January 31, 2023

Virtual Account: Guide to Seamless Cash Collection

Companies in today's fast-paced digital world want to reduce the cost of financial operations while gaining better insights and regulation over their cash flow and liquidity positions. Simultaneously, clamping regulatory changes and an evolving need to offer differentiated product lines enable embedded finance providers to concentrate on the marketplace, such as virtual accounts.

Virtual accounts, while not a novel concept, allow companies to streamline their financial activities cost-effectively. Virtual accounts save a ton of time and protect the company from troubles as it acts as a one-stop solution for effective cash management processes. 

Although virtual accounts are similar to regular bank accounts, they come with additional benefits for businesses. So what is a virtual account, and how does it work? Read further

What is a virtual account?

Virtual accounts entail nothing more than shadow accounts with the same features as a regular bank account. However, they do not come with the administrative burden and other expenses involved with most bank accounts. As a result, the need for physical accounts is reduced significantly.

Accepting funds into a particular virtual account makes it simpler and quicker for enterprises to recognize who made each transaction because each virtual account is unique. Additionally, virtual accounts enable businesses to integrate payments instantaneously.

Virtual accounts have evolved to improve time-consuming financial processes such as sending, collecting, and storing your company's money movement. This blog will provide you with a comprehensive overview of the diverse essentials and characteristics of virtual accounts.

What are the characteristics of virtual accounts?

Payment tracking

Every day, a business conducts numerous transactions. If it is an e-commerce business, the number multiplies. As a result, tracking customer payments may become difficult. The company must manually rationalize the bank statements, which is time-consuming. And this is where virtual accounts come into play. 

With virtual accounts, the flow of money is recorded automatically without any manual support from the receiver. 

By assigning distinctive virtual bank account details to each payer, it is possible to track customer payments, also called an account receivable. As a result, the reconciliation process becomes simple and error-free. It aids the cash collection automation method by removing the necessity for manual reconciliation.

Accept payments in a variety of ways.

Your clients can transfer funds in the virtual account via various methods, just like a bank account. It comprises IMPS, NEFT, and RTGS. Your customers can even pay through UPI at any time they want.

Wallet services

With virtual account API, you can create a wallet for your customers, similar to Paytm and Amazon Pay wallets. They can send, receive, and request money from here until it is transferred to their bank account.

Transactional mediator

All of the benefits listed above are incredible. However, they do not stop there. The API also aids in the accumulation of escrow account benefits. It protects against scams and fraud.

Furthermore, the actual account number is not disclosed to others. As a result, the likelihood of fraud is low.


You may be familiar with the arduous process of opening a bank account. A virtual account, on the other hand, does not have this limitation. You can create an account while relaxing at home. It makes the entire process more pleasant and efficient.

Increased Customer Satisfaction

Consider yourself a customer. What will your reaction be if a business person contacts you to confirm payments? You will be disappointed, won't you?

However, a virtual account addresses this problem. As a result, your customers will not be angry with you and will have a positive experience interacting with your company.

How do virtual accounts work?

In general, virtual accounts work in two ways:

Escrow Account-Created Virtual Accounts

An escrow account is one in which funds are managed to hold with a third party with the party's consent. You can also think of them as a PayPal extension.

The third party holds the funds until they get transferred to the payee. As a result, the duration is only temporary. To complete the transaction, the parties must approve the transactions. As a result, it guarantees the integrity of transactions while reducing the likelihood of fraud.

Virtual Accounts addition to Current Accounts

Businesses need a current bank account to open a virtual account, as the name implies. The virtual account number allows the businessman to identify the payer. Its API also aids in gaining an understanding of the transactions that are taking place.

It has gained popularity among NBFCs as a result of this feature. Firms, like other businesses, can track cash payments by borrowers. This feature assists firms in identifying and managing their non-performing assets (NPAs). It also helps in calculating and collecting interest.

Banks must follow various regulations. As a result, they must retain the services of a legal counselor. However, a virtual account handles it as well. Its advanced features allow it to comply with laws.

Frequently Asked Questions

What exactly are Virtual Account Numbers?

They are system-generated, one-of-a-kind account numbers that allow businesses to accept payments. These are associated with bank accounts. The use of a Virtual Account Number simplifies the unification of inward payments.

How do I set up a Virtual Account?

The procedure is not complicated. You need to go to the website of your preferred bank and open a virtual account. According to RBI guidelines, you must also complete KYC.

What types of businesses can benefit from a Virtual Bank Account?

Their use is pervasive. You can utilize a virtual account regardless of the field you work in, from schooling to B2B to B2C and others. 


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