The Value of Virtual Accounts

Apr 16, 2020

Virtual bank accounts (VBAs) are a trending topic among corporate treasurers, but what are they and how have they evolved to improve cash liquidity and payments for businesses?

Virtual bank accounts (VBAs), are, as the name suggests, non-physical bank accounts. Corporate treasurers use VBAs to increase the efficiency of their working capital processes and take cash management to the next level.

According to Dick Oskam, Global Head of Sales for Transactions Services at ING, VBAs have the potential to deliver benefits across organizations of varying types and sizes. “While it’s clear how non-bank financial institutions may use VBAs to help allocate client monies, or how large collections businesses such as utilities or telecom companies can use VBAs to improve their complex reconciliation processes, VBAs are just as suitable for multinational companies (MNCs) in other sectors too.

Factors driving Instant Issuance

Instant issuance has been an attractive offering for financial institutions for three primary reasons. First, it gives institutions a competitive edge by keeping pace with consumer demand for fast, convenient financial services.

Second, many financial institutions view instant issuance to increase security and address fraud concerns by more quickly getting EMV chip cards in their cardholders’ hands. This can give an institution an important competitive advantage since most consumers (76 percent) view EMV chip cards as more secure.

Third, instant issuance often allows financial institutions to position their card top-of-wallet and immediately start capturing interchange revenue. Studies show that eliminating the lag-time for account holders to receive their card in the mail and activate it leads to higher use and better performance; instant issuances result in 30 percent of cardholders using their card on the first day and 70 percent within five days.

The real value of virtual accounts

Despite the clear advantages of virtual accounts, implementing them is a challenge and one that demands significant investment and time from corporate treasurers. But if approached correctly, operating a virtual account environment offers an abundance of benefits including:

  • Alternative to traditional cash management solutions
  • Centralizing of treasury functions
  • Substitute for liquidity management tools
  • Increased cost efficiencies
  • Improved straight-through processing (STP) reconciliation
  • Simplification of account and banking relationships

Choosing the most strategic avenue

Meeting consumers’ expectations for secure and convenient access to their bank accounts and creating a positive experience for account holders are two of the most important considerations for many businesses. Whether instant issuance, digital issuance or other card issuance strategies are right for your institution depends on these fundamental factors.

The financial sector is an integral part of Singapore's ambition to be a smart nation. And Aleta Planet is at the forefront to bring the financial technologies to develop the local and the global digital market. We are encouraged will the full support of MAS to push Singapore to greater heights by being a SMART nation through financial innovation.

To learn more about your options, and for expert guidance on the right path to take, stay tuned for our updates at Aleta Planet – your trusted payment provider.

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