Digital innovations in virtual bank accounts

Digital innovations in virtual bank accounts

What are the benefits to treasurers?

Nick Morrissey discusses corporate virtual bank accounts, with particular focus on the technology advancements and digital innovation that has been made in recent years.

It was not so long ago that corporate virtual bank accounts were viewed as a niche product, one where transition costs outweighed potential benefits. Due to recent digital innovation however, this is no longer the case. More competitive fee structures have changed the effort-reward calculation, with many businesses now actively exploring how their operations can benefit from a change in bank account structure.

Nick Morrissey

Head of Virtual Accounts Product, Barclays Corporate Banking

The benefits of a virtual bank account

The fundamental difference to a standard corporate bank account is that a virtual account operates online without a physical presence, and once established, it is quick and simple to open up a multitude of accounts. Accounts can be grouped together for reporting purposes such as by geography, or division. Each account has a unique International Bank Account Number (IBAN).

Virtual accounts are now being used by businesses in a number of sectors. They’ve become popular in legal and property companies, sectors where numerous client monies are being handled using manual processes to track individual payments. An added benefit for these businesses is an improvement in their compliance with regulations that govern the handling of client money.

Local authorities are also benefitting from the use of virtual accounts, where the ability to automate receivables (think of council tax payments as one example) has improved the customer experience and reduced costs.

What’s changed?

Here, we consider seven main topics which are playing a vital part in the evolution of virtual accounts.


A changing business strategy

Over the last three years, businesses have reviewed their strategy in light of the pandemic, higher interest rates, increased geopolitical risks and the cost-of-living crisis. For some, this means looking at new geographies, for others it means building or extending direct-to-consumer and e-commerce capabilities. Simplifying back-office processes (such as reconciliation and straight-through payment processing) is one key part of success – the ability to create new bank account arrangements quickly and at scale is helping these businesses to keep costs and manual effort under control while increasing business opportunities.


Demand for visibility

Whether it’s a legacy of 2020 or just good practice, treasurers are expected to have a real-time view of all corporate balances. Virtual bank accounts offer improved account visibility and management. With all the virtual ‘pots’ aligned to a single main account, treasurers can have enhanced visibility across their portfolio of accounts – balances, and the currencies in which they are held, in real time. Improved visibility can help the treasurer to strategically manage balances, minimising foreign exchange risk. In addition, cash concentration activities are significantly simplified as there is less need to physically move monies from one account to another.



A renewed focus on cutting headcount has resulted in the increased centralisation of key treasury activities. Many treasurers are implementing in-house banks to concentrate processes in fewer locations (The IHB model allows treasurers to provide a banking function to their group entities in order to centralise finance services (intra company loans, FX, netting for example) and rationalise multiple banking providers across the entities) and the use of virtual accounts is a natural extension of this. It enables local teams to maintain visibility of their accounts while operational control is retained at the centre. Other benefits of centralising key processes include managing working capital better, reducing transactional costs, removing payment floats and improving controls.



The increasing use of technology such as Application Programming Interfaces (APIs) and the new payments standard ISO 20022 have provided a more dynamic and adaptable technology that enables more opportunity to automate and integrate treasury (and wider business activities). Richer data coupled with new developments in AI offer greater insights and the use of virtual accounts can provide a degree of transparency that was previously only available through significant investment in technology. With the IBAN, irrespective of whether payments include a relevant reference, businesses can have far greater confidence that payments are made into the correct account and can be easily reconciled with the matching transaction.



Know Your Client (KYC) requirements continue to be time consuming for treasurers and bankers alike. Whilst the importance of KYC cannot be understated, virtual accounts typically have a much lighter compliance touch, enabling accounts to be opened, closed and amended far more easily than physical accounts. This further encourages the opening of new virtual bank accounts that can improve transparency and enable greater automation, given the ease with which they can be opened.



Virtual accounts can add an additional layer of security – if one account is compromised, the potential damage is limited to that specific account, reducing the risk to the overall financial health of the business. That is not to say that all risk is removed from such accounts – there will always be the risk of cybersecurity threats such as hacking, phishing, or other online fraud. But the use of these accounts does allow corporates to set different approval levels and create customised rules depending on what the account is used for.



An organisation’s impact on its environment is never far from treasurers’ minds. Any process that helps reduce or eliminate an organisation’s physical impact, such as the use of paper forms and a reduction in the number of visits to bank branches, can be of benefit. And as the account is operated entirely online, remote access allows for greater flexibility in the working environment.

Looking at a portfolio of physical bank accounts, the idea of migrating to virtual accounts may feel daunting and a big bang approach may be a step too far for many organisations. But a gradual approach, creating a virtual account structure for new bank account needs (for example, as a result of acquiring new businesses or clients), can ease the transition process. The key will be a thorough analysis of specific requirements and a detailed use case that sets out the key benefits and considerations, looking at how scalable any solution is and how well it can integrate into existing systems, including treasury management systems.

What does the future hold?

Virtual bank accounts are not new but the environment within which they operate has changed significantly. They offer scalable solutions, improved controls, greater operational efficiencies and reduced compliance requirements. So, it’s worth the treasurer’s time and effort to discuss the cost-benefit analysis with their bank and internal stakeholders – they may be surprised at the conclusion.

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