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VAM: One idea that’s solving multiple problems. Here's what you need to know about it.

Ask a room of corporate bankers, “What is VAM?” and you’re likely to get many different answers. And that is a good thing.

Virtual Account Management (VAM) has the potential—with the right technology foundation—to be infinitely flexible with new business use cases imagined daily. It can deliver tremendous value to both corporates and their banking partners. Corporates stand to reduce cost and complexity, introduce new levels of automation, improve customer relationships, and streamline compliance. Banks, in turn, can strengthen vital relationships by elevating their service to address their corporate customers’ growing pains while reducing their own operational costs. VAM is transforming treasury—and the journey is just beginning. 

Burning questions? Here's what you need to know:

There are a lot of different perceptions about VAM and what it is.  What is VAM? 

Banks have offered "virtual account" solutions for many years, but most of these offerings were for specific purposes and targeted customer segments. But with the advent of real-time payments and Open APIs, banks today are starting to adopt a more holistic approach with VAM to encompass numerous business propositions and use case scenarios.

VAM is about the challenges faced by both corporates and banks for cash management efficiency. It goes well beyond virtual IBANs or virtual reference numbers and offers more than just efficient receivables management. VAM encompasses payables and receivables, including On Behalf Of capabilities, corporate In-House Banking, and management of client funds.

What types of organizations can benefit the most from VAM?

Historically, VAM has been a solution for large corporates who have complex structures of physical bank accounts spread across the globe. With growing globalization, organizations that can benefit from VAM are now defined not by their size but by complexity and business breadth. This might include an organization dealing with payments and collections in various currencies or managing funds for new-economy platforms for gig workers and service providers.

How are banks using VAM to enrich their value proposition? 

Currently, many banks support a limited set of VAM business propositions. Meanwhile, their customers are still facing increased challenges, leaving banks with a gap in unmet needs. The use cases can span a wide spectrum. One bank that we are working with has been supporting client money management for many years. It has outgrown the capabilities of its legacy solution. It is using the renewal opportunity to expand its services to address multiple virtual account propositions. Another bank is looking at offering services across the geographic region and currencies in which they operate, beyond the local, single-currency cash pooling services that they currently provide. Others are looking to use VAM capabilities to support digital wallets, e-commerce, and the gig economy. Nearly every discussion today seems to create new thinking about what business propositions a bank can address with VAM. 

How will VAM continue to evolve?

Banks have started to realize that the traditional VAM techniques of virtual IBANs and virtual reference numbers only address a small portion of corporate challenges. The second generation of VAM solutions typically addressed additional business propositions for payables and receivables management, in-house banking, and client money management with self-service capabilities. Beyond this, next-gen VAM solutions need to combine traditional liquidity management techniques with virtual accounts. This will enable corporates to build off physical sweeping (including relationships across multiple banks) with real-time cash concentration (via virtual accounts) into hybrid physical and virtual structures. The next step in the evolution is predictive cash flow forecasting based on accounts receivable and accounts payable, using artificial intelligence and machine learning.

What types of hurdles do banks encounter when developing VAM offerings?

One of the significant hurdles is to carefully identify the precise customer segment challenges and what is needed to deliver real value to the corporate customer. This, rather than simply introducing a new solution is crucial. Our approach is a phased, minimum viable product (MVP) so that customers can see tangible benefits with rapid time-to-market.

Another challenge is adapting the mindset of banks toward a more client-focused, self-service approach. As with any financial services project, the integration of a new solution is always a challenge. VAM interacts with many areas of the bank. Therefore, it requires many touchpoints with the bank’s systems. Finally, some banks struggle to identify the business case related to developing a VAM offering. It’s not easy for some banks to quantify the benefits for them and their corporate customers around specific VAM applications.

What are the predictions for VAM’s adoption in this new, emerging world, especially with the mounting pressure on capital and the urgent need to manage it more efficiently? 

Traditionally, banks have offered cash management solutions for corporates to optimize their working capital and liquidity needs; these offerings used conventional cash pooling techniques. However, banks are moving away from notional pooling due to regulations and the rising costs of this business. At the same time, corporates are looking for greater insight and control, as well as lower costs through alternative solutions. Virtual accounts fit perfectly with these drivers, providing banks and corporates with greater operational efficiency. Corporates require real-time clarity of their working capital and the self-service control for efficiency and speed.



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Sam Shaqareq

Sam Shaqareq

Head of Corporate Banking, Solution Marketing


Member since

18 Mar 2020


New York

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