Virtual account management or VAM is suddenly everywhere. Corporate treasury teams are demanding better visibility, faster movement, cleaner reconciliation and treasury automation at scale. Virtual account management solutions are designed to streamline and optimize complex account structures, improving efficiency, control and cash management for multi-entity organizations. In response, banks are eager to offer “virtual accounts”. The problem is the term has become so broad it often hides massive differences in actual capability.
This creates a significant disconnect. Most businesses believe they are getting a true virtual account management solution only to discover it’s just rearranged reporting or a visibility-only sub-ledger. Virtual account structures can vary significantly in their design and impact on treasury operations, affecting how organizations manage cash flow, reconciliation and financial control. When the expectations of treasury teams and the capabilities of banks don’t align, operational friction skyrockets and customer trust erodes.
From a customer’s perspective, VAM exists in three very different forms. The first is a visual grouping of core accounts, sometimes called Active VAM. The second is a set of real but non-transactional virtual accounts known as Surrogate VAM. The third is a system of fully functional Operational Virtual Accounts. These forms differ in how they interact with underlying bank accounts and account structures, influencing reconciliation, liquidity management and overall treasury operations. The difference in customer experience between these three is dramatic and that’s the real story for banks looking to compete.
What Treasury and Finance Teams Actually Expect Today
Before diving into the different types of VAM it’s crucial to understand what treasury and finance teams are actually trying to achieve. These teams are under pressure to support increasingly complex business models and provide real-time financial insights. Their expectations are no longer about simple cash management. They are about strategic financial operations.
Today’s treasury teams expect:
- Clear liquidity positions: They need to see cash positions broken down by business line location customer segment or any other relevant metric in real time.
- Near-instant reconciliation: Waiting for end-of-day batch postings is no longer acceptable. Reconciliation needs to happen as transactions occur to support agile decision making.
- Powerful treasury automation: This includes automated sweeps allocations on accounts and event-based triggers to move money without manual intervention. Automated processes replace manual work, streamlining data collection, reporting and cash management tasks to improve efficiency and accuracy.
- Operational independence for sub-groups: Different business units or franchises need the ability to manage their own dollars within a controlled framework.
- A sharp reduction in manual exceptions: The goal is to eliminate the end-of-day scramble to fix errors and handle one-off issues.
- A structure that supports modern business models: This is a big one. Marketplaces escrow services franchises and vertical SaaS platforms all require a flexible B2B infrastructure that legacy systems can’t provide.
Modern treasury functions increasingly rely on systems and integrations to deliver real-time insights and control.
The gap is clear. Traditional VAM models were designed for a simpler world. They were never built to handle this level of operational complexity or the degree of autonomy that modern businesses demand. ERP systems play a critical role in supporting these advanced treasury functions. This is where the confusion and frustration begin.
“Active VAM” (Core-Facade VAM): The Illusion of Control
The most basic form of what gets labeled “virtual account management” is what we can call Active VAM or Core-Facade VAM. Think of it like this: it looks like you have multiple distinct bank accounts but behind the scenes it’s still just old-fashioned core accounts. These old-fashioned core accounts are actually traditional physical accounts, typically demand deposit accounts held at a physical bank.
This approach essentially involves grouping or relabeling existing core accounts to create a visual hierarchy. The bank’s interface might show balances for different “virtual accounts” but these are not truly segmented. It’s a reporting layer a facade placed on top of the bank’s traditional core system. There is no true virtual sub-ledger.
Because all actions still rely on the bank’s core system this model is bound by the same old constraints: batch processing cycles strict cutoff times and rigid product structures.
The Customer Experience
For the end users, the feeling is one of disappointment. “I can see more but nothing actually works differently.” They get a better view of their cash positions but they can’t act on that information in real time. Money movements still require manual requests or nightly batch processes. There is no account-level treasury automation. The structure is inflexible limiting their ability to tailor accounts to specific client needs or business units. The result is continued high operational overhead behind the scenes. This often leads to data silos, making it difficult to access unified financial information.
Use Cases That Break Active VAM
The limitations of this model become obvious when applied to modern business models.
- Marketplaces: A platform might want to show each seller their individual “account” balance on a dashboard. But with Active VAM all incoming funds land in a single core account. The platform must then redistribute those funds to sellers manually or through a slow batch process.
- Franchises or Multi-location Retail: Each store location appears to have its own account for daily deposits. However the actual cash is pooled in one central account. Moving funds for payroll or vendor payments requires manual sweeps.
- Vertical SaaS Platforms: These platforms need scalable sub-ledger accounting driven by APIs to create accounts for their customers on the fly. Core-facade VAM simply cannot support this kind of dynamic high-volume account creation.
The impact on operations is severe. Exception rates remain high as manual processes persist. Finance teams are forced to rely on “shadow spreadsheets” to track what’s really going on. Ultimately banks offering only a facade cannot support the platform-based business models that are driving economic growth. These limitations can disrupt the whole process of treasury management and payment operations.
Surrogate VAM: Real Virtual Accounts With No Power
The next step up is Surrogate VAM. Here the bank provides true virtual accounts created within a separate ledger. This is a significant improvement because it allows for genuine internal segmentation and reporting. Balances held in these virtual accounts accurately reflect sub-ledger positions, and these sub ledgers allow organizations to manage multiple accounts efficiently within a single system. It’s an ideal solution for tracking funds across different clients divisions or specific payment flows.
There’s just one major problem: these virtual accounts are for visibility only. They can’t do anything. They have no unique account numbers or external identifiers. They cannot receive inbound payments directly nor can they initiate outbound payments. All money movement must still occur through the parent physical account.
The Customer Experience
The customer experience is one of partial satisfaction mixed with frustration. “I can finally see the breakdown… but I still can’t automate or control it.” They have perfect visibility into their balances which is a huge step forward for reconciliation and reporting, as it also streamlines cash reporting and helps generate reports more efficiently. But they have no operational autonomy. They are still completely reliant on manual actions or scheduled processes to actually move money.
Use Cases That Hit a Wall
This model provides clarity but falls short when action is required.
- Healthcare Third-Party Administrators (TPAs): A TPA can use virtual accounts to track patient co-pays or claim-level balances perfectly. But they cannot trigger a payment to a provider or release funds to a patient directly from that virtual account.
- Corporate Liquidity and Cash Pooling: A corporate treasurer can view balances for each subsidiary in real time. But they cannot automate sweeps between those virtual accounts or enforce dynamic spending limits at the sub-account level.
- Marketplace or Gig Economy Payouts: A platform can display each gig worker’s earnings in their individual virtual account. But when it’s time for payout the platform cannot initiate payments directly from those accounts.
The operational impact is a mixed bag. Visibility improves the precision of financial tracking and reduces some manual reconciliation work. However the system still requires humans or batch logic to execute transactions. It cannot support time-sensitive use cases that require immediate automated action which limits its value for a growing number of businesses. The lack of automation can hinder risk mitigation by increasing exposure to financial risks and can also create additional tax implications for organizations, as manual processes may complicate tax reporting and compliance.
Full Operational VAM: Virtual Accounts That Actually Act
This brings us to the ultimate goal: Full Operational Virtual Accounts. This is the B2B infrastructure that modern businesses need. With this model each virtual account is a real functional account with its own address rules and autonomy.
An operational virtual account has a unique identifier like an account number or VA ID. It can receive inbound payments directly from external sources. It can originate outbound payments. It can hold balances run rules and automate movements independently of the bank’s core system constraints. These accounts are driven by a programmable ledger layer that allows them to be scaled up or down dynamically per client per transaction or per event. Operational VAM enables organizations to centralize cash and design flexible virtual account structures tailored to their specific treasury and financial management needs.
Qolo’s platform is built to deliver this full operational capability. It provides a real-time programmable ledger that unifies virtual account management card issuing and money movement across multiple rails.
The Customer Experience
This is where the magic happens. They get both visibility and real-time action. Each virtual account behaves like a fully functional operating account, and an automated system can streamline payments and treasury workflows by replacing manual processes and improving efficiency. Workflows for sweeps fund routing allocations and approvals can be completely automated. The result is treasury precision at scale.
Use Cases Unlocked
Full operational VAM unlocks the potential of modern platform business models.
- Marketplaces: Each seller gets an operational virtual account. Incoming payments from buyers are automatically allocated to the correct seller’s account. The platform can programmatically capture its fees and sellers can trigger instant payouts based on predefined rules.
- Franchise Models: Each store has its own operational VA. End-of-day sweeps to a central corporate account are automated. Divisional profit and loss statements instantly align with actual cash positions.
- Franchise Models (continued): Real-time visibility into cash position and liquidity buffers enables better financial planning and risk management, ensuring that businesses can optimize working capital and maintain sufficient liquidity for operations.
- Escrow or Claims Flows: Complex multi-step review processes can be built directly into a flow. Money can be held in a virtual account and released automatically based on events or thresholds.
- Corporate Treasury: A treasurer can create a sub-account for each division product line or region. Liquidity management is automated and access can be controlled on a granular level for each business unit.
The operational impact is transformative. Manual steps are removed. Exceptions are dramatically reduced. Treasury becomes a proactive strategic function rather than a reactive one. For banks this means they can finally support modern platform-based business models without a risky and expensive overhaul of their core systems.
Implementation and Onboarding: The Hidden Hurdle
Most organizations think choosing a virtual account management platform is the hard part. They’re wrong. The real challenge starts when you flip the switch on implementation and onboarding. Skip this phase at your peril – it’s where promises of improved cash management either deliver or disappoint.
Integration hits first. Your treasury already runs on a patchwork of legacy cores, accounting systems and scattered bank relationships across entities. Sound familiar? Dropping a virtual account solution into this maze demands surgical precision. Without mapping your actual cash positioning needs and working capital flows, you’ll build a structure that looks modern but works like the old system. Just shinier.
Data migration separates the pros from the amateurs. Moving account balances, transaction histories and payment instructions from legacy systems isn’t a weekend project. One miscalculation disrupts cash flow. One mapping error creates reconciliation chaos. One oversight impacts daily operations. Banks that nail migration maintain real-time visibility throughout the transition. Those that don’t… well, they learn why migration planning exists.
Operational efficiency shouldn’t be an afterthought – it should drive every onboarding decision. Automate the manual work. Streamline payment flows. Deliver real-time cash visibility that actually means something. Done right, you eliminate errors, kill duplicate entries and give your team strategic work instead of spreadsheet wrestling. Your CFO will thank you.
Regulatory compliance doesn’t pause for implementation timelines. Your virtual account structure must deliver comprehensive reporting from day one, maintain bulletproof accounting records and satisfy auditors who’ve seen every shortcut attempted. Compliance failures don’t just cost money; they cost credibility. Banks that treat regulatory readiness as a checkbox instead of a foundation pay twice: once for the oversight, again for the cleanup.
The Moment of Truth for Banks
The competitive line in corporate banking is now being drawn around virtual account capabilities. Banks that continue to offer “VAM” that is just a core-facade will frustrate their clients and lose their competitive edge. Those offering visibility-only surrogate accounts will meet some customer needs but will miss out on delivering true operational value.
The banks that win will be those that provide full operational VAM. They will become the partners of choice for the fastest growing segments of the economy: marketplaces, SaaS platforms, modern franchise models and forward-thinking corporate treasuries, as corporate treasurers are seeking solutions that provide a strategic advantage and support better investment decisions. Providing a robust B2B infrastructure has become a strategic imperative in attracting and retaining high value clients.
What Can Your Virtual Accounts Do?
The confusion around virtual accounts requires banks and their customers to ask a more precise question. The question is not “Do you have VAM?” It is “What can your virtual accounts actually do?”
If your virtual accounts only show you data it’s a surrogate solution. If they only look segmented but are tied to a single core account it’s a facade. But if your virtual accounts can receive, send, route and automate funds independently, that’s real operational virtual account management. Integration with a physical bank account ensures that virtual accounts are directly linked, supporting more accurate financial planning and financial reporting by providing real-time, integrated data for better cash flow visibility and reconciliation.
This is where modern treasury is headed and it’s where Qolo already operates. We provide the unified platform that enables banks to deliver the powerful and flexible financial tools their customers are demanding. With our real-time ledger and multi-rail capabilities, banks can leave the chaos of fragmented systems behind and offer the control and clarity their clients need to innovate and grow. If you are ready to assess your VAM capabilities, Qolo is here to help.
