BankingVirtual account management and better banking experiences

Virtual account management and better banking experiences

In an era of continuous technological change, corporate banks can better serve their clients' needs by looking to the retail banking industry and offering products such as virtual accounts, writes Tim Martin, product manager at Cashfac.

The way we interact and engage with our banks has completely changed in the last few years as a result of the rapid adoption of technology. Digital disruptors such as Monzo, Atom and Starling Bank have tapped into our cultural obsession with technology and are constantly reshaping consumer expectations of what good, effective banking looks like. Retail banking is thriving on this change, with traditional banks pushing to outpace the disruptors to meet consumer expectations.

Unfortunately, corporate banks tend to move slowly and often fail to keep pace with change as it relates to consumer expectations. Yet critically, the corporate treasurers who make up their client base are consumers first. As such, their expectations are set by the retail banking sector. As Anupam Majumdar, management consulting manager at Accenture Payments comments: “The wave of digitization that is happening in banking today, with retail banking being at the forefront, corporate customers are realizing they need to be empowered and be in control of their treasury functions.”

It’s clear that consumers now expect business banks to understand their needs and innovate to deliver against these; failing to do so can lead to customer attrition. In fact, findings from recent Cashfac research, independently conducted by Ovum Consulting, reveals that half of the European corporates have considered switching their main banking relationships in the last year. In addition, almost two thirds (62%) of European banking respondents reported that winning and retaining new business is more challenging than a year ago.

Open Banking – compounding the challenge

Consumer expectations aside, corporate banking is also being forced to transform by the advent of Open Banking. These regulations require banks to hand customers control of their transactional data. This information can be shared with fintech disruptors who build cutting-edge services over the top.  The new services enabled by Open Banking will include streamlined access to multiple bank accounts – a factor which is a huge priority for this audience.

Once they have experienced the possibilities created by Open Banking, we can expect business customers to demand more capabilities from their own banks – and all of it offered at breakneck speed. If this recent PwC report is anything to go by, Open Banking shows no signs of slowing down either. In fact, it could quadruple in size by 2022 and be worth £7.2bn, meaning corporate banks will need to move fast to hold on to their customers.

The combination of heightened consumer expectations, Open Banking and a highly competitive market means one thing for corporate banks — change is the constant. Corporate banks will have to be laser focused on delivering the products and services that are most important to their customers. To do this, they must follow the lead of their retail banking counterparts.

Only the banks that change and innovate will survive, thrive and grow. The question is, how do you facilitate this change?

94% of banks say virtual accounts help win new business

Firstly, our research reveals that virtual accounts software provides corporate banks with a means to help close the service gap between themselves and their corporate customer base. This is because virtual accounts enable the customer to better align their ledger system with their real bank accounts as well as combining the view across banks.  This is important as our research also found corporates are concerned with the improved analysis of receivables and real-time cash forecasting. Virtual accounts enable this single view, meaning corporates can control all their internal and external accounts in one platform and across multiple geographies.

In doing this, virtual accounts provide corporate banks with the opportunity to match and better yet exceed corporate customers’ expectations. It may even change a culture accustomed to switching banks. This is because customers that can easily access the information they want when they want it, are less likely to shop around. To quote David Bannister, Ovum’s principal analyst of financial services technology: “Corporates are asking for new functionality that solves their problems. Banks are cottoning on to this, and realizing that virtual accounts are a tool to solve client problems.”

What’s perhaps most interesting, beyond client retention, is that our research also found that 94% of banks say that virtual accounts help them win new customers. This is a trend that is catching on fast. Almost all banks surveyed (99%) claim they either currently offer or intend to offer a virtual account solution within the next 18 months.

Working together to tackle corporate pain points

While corporate clients might not be demanding the implementation of virtual accounts per se, they are certainly requesting the functionality delivered by these accounts. In particular, today’s treasurers look to banks to help them tackle the following cash management challenges:

Enhanced treasury management control

A growing number of corporates are demanding a seamless multi-bank strategy to streamline the management of multiple accounts. They need a single banking platform that presents a consolidated view of their financial position, avoiding the complexity of accessing and analysing the position of multiple online accounts.

Driving operational efficiency to provide a platform for growth

Boosting productivity is a core goal for corporate treasurers, who need to reduce the administrative burden and focus their team on tasks that add real value. This can be achieved by implementing self-service tools which remove the need for a multitude of banking tasks. By eliminating the need to manually open and close accounts, manage interest rates, source statement archives or access target balance and sweeping capabilities, treasury teams can focus on driving innovation and growing the business.

Enhanced operational control to drive compliance with sector regulation

Regulation is a core consideration for any corporate treasurer, which means that any technology which enhances operational control will be welcomed with open arms. Here again, virtual accounts can play an important role such as ensuring the full transparency of the transaction lifecycle as well as the quicker reconciliation of expected receipts recorded in a customer’s ERP system against actual receipts received at the bank – swiftly identifying gaps that need to be resolved.

Customer service improvement

Understanding end to end customer journeys is vital to improving customer service. The ‘hard wiring’ of banking services within those customer journeys through enhanced connectivity options ensure joined-up and real-time fulfilment actions – this often means the availability of APIs to help join up banking services with the wider system ecosystem of the corporate client.

Virtual accounts management in action

A perfect example of a corporate client seeking to tackle the challenges set out above comes from LV=, a leading provider of insurance, savings, investments and retirement plans. LV= wanted to reduce the administrative burden of setting up and managing large numbers of bank and client accounts with a virtual account infrastructure. Not only would this reduce time and effort, it would also ensure the business was bank agnostic and more flexible in its product offering to clients.

LV= required a new system to cope with these changes. Before implementation the business was maintaining 40,000 real client bank accounts, a number which was fast increasing and becoming harder to manage internally and by its bank. LV= went through a tender process to seek out the best solution to fulfil its specific requirements and decided to acquire the solution via Cashfac, a leader in virtual bank technology.

Implementing the solution resulted in the migration of over 40,000 real bank accounts holding over £140m of funds. These were rendered down to six real accounts and thousands of client-managed, virtual accounts, with no disruption arising nor breach of client money rules. In total, the whole implementation took only seven months from start to finish.

The virtual account solution has reduced LV=’s operational administration and freed up their internal IT resources. The burden of setting up real client accounts and the reconciliation of those accounts have been reduced to a minimum, creating more time for staff to focus on more strategic tasks. In fact, the whole treasury operation has been streamlined, is more controlled and less prone to human error. Andy Young, head of finance at LV= and a key stakeholder in the project said “The business case for virtual accounts has proved a success. The cost of acquiring Cashfac technology has already been recovered by the cost savings the solution has delivered”.

This is just one example amongst many, where virtual accounts proved a win for a corporate client — and ultimately for the bank whose operations were also simplified. What case studies such as this prove, however, is that corporate banks simply can’t ignore virtual accounts, and thankfully as our research shows they don’t intend to.

The corporate banking industry is about to face a time of rapid change. However, change does not need to be scary – it can be exciting and, in the right circumstances, a power tool for growth. We believe that banks which offer virtual accounts today, and in the near future, will have the edge over their competitors. They will not only meet but exceed the expectations of their corporate customers and close the dangerous service gap — all while retaining existing customers and winning new ones.


Tim Martin is product manager at Cashfac.

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