Innovating Treasury with Virtual Accounts and a Multi Currency Global Wallet

Innovating Treasury with Virtual Accounts and a Multi Currency Global Wallet

In the international context, contactless online payments are increasingly on the rise. At the same time, globalization triggers international expansion of businesses leading to increasingly complex structures within their payment transaction scheme. Businesses are dealing with the challenge to oversee all transactions of the many smaller business units and subsidiaries as well as overcoming the burden of handling various different currencies.

Virtual Accounts and so-called Multi Currency Global Wallets might bring a valuable change to this scenario and will make Cash Management and payment operations more transparent.

What are Virtual Accounts?

One might think that virtual payment transactions just recently gained importance but actually, they have been around since the early 2000s. The concept relies on virtual bank account numbers that are connected to one main physical account. Transactions only happen on that main account. The number of virtual accounts created is unlimited, which makes it easier to administer and oversee the complex network of a company’s accounts. Each virtual account may be entitled to one specific customer or serve one special purpose. This makes the administration of thousands of different bank accounts redundant, as there is only one main account to overlook by the company. 



Schematic of a typical virtual account solution
Schematic of a typical virtual account solution


Along with the so-called “Virtual Account Management”, Treasury will profit immensely from virtual accounts. Complex, multi-layered account structures with multiple banks will be simplified to make Cash Management more transparent and faster. Additionally, costs occurring from issuing several bank accounts can be lowered. Treasury will therefore be able to oversee the entire cash assets of the company in real-time while payment on behalf of (POBO) and collection on behalf of (COBO) procedures are being enhanced.

Some institutions already offer virtual account structures. UniCredit provides a company-wide overview of all account movements with their UC Virtual Accounts Tool, Deutsche Bank also offers an Account Receivable Manager for SEPA and smaller banks are using the opportunity as well.


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International Payments out of the Global Wallet

Another challenge in Treasury is the foreign exchange (FX) risk that not only affects multinational conglomerates anymore. Nowadays we notice an increasing need for an opportunity to manage various currencies in one account instead of handling various accounts in different currencies. This could be realized through the concept of Global Wallets.

Usually, global wallets are being used for managing crypto currencies but also in travel management the „YouTrip Multi Currency Travel Wallet“ from Singapore acts as a virtual wallet. Hereby, the need for multiple currencies when traveling through different countries got addressed and seems to be working without international fees or charges from third party service providers. The user simply pays with a prepaid MasterCard.

While this concept is also increasingly offered for corporates, it presents the chance for treasurers to decrease losses through FX risk. Instead, processes are again simplified, as businesses do not need different accounts for different currencies anymore. COBO and POBO transactions are enhanced because payment transactions of subsidiaries in other countries can be billed to one main account connected to the global wallet.

How virtual accounts could go along with the Global Wallet

To combine these two concepts, companies will need one central, global account that is equipped to carry out transactions in all currencies. These central currency accounts can end up in a “Multi Currency Global Wallet (MCGW)” via real-time pooling and thereby realize the “Follow the Sun (FtS)” concept. This will make it possible to show transactions in real-time while minimizing the FX risk at the same time. The basis for this are 24/7 payment transactions which are independent from time zones but instead follow capital markets and reduce cut-off times to a minimum.

How virtual accounts could go along with the Global Wallet
How virtual accounts go along with the Global Wallet


But what does this ultimately mean for the treasurers daily work? They will profit from a simplified Cash Management since all payment streams, no matter the currency, are shown in a real-time treasury hub. Structures are less complex, which is especially important for large multinational corporations. Treasurers will rather function as advisors to the management with precise real-time analyses and forecasts about topics such as liquidity, risk management and cash flows on hand. Virtual accounts in combination with a MCGW are valuable steps in the direction of Real-Time Treasury in the future.

Contact us for further information about the concept of Real-Time Treasury and the Multi Currency Global Wallet.
Christian Million

Christian Million
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