In an insightful 2022 interview, Bradley Jarrett, Group Director of Financial Services at Bancon, shared his thoughts on Virtual Account Management (VAM) and its potential to revolutionise corporate banking. As we look back on his predictions and the actual developments since then, has VAM fulfilled its promise and reshaped the landscape of banking and finance?

The Vision

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Brad’s vision for VAM was rooted in the need for greater financial control, efficiency and crucially transparency for businesses. He emphasised several key benefits of VAM:

 
• Streamlined cash management: VAM promised businesses the ability to centralise their banking operations without needing multiple physical accounts. Through virtual accounts, businesses could better manage cash flow, reconcile payments and reduce the complexity of financial operations.
 
• Enhanced reconciliation and reporting: With virtual accounts, reconciliation processes were expected to become more efficient, allowing companies to map incoming and outgoing transactions directly to specific virtual accounts. This would facilitate improved reporting and financial visibility.
 
• Cost and operational efficiency: Brad highlighted that VAM could reduce the need for numerous physical bank accounts, cutting down on banking fees and simplifying the management of payments across subsidiaries, branches and global operations.
 
• Financial flexibility: VAM would provide companies with the ability to design more agile and responsive financial structures, including easier management of currency, interest and liquidity risks.    

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So, has the future vision for VAM been truly realised?

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Fast forward to 2024, let us explore whether VAM has become a widely adopted and impactful solution in corporate banking.

 
• Adoption and integration: While VAM technology has undoubtedly seen growth and adoption across large corporations, its rollout has been slower than anticipated. Many large banks have integrated VAM into their product offerings, giving clients the flexibility to manage virtual accounts. However, adoption has been uneven. There is an opportunity for smaller and mid-sized businesses, in particular, to adopt the solution.
 
• Efficiency gains: For companies that have adopted VAM, the benefits Brad envisioned are becoming a reality. These businesses report improved cash management, particularly in multinational organisations where VAM reduces the need for multiple physical accounts. The ability to centralise funds while maintaining the flexibility to create virtual sub-accounts for specific business needs is a game changer. This also applies to industries with complex payment reconciliation needs, like retail and healthcare, where virtual accounts provide much-needed operational clarity.
 
• Regulatory and market challenges: VAM’s success has been somewhat constrained by the need to navigate complex banking regulations across different regions. Banks and corporates must ensure that their virtual accounts adhere to local regulatory requirements, which can vary significantly from one market to another. This has slowed the pace of adoption in some regions, as both banks and businesses seek to ensure compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations. The need for an experienced partner when implementing VAM is key to ensuring this isn’t a barrier.
 
• Technological maturity: While the technological infrastructure for VAM has evolved, particularly with the integration of APIs and cloud-based solutions, it has not reached full potential across the board. Some banks still offer VAM solutions with limited flexibility or outdated interfaces, which can hinder user experience.    

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The Future

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Looking ahead, VAM will continue to grow and evolve. The rise of fintech solutions and the demand for more sophisticated cash management tools are driving innovation in this space. As banks improve their VAM offerings and businesses become more familiar with the technology, we are likely to see broader adoption.

For those organisations that have embraced the technology, VAM is delivering on its promise of improved efficiency, streamlined operations and better cash management. As VAM continues to develop, the industry may eventually reach the tipping point where Brad’s vision becomes the norm rather than the exception. For now, VAM remains a powerful solution for those ready to invest in its capabilities but still has room to grow before it becomes ubiquitous in the corporate banking world.

In a landscape where efficient cash flow, rapid adaptation and superior customer service are paramount, early adoption of VAM gives banks and businesses a head start in realising these advantages and cementing their leadership and responsiveness in the market. VAM is becoming crucial for banks and businesses seeking to stay ahead of the curve, helping them respond to client demands, manage cash efficiently and reduce costs in a constantly shifting financial environment.

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How Bancon can help?

The strength of having us implement VAM lies in the deep expertise of our people who have spent their careers mastering SAP Banking. Many of our consultants have co-delivered the foundational SAP Fioneer VAM product which has recently been named the Platinum Winner of the Future Digital Awards for their innovation in Digital Banking and Finance. So, whether you’re considering upgrading an existing Virtual Account platform, or looking to introduce this as a new offering, Bancon can help.

 
• Certified SAP Fioneer Build and SAP Fioneer Implementation Partner
 
• Official build and implementation partner of the SAP Fioneer Virtual Account Management custom project for a Tier-1 UK bank.
 
• Experience in implementing SAP Fioneer Banking for the top 50 global financial institutions, spanning retail, corporate and investment banking