Virtual accounts: Forget everything you thought you knew

Apr 28, 2020

There is no denying that virtual bank accounts (VBAs) are a hot topic among the treasury community today. While you may have heard of VBAs before, their usage is rapidly evolving – and their benefits for treasurers continue to grow.

In an increasingly international marketplace, achieving centralized visibility, control and access to information is a significant challenge. This is where virtual bank accounts come in. Whether you are new to VBAs or are already familiar with the concept, there are a growing number of use cases and benefits to consider.

Understanding the premise

Before we delve into the detail, let’s have a quick refresher on VBAs and how they work. After all, the concept means different things to different people. The VBAs are bank-issued dummy current accounts that replace current physical accounts and instantly route payments and collections to a linked ‘master’ current account.

Easily set up, VBAs can be allocated to any purpose – from denoting a legal entity or business unit to pinpointing individual payers. Every VBA has a unique number, which helps to separate funds in the master account.

The potential benefits include the ability to centralize incoming and outgoing transactions and achieve cash concentration; straight through reconciliation; and reduced manual post-processing of unmatched items. Since physical account structures can be rationalized and no balance is held on a VBA (as funds are directly routed to the master account), bank account costs and administration can also be significantly reduced.

Take cash management to the next level

For businesses, constantly finding ways to enhance and improve cash management should be paramount. Every decision made should minimize risk and maximise return for the business. Thus, every bank account adds complexity: it needs to be reported on and reconciled, balances managed, and authorized signatories maintained. Every account also has a related cost and represents a potential security risk without adequate oversight over signatories and balances. However, with virtual accounts, it removes the risk that is brought with bank accounts and brings significant liquidity benefits for the business where they can reap all the benefits of a structure that mimics physical bank accounts whilst harnessing the power of near real-time multi-bank data and reporting to make better-informed decisions.

Making informed decisions for your business

The need to manage the cost of change, such as communicating new settlement instructions to customers and adapting systems, also needs to be factored in in order to move your business forward. More companies will continue to expand internationally and adopt new business models in the next few years, the value proposition of holistic virtual account solutions, combined with automated and increasingly real-time liquidity solutions, is becoming enhanced. Being able to integrate a virtual account for your business can build in additional services progressively, without disruption, as the needs of the company continue to evolve and new opportunities and demands emerge.

Expanding your business to the World’s Largest Economy

As mentioned, virtual accounts are ideal for businesses that are looking to expand geographically. With that in mind, why not target the Asia’s economic powerhouse, China? Aleta Planet’s Virtual account promises ease of B2B and B2C cross-border trade payment collections from China, without the need to have a Chinese bank account to accept payments from China. Our virtual account enables businesses to collect payments in your base currency through fast, reliable and timely digital e-payment solutions utilizing the most secured payment channel via UnionPay.

Our Virtual account also requires no setup cost on our online/mobile payments platform – reducing even more cost for your business endeavors.

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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