Our client is a leading retail, commercial and transaction bank headquartered in the US. Their global network enables them to connect and conduct business in over 100 countries. The bank provides a wide range of financial products and services, including banking, investment, credit cards and wealth management. They collaborated with HCLTech to implement a Virtual Account Management (VAM) solution to streamline transaction processing, simplify reconciliation and improve liquidity and risk mitigation.
There were several key challenges that needed to be addressed, including:
- Difficulty in identifying payment source
- Risk of sharing physical account DDA (Demand Deposit Account) with vendors/suppliers
- Manual touchpoints to reconcile payments
- Opening of multiple DDAs for the same customer
- Payer ID was used to receive payments but not for outgoing transfers
- Identifying and analyzing the impact on multiple systems (liquidity, charges, statement) where virtual accounts needed to be mapped
- Managing virtual accounts in the bank’s core banking and VAM platforms, as the two systems are tightly coupled, resulting in maintaining static data maintenance requirements (customer, account, FX, charges, interest) in both systems
- Transaction posting and balance updating for virtual accounts needed to happen in both core banking and VAM platforms, resulting in the need for multiple communication lines
The bank’s legacy cash management processes were cumbersome in terms of reconciliation. It was also difficult to obtain a consolidated view of the liquidity position. The bank was offering Payer ID to their corporate customers, which was used to receive payments and not for outgoing transactions. Their objective was to implement a VAM system to provide an automated and simpler solution for handling collections and outgoing transfers for their corporate customers to help them achieve a comprehensive and faster view of their liquidity position.
HCLTech helped the bank design and implement a VAM solution that allowed their corporate customers to manage liquidity concentration and enable segregation of activity under a centralized bank account. Below are some of the key components of the solutions that were implemented as part of the VAM:
Streamlining payables and receivables management
The bank is now offering virtual accounts to their corporate customers that can be used for both receivables and payables.
Sweep from virtual accounts to DDA
To resolve the issue of duplicate entries, HCLTech implemented sweep functionality from virtual accounts to a parent DDA.
VAM structure and roll-up entry
Virtual accounts carry a notional balance, and the real balance is available in the DDA. Whenever there is debit or credit in the virtual account, the corresponding roll-up entry happens on a DDA. A sum of all the underlying virtual accounts would match the balance available in real DDA.
Statement (MT940)/reports for virtual accounts
Built a functionality for statement (MT940)/report generation, such as virtual account balance and transaction details, so the bank can send the same to their customers.
HCLTech also assisted the bank in rolling out VAM in 19 countries (North America, Western Europe and APAC regions) and developed an interface between VAM and the bank’s existing systems such as CRM, core banking DDA, product processors (e.g., ACH, FPS, billing and pricing engine) and an online banking portal:
- Designed the layout in such a way that only relevant virtual account data is sent to the partner system
- Built an online integration platform between VAM and core banking so that both are in sync with virtual account details
In addition, HCLTech implemented the following enhancements:
- Single deal creation functionality to group multiple deals into a single deal and send the request from CRM to core banking for physical and virtual account creation
- Sanctions screening for virtual accounts during activation, modification and rescreening of existing accounts, which was a regulatory ask
- Enabled STP (Straight Through Processing) to integrate between VAM and client ERP to get the request for virtual account activation, modification of name and address, status change
- Automatic static data shipments (e.g., customer, accounts, FX, charges) from core banking to the VAM platform, which helps in data consistency in both systems
- Designed the entire architecture of VAM, so that it fits into the existing landscape
Ease of reconciliation
Virtual accounts help in identifying the payment source and simplifying the reconciliation process. This resulted in reduced operational costs through the optimization of the reconciliation operations.
Cost and overhead reduction
Corporates can create virtual accounts for each of their customers and partners to receive or make payments. This eliminates the need to share their real DDA with partners, reducing the cost and overhead associated with opening and managing multiple DDAs.
Improved liquidity and risk mitigation
Post VAM implementation, the bank was able to improve the liquidity and cash concentration and mitigate risk by making use of sweep functionality to move funds from virtual accounts to a parent DDA, leading to the removal of duplicate entries in the DDA statement.
Ease of creating a virtual account
Virtual accounts can be created or requested from multiple channels, such as CRM, client ERP and core banking platforms.