Virtual account management or VAM is one of the most unique trends to explore in today’s banking climate. VAM is a practice where a bank will move transactions in a master physical account to multiple virtual ledgers. These include extra ledgers that work separate from others.
VAM is ideal for many reasons:
- A bank will manage fewer physical accounts. The bank’s operations will remain consistent even with there being fewer items on hand.
- There isn’t a need to operate many physical cash sweeps. A bank will have more time to manage other functions.
- The money the people will invest will be secure. Their funds will be in virtual setups that do not have any physical money in them. The people can access their physical funds by request, but they will not stay in one singular place.
- A bank will spend less money managing its accounts thanks to there being fewer physical assets to run at a time.
- People can review their cash positions at any time. They can review their working capital reports in moments.
People can manage their financial decisions in less time thanks to virtual account management. The implementation process requires a few points to ensure it stays functional while still being accessible for everyone’s needs. The work should be about providing freedom and control while ensuring all people in a system understand what works and that they have enough support for their funds.
Review Banking Objectives First
To start, a bank must look at the goals it wishes to attain through virtual account management. It could reach any goal, from reducing physical capital to giving clients more control over their funds. The desire to increase transparency in the workplace is also essential to note. Every bank should have ideas for what it wishes to do with its funds if it wants to be successful and effective in handling its assets here.
Produce a Centralized Account
The VAM process must be fully centralized if the system will work. The bank will divide balances in a deposit account virtually instead of physically.
Each account in the VAM platform should link to a central network. After this, these accounts can use different setups based on unique parameters. The bank can select these parameters, although the client might also have some control over whatever works here. It could choose to incorporate certain payment networks, although a system-agnostic approach is ideal in this case.
Proper centralization is necessary to ensure there are set rules for how people can divide their accounts. Failing to centralize things can result in complicated rules or mixed messages surrounding whatever might work.
Establish Configurations
The virtual accounts must be established with specific configurations that fit the bank’s goal. A bank can create many subledgers surrounding different items:
- Specific assets may move to some new ledgers. These include checking and savings assets that a customer wishes to divide in separate spaces.
- Customers can plan additional ledgers for dependents. These include children who will have separate accounts.
- Loans and other debts may also feature separate sections. Users can review their loan data and figure out how much they need to spend to pay back their dues. The system can also feature a calendar or planner highlighting what someone should be doing when completing one’s payments here.
Virtual account identifiers may also work. A bank can select unique identifiers for each small ledger, although individual clients might adjust them if they wish. The specifics can highlight whatever someone finds suitable for work.
Create New Rules For Each Subaccount
The VAM process also needs new rules surrounding how each sub account can work. A customer can use as many sub accounts as necessary, although they should be easy to control with unique rules for every operation one wishes to plan. A VAM setup can work with different rules for everyone’s needs:
- Support for multiple currency types is necessary. Fiat currencies are the only ones most parties support, but cryptocurrencies may also work in some situations.
- New interest rates may also appear in some accounts. These rates can feature different values separate from what one’s regular bank account uses.
- People can calculate cash flow forecasts for each sub account. New rules for how each one works will be vital to their operation.
The platform should include an interface that lets the client adjust these rules as necessary. It gives the client more control over one’s funds. The effort also helps the business find smart choices for handling money.
Self-Service Helps
One idea for VAM implementation involves producing a self-serve setup. Self-service is necessary for VAM, as customers need access to ensure everything works well.
A self-serve VAM setup can include a platform where the customer can add whatever ledgers one wishes. The system must be programmed where the customer understands what is open and can create something unique and useful.
A System-Agnostic Approach
Banks can utilize various platforms, including multiple payment systems. A proper VAM setup should be system-agnostic, meaning it can work regardless of whatever system someone is trying to use at a time. The system-agnostic approach ensures full accessibility while being universal for all needs that customers may hold.
Accessibility Is Critical
The most significant part of virtual account management efforts is that they allow customers to track all their financial positions in one spot. Each position can work independently from one another. VAM lets people see how their funds are working and gives them control over their experiences, giving them the support they need over their money. The need to implement VAM well and to keep it functional is critical to the industry’s success.
It will be exciting to see how virtual account management plans work. There’s no telling where the field will move, especially since it will not be tough to incorporate the work. But it won’t be too tough to manage if everything works right.
