Virtual accounts

User Experiences with Virtual Bank Accounts

Report date: 
20 May 2025

Commentary

All your cash in one place – but with each transaction tagged so it can be identified and allocated automatically. This is the promise of virtual bank accounts: the first offering was a unique IBAN for each customer to pay into, although all the cash really goes into the main account. This makes it easier to reconcile the receipts to invoices – the customer is already identified.

The second step is to keep one bank account, but give each subsidiary or division its own IBAN: no need for cash sweeping or pooling – all the cash is in one place. But you can then use the tags on the records to constitute and account for each entity. This structure is used by many in-house banks.

Banks have been marketing virtual accounts for more than a decade. In a recent CXC poll (results here) , 30% of respondees said they use them: of these, 84% found the product met or exceeded expectations, while 16% were disappointed.

So – what is happening? Why hasn’t the product taken the world by storm? 

Overall:

Some peers have effective solutions, which vary from complete in-house banks to receivables and payables solutions with varying degrees of sophistication.

Others have found that they are able to achieve many of the objectives of virtual accounts by using the enhanced data recognition and machine learning capabilities of more recent ERPs. These peers generally found virtual accounts added limited value.

During our call, we learned of unexpected uses of virtual accounts. These included managing payroll confidentiality, enforcing limits on employee credit cards, and segregating customer cash.

Positive cases:

  • One peer achieves significant benefits, not only from cash pooling, but from eliminating the need to do intercompany settlements. Several peers have implemented...
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Topics covered in this report: 
Virtual accounts, POBO/ROBO, COBO, in-house bank, Cash Pooling - cross border, Cash Pooling - domestic, payroll
Service providers discussed in this report: 
BNP Paribas, Citi, JP Morgan, Wells Fargo, Barclays, HSBC, FIS, Coupa, Blackline, SAP, Deutsche Bank

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Corporate Treasury Payment Service Provider Relationship Management

Report date: 
24 Oct 2023

Commentary

“May you live in interesting times” goes the old Chinese curse. Whether we are cursed or not, we are certainly living in interesting times.

This call focused on one area of the information revolution – Payment Service Providers

(PSPs), but it was an illuminating insight into the challenges treasurers face. The multitude of payment methodologies and PSPs are forcing treasurers to deal with many different approaches, companies and formats. Today digital sales are mostly for B2C transactions, but this is spreading to B2B as business models evolve.

As treasuries move to APIs, bots and other less structured forms of communication, everyone will face the issues discussed in this report (the full 18 page report is available to premium subscribers - enquire here for details).

The biggest issues participants raised are:

  • Ownership. Treasury clearly owns the relationship with traditional banks. But many treasurers find that marketing or other functions (notably IT) sign up the company for a PSP relationship, and then leave it for treasury to resolve the issues. Participants are beginning to lay down rules for approving new relationships, usually involving marketing and IT.
  • Management system. One participant has a rigourous process which involves marketing, IT and treasury to make sure all aspects are covered.
  • Local vs global. Some PSPs are global, while others are regional, or purely local. The purely local ones are usually left to local or regional teams to manage, while global ones are typically managed from HQ. In some cases, only local options are available: this is a challenge for centralised treasuries.
  • Global PSPs. The main providers mentioned were PayPal, Ayden and WorldPay. No-one finds they can
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Topics covered in this report: 
PSP, API, Cash forecasting, Risk - counterparty, Virtual accounts, Receivables

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FX & Treasury in South Korea

Report date: 
25 Nov 2022

Commentary

South Korea is a market which it is notoriously difficult for foreigners to penetrate: this applies as much to banks as it does to industrial companies. The culture is fiercely patriotic, and the vitality of South Korean industry means that most products are available from local companies, who are often world leaders.

The result is a situation where, despite the size of the economy – in 2021, it had the world’s 10th largest GDP, ahead of Brazil and Russia – it tends not to be a major market for most non South Korean MNCs. This was reflected in the call, where the country is complicated, and not a major focus for most participants. The situation is further complicated by language – English language skills can be rare amongst local staff and banks – and by a significant reluctance on the part of staff and customers to work with foreign banks. When you add in a series of specific, and very strong, local customs and processes, such as customers who often insist on making payments in person, you have a challenging situation.

Despite all of this, our participants manage to work successfully. Cross border cash pooling is possible, using the Consolidated Management of Funds (CMF) structure, which has to be approved by the Bank of Korea. The approval process is burdensome and requires a lot of work – and it all has to be done in Korean. But it works. 

Equally, dividends can be paid – but again, there is bureaucracy. Currency trades must be settled onshore, so many people find it easier to use the offshore NDF market, which is fairly liquid. Intercompany netting has to be gross in gross out – and the won can be remitted offshore. Cross border intercompany loans

 

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Topics covered in this report: 
Cash Pooling - cross border, Hedging FX, Bank Relationships, Collections - domestic, CMF, Netting, Dividends, Virtual accounts
Service providers discussed in this report: 
HSBC, JP Morgan, Standard Chartered, Bank of America, Citi

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