How Virtual Accounts Hold the Key to More Efficient Cash Management
Virtual accounts are not merely a solution to replace existing bank accounts; they offer far more than that. By deploying virtual accounts, treasurers can open up a world of cash management efficiencies, drive a multitude of cost savings, and take control of cash organisation wide. Rail technology firm Wabtec has done just that.
Virtual accounts are not a new concept. Many treasurers will be familiar with the idea of assigning a variety of sub-accounts to various customers – be they internal or external – under the umbrella of a single, physical account. This enables corporates to reduce the number of physical bank accounts they run. In the market, there are two main types of virtual accounts that banks will offer.
Elise Hoyet, Head of Virtual Account and Payment Factory Solutions, Societe Generale, explains her institution’s approach: “We generate virtual IBANs that are attached to a single physical account for our corporate customers. There are no accounting characteristics with this type of virtual account, and they serve many use cases for treasurers. We can identify a payer, business line, activity, or project within the same legal entity. It’s also possible to use these virtual accounts to identify a participating entity or subsidiary in a POBO/COBO context.”
“The most significant difference between a physical account and virtual accounts is that the client can use an IBAN to identify a subsidiary, for instance, but with fewer administrative charges and no account convention to sign,” adds Hoyet. “It’s very fast to open, deactivate or modify a virtual account, and they don’t require the complete KYC needed with physical accounts.”