Industry trends November 17, 2020

Why virtual accounts are key to your digital banking strategy

Think about the last time you opened an app like Venmo and used your balance to pay for something quickly. You didn’t need to dip into your bank account: the funds were there and your purchase was instant (and hopefully instantly gratifying, too!). 

It’s possible you were on the move, even traveling between countries. You likely can’t remember because the interaction was so easy and you were able to move on with your day without a second thought.

Fast, painless electronic transactions are quickly becoming the norm in everyday life. And that trend is the future for commercial banking, too: business transactions are still overwhelmingly manual by comparison.

But here’s the thing: there’s no international Venmo for businesses.

Digital banking and growing fintechs are rising to meet this need. Unfortunately, in today’s fast-moving, global economy, it can be hard to find the best solution that solves for every challenge in international business.

That’s why virtual bank accounts are a lynchpin feature of digital banking. They allow fintechs and challenger banks to compete with traditional banks by offering flexibility and accessibility in the ways they manage payment flows.

The upside: ideal for serving growing businesses

For small and medium businesses (SMBs) that have international clients, finding a bank account structure that minimizes friction and manual labor can be daunting. Traditional banks simply don’t necessarily focus on SMBs taking on global trade because they either don’t have the structure to do so or don’t see them as large enough to be worth their time.

As a result, most businesses end up opening numerous bank accounts internationally to wire money between different locations. It’s a headache.

Digital banking opens up a new world of possibilities, because there are virtual bank account solutions out there flexible enough to accommodate all types of customers.

Essentially, virtual bank accounts enable customers to have stored value or “wallets” in different locations. A digital bank assigns a virtual account to each of their individual end-users, who can then use that one account in a range of areas (with a few caveats).

Centralization is an enormous value-add for customers and a leg-up against traditional banks because end-users can operate with just one account – they can keep funds in one central balance to handle all types of payments.

Done right, virtual bank accounts also ease regulatory stress on digital banks because the virtual account provider will typically provide all compliance needs on their behalf by underwriting them — so even non-regulated companies can offer these virtual accounts with the right partner.

The caveat: customers need universality

Banks are beginning to realize that serving SMBs with flexible virtual account options makes them competitive vis-a-vis traditional financial institutions. Yet, there are still some barriers to SMBs getting the type of optimal service they require.

For instance: few virtual accounts optimize international transactions. Others miss the mark on user experience. Customers largely need a few key features:

  • a single bank account with a unique log-in that they don’t have to open everywhere
  • the ability to send payments internationally with ease
  • reduced friction with in-app features

There are plenty of virtual account providers out there, like Nium or Transferwise, that offer core virtual account functionality. But they fall short when it comes to those key features. Nium, for instance, can’t offer multi-currency accounts, which means it can’t facilitate international business. Transferwise can’t work with other payment providers, so it’s limited in its functionality and compatibility.

In particular, multi-currency virtual accounts are ideal for digital banks and fintechs looking to support SMBs and SMEs expanding internationally. For instance, Starling Bank sought exactly that: SMBs in the UK were traditionally under-supported by larger banks when it came to international business, so Starling Bank used Currencycloud’s virtual account solution to provide fully tracked payment functionality to their clients no matter where their end users sent money.

That flexibility is a huge win. Multi-currency compatibility means virtual accounts can deal across currencies with little to no delay in adjusting account balances, and far less money lost to exchange fees. Without automatic compatibility, post-transaction currency reconciliation can take weeks and mean lost time spent manually updating ledgers.

The solution: winning market share with Spark

So…what’s the secret to winning market share and customers? For digital banks, providing a digital account feature is a no-brainer. A sophisticated virtual bank account is just another tool to compete against other financial institutions.

Serving SMBs is hard. And it can seem like there is no one-size-fits all solution that does everything a growing business needs.

Enter: Currencycloud Spark. A multi-currency, universally compatible virtual account solution like CurrencyCloud Spark is a must for your digital banking strategy because of its emphasis on both optimizing the user experience and making digital banks more data-driven and globally competitive in the long run.

In today’s world of international trading, Currencycloud Spark offers a virtual bank account solution that alleviates customers’ international headaches while working invisibly in the background. Many banks offer the same basic features, but in order to rise above the tide in the new wave, your virtual accounts need to be buoyed by Currencycloud Spark’s stand-out features:

  1. International Customer Focus
  2. Multi-Currency Compatibility
  3. Crystal-Clear Policies
  4. Pain-Free Reconciliation
  5. Valuable User Data

International customer focus:

It should always be smooth sailing for your globetrotting customers, with no difference in service for domestic vs international transactions. We can’t say this enough: offering flexible virtual accounts allows your bank to be competitive and win customers. Turn international receivables and payments from a headaches into a revenue opportunities.

Multi-currency compatibility

Global traders need to receive and send money internationally using a unique user profile tailored to their business. Did you know that with Currencycloud Spark, a payment can be converted to the user’s preferred currency and reconciled within hours?

Crystal-clear policies

Payment fees and rates are clear and transparent so your customers always know what to expect, and the right amount of money always ends up in an account — no one is unexpectedly left short.

Pain-free reconciliation

Tools like Currencycloud Spark plug into your current platform or systems. All funds are automatically screened and reconciled. Imagine a reality free of manual, cross-currency reconciliations that take days. Say goodbye to unnecessary costs and errors.

Valuable user data

One of the most valuable things about Currencycloud Spark? Its ability to track financial data over time. In addition to providing a delightful customer experience, Currencycloud Spark acts as a reconciliation or ledger tool, so that you can automatically track money flow over time, and see trends by user. This helps you build your strategy and continue to meet customers how and when they need you, wherever in the world that may be.

Learn more about Currencycloud Spark here.

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