In virtual banking technology physical ledger accounts are replaced by virtual bank accounts held in a various types of virtual banking system. Companies can, theoretically, run their whole operations with just one bank account. This is only the start, virtual account technology and the approach is now being used in many different ways world-wide.

Reconciliation using virtual accounts  

Corporates are using virtual accounts to cut their reconciliation costs significantly by first rationalising who owns and needs bank account(s), then just using one bank account with many virtual sub-accounts - typically one per customers so corporate knows precisely who the payment from. This can cut reconciliation costs dramatically. However, many corporates have found that (inevitably) they still need to have separate payroll a/c and other special accounts, e.g. for tax, etc.

All the leading cash management banks now offer virtual account solutions of different kinds.

Solving the ‘what for’ problem

Having a separate virtual account for each customer does not solve the problem as to what the payment is for. Corporates still need to have the information as to what exactly the receipt is for, which is notoriously difficult to obtain.

RBS have been offering their Smart Collect Integrated  Receivable Solution since 2011:

Source & Copyright©2017 - RBS 

This system, like many others, offers reference accounts. The difference is that the beneficiary can also choose whether the reference account is allocated per client or per invoice or can adopt their own internal identification system, so enabling them to identify what the payment is for as well - see.

Virtual payment cards solution from Amadeus and US Bank

With virtual payment cards each payment transaction has a unique credit card number, so, as long as they have the technology, users of virtual payment cards will know exactly who the payment was to and also what for.

The recent announcement that Amadeus and U.S. Bank are partnering to deliver virtual payments technology to U.S. travel agencies shows exactly how the technology works and the huge advantages it can bring.

For years, offline and online travel agencies have laboured with inefficient payment processes to settle with travel suppliers. U.S. Bank, America’s third largest commercial bank card issuer, and Amadeus, a leading provider of advanced technology for the global travel industry, have entered a strategic alliance through which Amadeus will offer the bank’s virtual payment technology to its U.S. travel agency subscribers. Amadeus will launch a Mastercard-branded Amadeus B2B Wallet which enables:

• easy reconciliation of payments with sales files as each payment transaction has a unique credit card number
• travel agents to pay their travel suppliers faster, replacing payment methods such as invoicing, wire transfers, bank debit card, checks and cash advances
• travel agencies to securely pay suppliers almost anywhere in the world
• travel agencies to earn rebate revenue from their supplier payments.

Amadeus B2B Wallet is currently being rolled out to select travel agencies in the U.S., with wider availability to follow in the coming months.

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CTMfile take: Virtual technology in accounts and payment cards offers real and significant cost savings in reconciliation, and improvements in cash management control. How virtual and efficient are your payments and cash management processes?