Tieto whitepaper, researched by Payments Cards & Mobile, presents the case for virtual accounts for corporates and banks to use them throughout their cash management solutions and services.

What are virtual accounts?

The paper defines Virtual accounts as “a series of off balance transaction accounts which can be incorporated into various forms of hierarchical structures. A group shadow account in the top of the virtual account structure is linked to and mirrors the physical accounts per currency. Such hierarchies can be used to manage working capital and liquidity processes.” 

Key drivers

The report lists the key drivers that are producing the need for virtual account type solutions:

Source & Copyright©2017 -:  Payments Cards & Mobile and Tieto

Part of solution

The problem with virtual accounts is that they can only be part of any cash management solution. The figure below summarises the key areas where Virtual Account Management can make a difference for corporates:

Source & Copyright©2017 -:  Payments Cards & Mobile and Tieto

Bank services

Some of the main areas where virtual account management solutions support a range of corporate treasury services, enabling banks to offer various propositions for centralised, global treasury management. Providing functionality that can include:

• Payables management, payment factory and payment on behalf of
• Receivables management, collection factory and receivables on behalf of, such as automated funds allocation and receivables reconciliation
• Timely and accurate multi-entity liquidity management
• Optimisation of multi-entity funds, including physical and virtual pooling as a viable alternative to notional cash pooling
• Inter-company lending
• Interest apportionment.

The report points out that, “The self-service element of VAM means corporates can open and close virtual accounts themselves as quickly as they wish. They can rationalise physical bank accounts, make inter-company loans and calculate interest with ease. A dashboard view and full suite of reports is also available in real-time at the touch of a button for effective decision-making.”

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CTMfile take: Virtual account management is an important technology for building new corporate cash management solutions, but not a panacea. This report will be of interest to both corporates and banks.