Virtualbank

Dick Oskam, ING, dispels myths around virtual bank accounts

Virtual bank accounts (VBAs) are a hot topic among the treasury community today. While you may have heard of VBAs before, their usage is rapidly evolving – and their benefits for treasurers continue to grow. Dick Oskam, global head of sales for transaction services at ING Bank, explains what VBAs are all about.

In an increasingly international marketplace, achieving centralised visibility, control and access to information is a significant challenge. This is where virtual bank accounts come in. Whether you’re new to VBAs, or are already familiar with the concept, there are a growing number of use cases and benefits to consider – as well as a few lingering myths to dispel.

Understanding the premise

So what are VBAs and how they work? After all, the concept means different things to different people.

The VBAs are bank-issued dummy current accounts that replace current physical accounts and instantly route payments and collections to a linked “master” current account.

Easily set up, VBAs can be allocated to any purpose – from denoting a legal entity or business unit to pinpointing individual payers. Every VBA has a unique number, which helps to separate funds in the master account.

The potential benefits include:

  • the ability to centralise incoming and outgoing transactions and achieve cash concentration;
  • straight-through reconciliation;
  • reduced manual post-processing of unmatched items.

Since physical account structures can be rationalised and no balance is held on a VBA (as funds are directly routed to the master account), bank account costs and administration can also be significantly reduced.

Yet, despite the obvious advantages, the applicability of VBAs is sometimes underestimated.

How VBAs work. Source: ING

Setting the record straight

A common misconception about VBAs is the type of company that they stand to benefit. While it’s clear how non-bank financial institutions may use VBAs to help allocate client monies, or how large collections businesses such as utilities or telecom companies can use VBAs to improve their complex reconciliation processes, VBAs are just as suitable for multinational companies (MNCs) in other sectors too.

For corporates with purely domestic cash flows and those with cash flows coming in from different legal entities, in disparate locations and denominated in various currencies, VBAs can help streamline cash management processes – potentially reducing the drain on experienced staff and minimising future investment in sophisticated ERP/TMS systems.

Another common myth surrounding VBAs is that they cannot be used on a cross-border basis. While this may be true at some banks, at ING, VBAs can be held in another country from the master account, as long as the accounts are in the same currency.

Take cash management to the next level

VBAs can also be combined with an allocated sub-account hierarchy – called virtual ledger accounts (VLAs) – which populate a multi-bank reporting dashboard, to deliver a complete virtual cash management solution (this has been done at ING).

This allows full cash concentration and visibility to be realised right across the group, no matter how the company’s treasury function is organised, or how sophisticated and harmonised its technology infrastructure is.

VLAs are administrative “sub-accounts” of one current account. Under the current account, clients can open, close and modify as many VLAs as they need, and organise account hierarchies to their liking. Funds and transactions can be earmarked as belonging to a VLA, allowing clients to allocate their funds without physically having to divide them.

As a result, treasurers can reap all the benefits of a structure that mimics physical bank accounts whilst harnessing the power of near real-time multi-bank data and reporting to make better informed decisions.

Moreover, corporates can set up an in-house bank, payments-on-behalf-of (POBO) and collections-on-behalf-of (COBO) structures – and multi-entity funds can be managed without the need for dividing cash physically.

More than a reconciliation tool

What all this highlights is that there’s much more to VBAs than meets the eye. Once the domain of pension funds and electricity suppliers, VBAs have a significant role to play in helping companies large and small, multinational and domestic, to improve their cash management.

Even those corporates already achieving high levels of centralisation can still benefit from VBAs. They can be used to replace physical accounts for tax or salary payments, for instance, which are often left out of the scope of traditional payment factories or POBO structures for legal reasons.

So, whether you want to kick-start your cash centralisation journey or looking for a solution to help tidy up any “loose ends” in your centralised structure, VBAs deserve a second look.


virtualbank

Virtualbank

The purpose of the Virtual Bank program is to create a previously disadvantaged learner who is immediately productive in the banking and micro-finance environments.

The Virtual Bank program is based on practical work flows and experience in a simulated environment. The training is overseen by professional bankers who have considerable in-depth experience of banking.

The Virtual Bank environment is unique. It is a simulated banking environment. We give hands-on, real life examples for our learners to train on. Case studies are drawn from real life. These are role-played, documented with full financials, real people situations and real make-break business issues impinging on the learners. This is where theory meets real life. And our learners leave the program with a high degree of practical understanding of the real world of banking and micro-finance.

The Virtual Bank program is directed at commerce graduates in one stream and to post-matriculants in another. The Post-Graduate program is currently being delivered in Cape Town, Durban and Johannesburg, whilst the Post-Matric program is delivered in Bloemfontein, Nelspruit and Port Elizabeth.

We select about one in ten of the learner applications we receive. All are assessed for potential and performance orientation prior to being selected onto our programs. Once you are at the point of selecting learners from our Virtual Bank program, you apply your standard selection processes on top of what we have done. In this way you know you are getting the very best candidates in the market.

Our selection assessments are done to establish the applicants’ suitability including motivation, numeracy, literacy and organizational sense. The latter is critical to a learner being a success in the detailed environment of the banking and microfinance world. On average between 2500 and 3000 learners apply for entry to each program. From these applicants, we select the number needed, around 140, depending upon the program being undertaken.

We select only the best and most suitable applicants ensuring our Learners have the attitude and ability to become productive assets to the organizations they are placed with.

Pre-selected learners are a huge benefit to the banks and organsiations taking on our learners. As you well know, selection is a very expensive and time-consuming process and Guarantee Trust is able to cut both costs and time. An additional cost saving, and probably the most important, is that our learners are already work-ready. These training costs are built into our program costs thereby making our learners even more cost-effective from your perspective.

The second step (training) is conducted over a 5-month period. The training covers researched areas that actually prepare our learners for the banking and credit environment.

There are three main focuses of our Virtual Bank program:

  • Soft / life skills
  • Office ready skills
  • Basic banking knowledge and practical application

The training covers researched areas that actually prepare our graduates for the environment they are going to work in.

Subjects covered are basic skills that break down ‘learning for exams’ and build skills in learning for actual work environment application. Actual communication skills are taught with the accent on operating skill as opposed to technical skill. The training regime includes a set of courses on rules of professional conduct, full office orientation (which adds to filing skills), work-place manners, etiquette, work habits, performance techniques and much more.

The Post-Graduate program covers a full suite of soft skills training including client service skills, office skills, etiquette and manners, and the all vital communication skills. All learners have been honing their written and spoken English skills throughout the program. Banking codes of conduct and the legislative environment of the bank are also covered.

In our technical modules they cover a graduate-level 15-chapter banking text book which gives them a full banking orientation, from how banks operate and how they create income to the various products and services that banks offer. The Virtual Bank modules, in combination with the banking textbook, cover sales as an essential skills of modern banking. Once into the body of the Virtual Bank, the graduates learn credit risk assessment skills. This is done with real banking clients from partnerships, small and medium companies and individuals. They have client packs available to them and work through the entire process of assessing risk and submitting client credit application to qualified credit managers (hired for this purpose in each academy). Our graduates therefore end up knowing the nature of banking, client service skills and credit risk assessment skill. No matter where they may start with a bank, their forward progress is highly flexible because of this very solid grounding in the core skills of banking.

The Post-Matric program covers a full suite of soft skills training including client service skills, office skills, etiquette and manners, and the all vital communication skills. All learners have been honing their written and spoken English skills throughout the program.

In our technical modules they cover a 15-chapter banking text book which gives them a full banking orientation AND takes them through how to assess and service personal finance clients. These latter technical modules build a set of skills with each learner covering the full interaction with a personal banking client. We teach how to access the client information in a way that is valid and useful for the credit processes in the bank. They can therefore service clients with a full understanding of what is required by the bank, whilst bearing in mind the needs of the client. Case studies and real banking client situations are part of our unique Virtual Banking modules that form part of the overall program.

This gives you an idea of the placement value of the learner. The value of these gradates to you as an employer is high.

Once their training is completed, we then place the graduates into relevant employment. The Virtual Bank program provides a seamless but vital supply of learners who have been through extensive selection and training processes prior to arriving.

Our placement benchmark is 90% of all program learners placed into sustainable employment. This has been and is still true since 2003. This rate is unheard of and strong testimony of the success of our process and methodology.

Our placement staff can arrange tours of our facilities and interviews with our learners at your convenience.

Post-Graduate Program Learners who graduate from these programs will be suited for placement into all major banks. Micro-finance organizations or personal finance service banks would consider these graduates for more senior positions within your organizations

Post-Matric program Learners who graduate from these programs will be suited for placement into small/medium banking or micro-finance organizations, but of course will also be suitable for all major banks as well. Each branch of Guarantee Trust has placement officers ready to assist you to assess and consider our learners for employment.