In traditional, physical bank accounts, commonly referred to as settlement accounts, distinct account numbers are allocated. For the benefit of the settlement account, which is where the money is finally kept, can be used to transfer and receive money. Businesses frequently construct a number of virtual accounts, each of which is assigned to a particular client, transaction, entity, or other business-related purposes.
A virtual account is an online or non-physical bank account that has been formed virtually. You can create a virtual account for your clients or customers and effortlessly reconcile inward payments by including only a few simple facts like the customer's name, mobile number, and email address.
How do virtual accounts function?
Similar to how regular bank accounts work, so do virtual accounts. They simplify incoming and outgoing transactions, have their own account identifiers, and aid users in keeping track of their balances. The main distinction is that money cannot be stored in virtual accounts. They accept it, gather the relevant sender details, and send it on to a main account.
Your primary email address serves the same purpose as your corporate bank account. Virtual accounts are similar to email sub-aliases that are connected to your main address. You can set up many email sub-aliases while sharing a single inbox to distinguish your activities.
Let's assume that email@example.com is your primary email address. You want to subscribe to many publications, but you don't want to directly use your primary email address for that purpose. Create a list of distinct sub-aliases for each subscription, such as sunny+Prime@sunnymail.com, sunny+Voot@sunnymail.com, and sunny+Hotstar@sunnymail.com, to solve this problem. All of the emails will continue to build up in your primary account, but they can now be sorted according to the alias. An online account functions similarly. Since it is a sub-alias of your main account, you may manage the lead, or source, of a payee from just one place—your main settlement account.
Why do I require a virtual account?
Many different business models, like neo banks and organizations with complicated cash flows, require the ability to link each cash flow to a specific user since they have numerous cash streams going into a single sizable bank account. Businesses may easily track individual payments with the aid of virtual accounts, which also automate reconciliation, which would otherwise be a laborious, manual procedure.
Businesses must manually evaluate each transaction and submit the numbers during manual reconciliation, which leaves room for human mistakes.
On the other hand, virtual accounts operate in real-time and are entirely automated. They can thus display the most accurate bank account balance. They are sleek and effective, with no room for error or extraneous management.
Virtual account numbers (VANs) – what are they?
Businesses frequently struggle to keep track of who has paid what and when.
System-generated, distinct account numbers known as virtual account numbers, or VANs, are used to speed up the procedure. Open Virtual Accounts excel in this situation. Businesses can take payments via numerous methods and automate payment reconciliation all at once by giving each consumer a virtual account number or UPI ID.
A virtual account number is a system-generated, distinctive account number that conceals the real account number and is based on logic. Comparing these virtual account numbers to the payer's credentials as provided by the merchant, this in turn simplifies the process of data collection and MIS creation.
What distinguishes a virtual account from a typical bank account?
Because a virtual account is a non-physical bank account, businesses can open one without going to a branch or standing in line. Additionally, the virtual account allows for the digital tracking of all transactions, decreasing the need for manual tracking.
You only need to set up a virtual account. The distinct virtual account number makes it simple to identify both the payer (customer) and the payer source.
What advantages do virtual accounts have over conventional/physical ones?
Although virtual accounts give far more freedom than physical ones, they work similarly. Using a virtual account to reconcile payments from many consumers is more effective.
Most businesses find it challenging to match incoming payments to order numbers when utilizing a physical account. Additionally, virtual ones are a low-maintenance and cost-effective alternative to physical ones considering their high maintenance and operation costs. Additionally, monitoring numerous virtual accounts and reconciling payments is far simpler than manually tracking them via a physical account.
Therefore, virtual accounts use substantially less bandwidth for manual tracking than physical accounts, which consume more bandwidth.
Virtual accounts and balances
Many virtual accounts are unable to keep balances on their own since they are extensions of a physical, primary bank account. They work best when combined with a ledger, a bookkeeping system that keeps track of all of your company's transactions. A ledger can improve user balance tracking and monitoring when used with a virtual account. You may anticipate a simple, entirely digital banking experience thanks to virtual accounts that are driven by ledger-like features and provide you access to every small and big transaction.