What is a virtual account?

A virtual account is a non-physical bank account that businesses can use to manage their payments digitally. They function in a similar way to traditional, physical bank accounts, and streamline the process of sending a receiving payments from a single, centralized, digital location.

What are the main features of a virtual account?

There are several key features that contrast virtual accounts with traditional bank accounts. These include:

• High security: Virtual accounts have a fixed expiry date for account creation. This makes it harder for hackers to get into accounts.
• Easy access: Available 24-hours a day, customers can make payments at any time.
• Multi-currency support: A company can be based out of one country and pay and receive money in several currencies from different countries.
• Faster processing: Virtual accounts work faster than traditional accounts, as there are fewer hoops to jump through before making a transaction.
• Added visibility: Dashboards help organizations track and manage every dollar spent with an account.
• Easy reconciliation: Automated payment reconciliation helps companies make smarter business decisions.
• Low costs: Virtual accounts have different pricing models than traditional bank accounts. Virtual accounts usually come with small fees, lower or zero transaction fees, and no hidden charges.
• API integrations: Businesses can create and manage virtual accounts through an API, which can be integrated with other systems, such as management or accounting platforms. With integrations, transactions are automatically recorded.
• Transaction reports: Export transaction data in multiple fortmats with virtual accounts for easy and accurate record keeping.

How does a virtual account work?

Each customer will be given a unique VAN, a Virtual Account Number which will be used to identify their account, similar to a traditional physical bank account. This number is a secure way to mask your actual account number, generated automatically and expiable. Some VANs are only used once, making them a very secure way to make transactions.

They can also expire at a regular cadence, which can help with ending subscriptions or direct debits, for example. This is very different from a traditional bank account number, which remains the same for as long as the account is open, and provides criminals with access to your funds if stolen.

Without the manual work of using a physical bank branch, a virtual account can be a lot more flexible, reconciling payments automatically, tracking incoming payments against invoices, and reducing the operating costs of managing multiple different bank accounts.

Instead of using multiple systems and processes for tracking and managing payments, everything can be completed in a consolidated and centralized way.

Are virtual accounts safe?

Virtual accounts are safe if they follow strict security regulations. They use a variety of methods to protect transactions such as encryption, alerts, multi-step authentication, and secure email protocols.

Additionally, some virtual and online banks provide extra protection with fraud detection programs that run in the background of their platform, looking out for suspicious activity.

Do businesses need virtual accounts?

Businesses with complex finance flows may have several types of income flowing into one bank account, making it difficult to match each cash flow to each user. Virtual accounts make it easy for businesses to track individual payments and automate the reconciliation process, which takes time and resources away from finance teams.
Manual reconciliation also means that businesses need to review every transaction and report the numbers, increasing the risk of human error.
Virtual accounts are fully-automated and present information in real-time. With easy access to accurate bank account balances, businesses can devote resources to more strategic endeavors.

What businesses would benefit from using a virtual account?

Any enterprise who has a complex network of funds would benefit from being able to use a virtual account to consolidate payments and transactions. By channeling all the different streams into a single bank account, being able to track individual transactions, and automatically reconciling payments, businesses can save many manual hours of work, and also add accuracy and control.

As virtual accounts function in real-time, businesses will have a continuously accurate balance of accounts, with no margin for error. Manual effort removed, staff are freed up to work on more strategic tasks than simply managing accounts.

Can virtual accounts hold balances?

Virtual accounts cannot hold balances. This is because they don’t settle payments. Virtual accounts can only receive money, collect important information about the sender, and send it to a primary account. Virtual accounts work with physical accounts. The physical account functions as a holding base, while the virtual account is the vessel that carries transactions to and from the physical account.

Which industries adopt virtual accounts?

With the increasing popularity of digital payments and finance automation, multiple industries have started taking advantage of virtual accounts, including:

Manufacturing

Manufacturing companies receive and hold significant amounts of funds in physical bank accounts. This opens them up to hackers trying to get ahold of sensitive information such as bank account numbers.
Virtual accounts can identify payers without revealing physical account numbers, which lessens hacking risks.

Healthcare

Healthcare often sees large payment volumes coupled with time-sensitive orders. Virtual accounts helps customers generate a virtual account number to send a payment, shortening the time between verification and order fulfillment.

Hospitality and travel

During the confirmation and booking phase, many customers abandon the process. Virtual accounts provide customers with a simple payment method that goes through quickly, decreasing instances of cold feet.

Technology and IT service

Technology plays a crucial role in helping companies stay competitive, especially when it comes to streamlining payment processes. Companies that sell their products and services internationally can use virtual accounts for fast, convenient payments.

Startups

Most startups must stay nimble and can’t get bogged down with time-consuming tasks that prevent growth. Virtual accounts will help them with important processes, such as reconciliations, while allowing them to focus on other areas of the business.

Education

Combining virtual accounts with student portals or allowing them to pay their tuition through virtual accounts, grants them access to materials that may otherwise be locked, including transcripts or diplomas.

Retail

Retail and e-commerce verticals receive hundreds or thousands of transactions a day from paying customers. While there wasn’t previously a way to easily track where every transaction came from, automatically assigning each customer a unique virtual account number to pay their bill provides retailers with the source of each transaction.