The Benefits of Virtual Accounts … and Pie

The benefits of virtual accounts are many. They enable the financial infrastructure of a business to scale with rapid and evolving requirements.

This article will explore what virtual accounts are, who they are for, and what value they can bring to a business.

What Are Virtual Accounts?

Virtual accounts are account numbers linked to a core bank account (or settlement account). Virtual accounts function in much the same way as a bank account: you can send funds from them and receive funds into them.

The key difference is that all funds are actually held within the core bank account, not within the virtual accounts.

Let’s talk about pie.

Imagine a bank account as a delicious apple pie.


Your business owns this “pie.” Now, let’s say you want to section this pie off into slices of varying sizes for your family (customers). Your father-in-law needs a huge piece, your son needs a small piece, etc.

You could do that by moving slices to different pie dishes as needed. That process becomes cumbersome quite quickly, especially when talking about hundreds of pieces of pie.

Virtual accounts allow you to ring fence pieces of pie without cutting it. The benefit is that you never accidentally give away your father-in-law’s pie, or give your son a bigger piece than he’s allowed.

Why Not Use Multiple Bank Accounts Instead of Virtual Accounts?

As any treasury manager will know, the process of applying for a bank account is often extensive. Even if you already hold an account with a bank, a similar (if not identical) application process is required to set up more bank accounts.

There is also often a cost associated with opening bank accounts (to cover the admin work involved). These costs quickly rack up when you are looking to open tens, hundreds, or even thousands of bank accounts.

There is also the issue of scalability:

Virtual accounts enable you to quickly spin up an account in a matter of seconds, which means you can accept and process payments much quicker.

Why Is It Such a Cumbersome Process to Set Up a Bank Account?

“Modern” checking account services have been around for decades and were created in a customer-present world.

You would go to your bank and request a checking account for your business. If you needed another financial service, you’d go to your bank.

As a result of the in-person nature of banking in its infancy, onboarding and due diligence processes were very analog in nature. Many of them still exist today in banking.

Banks Offer Online Application Today; How Is This Any Different?

Banks have indeed been offering online applications for accounts for a decade or two in most cases, but this is still far from instant.

The application process is prolonged and cumbersome, as it operates in much the same way as the customer-present application process. These underlying analog set-up processes make things slow, and slower still when thousands of accounts are needed quickly (required for a new product launch, or expanding your product to a new territory).

Below are a few examples of how virtual accounts enable emerging new fintechs to flourish.

Payroll Processors


Many payroll providers are operating in the US today. In most cases, they receive funds from organizations prior to disbursing to each employee at the end of each payroll cycle.

Virtual accounts for each employee ensure funds are ring-fenced.

It becomes impossible to accidentally pay an employee twice, as the allocated paycheck amount is transferred to the virtual account. No more than that amount can leave the virtual account to the employee on payday.

Virtual accounts may also be used to receive funds from an organization.

This allows the payroll provider to clearly show how company A’s funds are being segregated from companies B, C, and D’s. This is helpful for auditing purposes and due diligence carried out by organizations.

Crypto Exchange


Virtual accounts may be issued to each consumer in order for them to make deposits to the Crypto exchange to buy fiat. Each virtual account is unique, so the exchange has a comprehensive record of inbound and outbound fiat buys and sells for an individual customer.

Crypto exchanges also benefit from the additional security afforded by virtual accounts.

It’s not possible to “steal the whole pie,” as each customer has their own virtual account with ring-fenced commodity money (US Dollars). This is especially valuable given the frequency of crypto exchange thefts in recent times. Additional theft statistics are collated by Comparitech.

E-Commerce Payment Processor


Virtual accounts allow for funds for each merchant to be ring-fenced.

This enables a payment processor to be able to collect funds for thousands of merchants, and securely hold funds within a network of virtual accounts until they need to be remitted to merchants.

Merchant processing for card payments carries risk. Being able to ring-fence the flow of funds of each merchant makes it easier to monitor their performance and chargeback rate.

This is necessary for fraud prevention, but also compliance with card payment scheme rules.


Virtual accounts offer numerous benefits to fintechs seeking to expand at scale, while also offering a crucial method of evidencing the integrity of how funds are being stored and moved.

More and more industries will inevitably look to virtual accounts as they expand their businesses and simplify their operations – if nothing else for fear of being left behind by the competition.

If you would like to learn more about how Victor can support your business’ virtual account and payment needs (or pie), please Contact Us.
James Palmer
James is a payments and fraud technology subject matter expert with a proven track record orchestrating the deployment of SaaS, and On-Premise technology solutions. James has a high degree of understanding of PSD2, and the impending changes that will reshape payments in region for merchants, fraud prevention solutions, and large financial institutions. James has a blend of technical competency, and industry expertise that uniquely position me as a payments and fraud SME within the EMEA region.

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