Tell us about BNPP’s Virtual Account solution. What makes it innovative?
What makes BNP Paribas’ Virtual Account solution so exciting and innovative is that it offers our clients the ability to implement an authentic end-to-end reference with each of their clients that will help them optimise their processes around the reconciliation of receivables, and bring them one step closer to the holy grail of full centralisation of collections.
Head of Collections
Guillaume Flies started his career in 2005 as a financial controller and treasury project coordinator in a large retail company, where he gained extensive experience in corporate treasury activities and reporting. After more than five years, Guillaume joined PWC as a Treasury consultant where he specialised in cash management, bank relationship management and corporate treasury process. In 2013, he joined BNP Paribas as Global Product Manager for Virtual Account with the objective to support the solution deployment and sales on a worldwide basis. Recently appointed as Head of Collections. In this position, Guillaume is responsible for leading all collection initiatives within BNP Paribas and also advising MNCs on related issues.
And with the harmonisation of payments formats in the post-SEPA environment, we are convinced that our corporate clients are now in a very good position to begin centralising their collections. In recent years, we have helped corporates to make great strides in terms of centralising their payments operations. Now, as a result of innovative, sophisticated solutions supported by BNP Paribas, like Virtual Accounts, much of what they have been doing on that side can also be replicated on the collections side too.
Centralisation has long been perceived to be more of a challenge on the collections side than it is with payables. Even if a company uses SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) there are still a variety of local payments instruments in existence across Europe, in Italy and Spain, for example. Because of that, most corporates probably do not see the present moment as a good opportunity to centralise their collections because they will still, in most cases, require a local account in each European country. But the complexity of the challenge notwithstanding, the centralisation of collections represents a momentous opportunity for corporates that is just waiting to be realised. By shrinking the number of in-country bank accounts required for their collections process, treasuries can transform their cash management operations; achieving greater process consistency and efficiency and, in turn, giving the treasurer greater control. In addition, through centralisation, corporates can achieve cost reductions through economies of scale and greatly improved credit risk monitoring. As a global front runner in the cash management space, BNP Paribas has developed a Virtual Account solution to support the most advanced treasury structures.
How, then, do Virtual Accounts work?
Let’s imagine we have one client with 100 customers, and we know that in 30% of the cases our client does not have the level of information required to identify the payer. What BNP Paribas does is create 100 IBAN numbers for each of the company’s customers (a unique account number per customer). Payments received on each Virtual Account are then rerouted to be directly booked on the corporate’s physical bank account. To perform the reconciliation the existing bank statement is enriched with the reference of the Virtual Account that has been used to receive the transactions to directly match the payer in the ERP.
Do Virtual Accounts work for any company, whatever their set-up?
Yes, Virtual Accounts can be very useful for any corporate, regardless of their set-up. The really interesting thing about this type of solution is that you have the capacity to customise a bank account structure, without adding the same complexity in physical bank accounts. As the customisation is almost infinite, all BNP Paribas clients can leverage on this solution to create their own solution. For example:
Use an extensive list of Virtual Accounts to identify the debtors (typical case of a telecommunications company that receive millions of payments per month with same amount).
Simplify an existing banking structure (for example, clients with activities in several regions in a country using one account per region can now play with the digits available in the virtual IBAN to identify the funds received for a specific region).
Customise the bank account structure to support a centralisation project (for example a collection-on-behalf-of structure aims to only rely on one bank account to collect on-behalf-of several legal entities belonging to the same group. Virtual IBANs are used in this set-up, not only to identify the debtor but also the final beneficiary of funds).
Have you identified any reluctance from treasurers about the product and, if so, what would you like to say to them?
Whilst benefits are clear, well-known and validated (simplification of the bank account structure, reduction of the processing cost, and optimisation of the reconciliation process, better credit risk monitoring), a certain level of investment does need to be performed to introduce the solution into our client’s systems (mainly ERPs): implementing one specific virtual bank account number per client is of course an investment in terms of time and IT resources. The client will also have to communicate with each of their customer and inform them about the new bank account number.
Meanwhile, on the IT side, they will have to update their ERP system. That said, BNP Paribas can support them all of the way with that update. For SAP clients, for example, we have specially developed implementation guidelines to help alleviate some of that implementation burden for clients.
Does the solution bring immediate benefits or are these seen more in the long-run?
As soon as clients start to pay on their new virtual bank account number, the corporate will be in a position to automatically match the funds received. That means the reconciliation process is already much improved compared to what it would have been previously. Then, over the long run, if a corporate is determined to centralise its entire collections process it will also be able to leverage BNP Paribas’ Virtual Account solution to implement collection factories, for example. So there are immediate benefits, as well as long-term benefits if you are in a position to centralise your collections process in the future.
From a market perspective, where does BNP Paribas’ Virtual Accounts solution stand today, in Europe and beyond?
In Europe, BNP Paribas is clearly a front-runner in this area. We are able to support all types of incoming credit transfers; we are able to support all the currencies; and we are able to support this solution in a number of countries. Currently we have eight countries live, and are continuing to extend our solution into other countries in the region.
We are also seen as a market leader for Virtual Accounts in Asia where, in recent years, we have been focusing on developing this solution along with our state-of-the-art transaction banking solutions. In Asia it is already live in 11 countries. As for other regions – the Middle East and the Americas, for example – we are also considering ways to develop our solution in the countries and markets where we see the strongest demand.
Where do you think the future lies for Virtual Accounts?
I am convinced that Virtual Accounts will be used not only to optimise reconciliation processes but also to support the broader centralisation projects of our clients. BNP Paribas already has some clients live who have decided to leverage our solution to implement collections factories and a collections-on-behalf-of (CoBo) structures, and have seen significant efficiency benefits as a result. We can say with a great deal of certainty, therefore, that our corporate clients can leverage Virtual Accounts technology to establish this type of structure.