Multi-currency account servicing

The banking industry is going through a period of change, in part driven by new client expectations and in part forced by the regulatory environment, says Tieto

Banks are looking for alternative operating models to drive down cost and provide new revenue streams from information-based client propositions. Cloud-based services are also essential in this context in order to achieve necessary flexibility and global coverage.

Tieto, a recognised Nordic-based technology innovation company, has responded to these changes by developing a Virtual Account Management (VAM) platform which is currently being deployed by a number of major banks.

According to Mats Wikstrøm, director of operations, financial services: “This new operating model, driven by self-service provisioning, enables significant improvements in efficiency and associated cost reductions, for both the bank and its clients.”

Self-servicing in VAM changes the client experience, enabling virtual accounts to be opened and administered by the client in a real-time environment, outside the traditional banking process. VAM allows clients to rationalise the number of real accounts held in the bank, and gives the flexibility to open and close virtual accounts quickly and easily. This capability can in turn be extended to the client’s clients, thereby enabling the client to improve its own customers’ experience.

VAM can be easily integrated into a bank’s traditional payment and accounting operating environment, giving a bank the possibility of rapidly creating state-of-the-art transaction services in a virtual front-end environment, with minimal impact on existing business-as-usual processes.

This new operating model enables significant improvements in efficiency and associated cost reductions

Traditionally, a company might have a large number of accounts in a bank which are used for different purposes, such as treasury, accounts payable and accounts receivable. VAM gives such a company the opportunity to reduce the number of real accounts on a bank’s ledger into a much smaller, more manageable number, while facilitating the self-service administration of an unlimited number of virtual accounts. These accounts can be set up as single accounts or in hierarchical structures and each virtual account is assigned a structured account number against which payment receipts can be noted.

“VAM is probably the most comprehensive solution in the market in terms of functionality and also incorporates a full cash management suite, including sweeping, pooling and netting, as well as payment validation and reconciliation services” says Tieto’s Mr Wikstrøm.

“There is no real money in these virtual accounts – the real money resides in a number of aggregated client accounts on the bank’s ledger – so VAM can actually be considered as a real-time reporting tool and management information system, unlocking the real value of the data held in the solution.”

The VAM solution is particularly relevant for the clients of banks who have a large customer base of their own, where VAM allows a client to open an account on behalf of their clients and to actually allow these clients to self-serve themselves. A practical example might be a fund manager with a lot of clients in the form of investors who could all be running virtual accounts in a VAM environment as part of the servicing model of the fund manager. The real funds are aggregated and held in real accounts in the books of the bank.

“A significant differentiator in this operating model is to allow a bank’s clients, and their clients, to self-serve. VAM is part of the evolving business environment serviced by transaction banks and is expected to become the transaction banking norm within the next three to five years. It’s a niche solution that could be a game-changer in the market,” says Mr Wikstrøm.

Tieto is a large Nordic IT services company, with multiple industry touch-points servicing both private and public sectors globally. Founded in 1968 and headquartered in Helsinki, the business employs 15,000 people and turns over €1.8 billion.

Mats Wikstrøm

Director, head of operations, financial services

mats.wikstrom@tieto.com

Phone +46 104818129