to be customers’ first choice for business renewal by combining software and services capabilities with a strong drive for co-innovation and ecosystems.
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