Open a new bank account immediately, when you need it
by Jack Large
The difficulties in opening new bank accounts are here for many years, if not forever. Know Your Customer difficulties are legendary, but there is a solution: Virtual Accounts.
The benefits
There is a long list of benefits claimed for virtual accounts (Accenture analysis):
- Substitute for cash management offerings
- Centralization of treasury functions
- Viable alternative to other liquidity management offerings
- Increased cost efficiencies
- Increased STP reconciliation
- Rationalization of accounts and banking relationships.
While Cashfac claims that they place control of client bank accounts into their hands. Flexible account structures allow segmentation of the business more precisely and allows them to gain greater transparency and control over cash.
- Simplification: A single view and a single platform for any number of accounts linked to multiple banks
- Compliance: Cashfac Virtual Accounts identifies and protects client monies by segregating client funds in dedicated client accounts.
- Speed: Instant creation of multiple bank accounts so that client onboarding limitations are removed and payments can be managed immediately.
- Scale: Quickly scalable to meet the changing needs of corporations, enabling them to improve how they client money management.
- Audit: continuous reconciled views of client cash and internal ledgers to demonstrate necessary segregation of client money and clear records of all transactions to support all associated audit and reporting requirements.Client Friendly: Cashfac Virtual Accounts provides corporations clients with a portal to see their own accounts, reducing internal administration and creating transparency across the cash management process.
But the simplest solution may be the most important: opening bank accounts immediately.
Speed of account opening = the key benefit
Virtual accounts allow creation of multiple bank accounts so that onboarding limitations are removed, so that corporates can setup new accounts when they want. This is is why:
- Roche used virtual accounts in their complete POBO & ROBO payment factory making subsidiaries ‘bank-free’
- Powys County Council used virtual accounts to improve the speed and efficiency needed to help vulnerable citizens.
CTMfile take: In the bank account opening nightmare of today (and many years to come), the simplicity of opening new Virtual Accounts really an example of a ‘frictionless’ service and it works. Does your account structure need to be adapted to incorporate virtual accounts?
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I do not really agree that virtual accounts (VA) are a solution to avoid KYC. At least not if those accounts are to be used outside an inhouse bank (IHB), i.e. for making or receiving payments.
If used for payments and collections, this becomes Payments on behalf of (POBO) or collections on behalf of (COBO) (sometimes also referred to as receivables on behalf of (ROBO)). In this case the bank needs to know the ultimate debtor or creditor. There might be differences in the legal interpretation of AML and KYC requirements by different banks, but in general an IHB would only be allowed to use the VA for those entities for POBO/COBO once the bank has done at least a “light” KYC.
If the IHB (and maybe a third party VA provider) should be “secretely” doing POBO/COBO I am just waiting for the news that company XYZ or the VA provider have been fined a few hundred million USD for breaking AML laws.
And maybe also the unsuspecting bank because they did not detect the misbehaviour of their client (i.e. insufficient KYC procedures). After all, almost all regulators nowadays seem to expect banks to be AML criminal investigators with all their clients being possible suspects until proven innocent.