Virtual Accounts, reimagined

How treasury tools are evolving – and why it’s time to take a fresh look.

Read time: 5 mins  Added: 19/03/26

Business people reviewing documents at a desk

Expectations of corporate treasurers have never been higher. The standards set by frictionless, real-time transactions in the consumer sphere are bleeding across to the corporate world and the demands placed on the shoulders of treasurers to optimise cash, capital and liquidity management are increasingly significant.

Operational efficiency is therefore high on the list of treasury priorities. The foundations of a coherent and effective treasury can be found in the optimisation of cash operations and the implementation of digitally enabled processes, with the strategic use of digital tools playing an important role in achieving this. Technology is accelerating fast, and the treasury tools keeping pace are becoming exponentially more valuable. Virtual Accounts stand out as one of the most powerful examples – and could open up fresh opportunities for efficiency, clarity and control.

From evolution to revolution

Virtual Accounts are by no means a new trick in the treasury toolbox. They have been used for a long time by treasury teams as a strategic enabler for automation, liquidity control and in-house banking. However in recent years, digital evolution has sparked a revolution in the capability of Virtual Accounts, with the product stepping back into the spotlight thanks to the development of external addressability.

Externally Addressable Virtual Accounts, or EAVAs, are a versatile digital solution which can support treasurers in their quest to optimise processes such as reconciliation and liquidity management. EAVAs are ledgers that carry their own IBAN, sort code and account number, meaning that customers, suppliers and partners can pay directly into the Virtual Account as if it were a standalone account. They represent a transformative departure from previous iterations of Virtual Accounts, which have been used on a strictly internal basis.

The development of innovative solutions such as Externally Addressable Virtual Accounts not only streamlines and enhances treasury operations, it also plays an important role in establishing a cash management ecosystem fit for the future.

James Mortimer Managing Director, Head of Corporate Sales, Transaction Banking Solutions, Lloyds Corporate & Institutional

For businesses that manage large volumes of receivables, collections and payments across a high number of accounts, EAVAs could represent a golden opportunity to simplify, automate and improve operational efficiency. While still linked to the main business account, they behave like individual real accounts and can be allocated on a client-by-client basis.

This means that when a payment is made, it can be quickly and easily identified without the need for any labour-intensive processes. For treasurers, this function could be game-changing; traditional processes without external addressability necessitated manual reconciliation, requiring treasurers to match payments with client invoices on a one-by-one basis. This would often cause bottlenecks, since the process could take hours – or even days – and therefore limit the regularity of reconciliation.

With EAVAs, this problem is eradicated. EAVAs offer treasurers the ability to open and close new accounts on demand, meaning that it’s simple to give every customer their own externally payable Virtual Account number so that incoming funds are automatically identified the moment they arrive.

“Treasurers are increasingly expected to do more with less and no longer have the time for cumbersome and time-consuming tasks,” said James Mortimer, Head of Corporate Sales, Transaction Banking Solutions at Lloyds. “Technological transformation is adding new capabilities to tried-and-tested tools, providing treasurers with the impetus to rethink their use. The development of innovative solutions such as EAVAs not only streamlines and enhances treasury operations, it also plays an important role in establishing a cash management ecosystem fit for the future.”

A multi-faceted solution

Ease of reconciliation is just the tip of the iceberg when it comes to benefits of EAVAs for treasurers, however. Not only can the solution be used in conjunction with a spectrum of other products to provide remedies to a wide range of treasury headaches, it can also improve the experience for clients.

Constructing walls

EAVAs can be used to separate and segregate different areas of the business, such as accounts payable, accounts receivable, and any relevant subsidiaries. This can be beneficial to align the accounts to their internal treasury policies, or improve processes and visibility on working capital requirements.

A future-first solution

For regulated businesses such as payment service providers (PSPs), EAVAs can support the use of e-wallets. Not only does this allow for the segregation of funds, it also makes it easier to reconcile payments across their customers.

Underpinned by power

EAVAs are available through Lloyds Bank Gem®, our future-proofed and omnichannel cash management and payments platform. Both ISO 20022 native and API ready, Gem is designed to give corporates real-time control, flexibility and consistency across all channels, combining advanced technology and analytics with self-service capability.

Optimising liquidity

The benefits of EAVAs are not just external and their ability to segregate funds means that they can also play a role in strengthening the functions of an in-house bank. They can be used to optimise liquidity – including credit and debit interest – and reduce credit requirements, as well as optimising capital requirement and the cost impact associated with traditional pooling and sweeping solutions. In short, they can be deployed internally to further reduce the burden on the treasury function.

This internal implementation can also enable the centralisation of treasuries and allow treasurers to streamline their resources. As a result, treasurers can use payments-on-behalf-of (POBO) and receivables-on-behalf-of (ROBO) functionality without losing track of key payment information to support reconciliation.

Payment orchestration

EAVAs can help to facilitate the automation of payment processes as part of the drive towards payment orchestration. Combined with the use of different solutions within our Embedded Payments suite, which can automate account-to-account Faster Payments using Application Programming Interface (API) technology, EAVAs can allow businesses to enhance their customer proposition by maximising speed and efficiency within the customer journey.

For example, EAVAs can work in harmony with our Confirmation of Payee solution, which checks payment details against the information on the account to reduce the risk of certain kinds of fraud and misdirected payments.

Flexible by design

Part of the appeal of EAVAs comes down to their adaptability as a treasury solution. Their flexibility means that they can be structured in different ways to meet different needs, and we’re seeing our clients in a broad range of sectors adopt the technology for a variety of use cases.

For example, the ‘vanilla’ set up features one header account, underneath which sits the Virtual Account structure. This is useful for organisations directly interacting with clients – from councils holding rent and bills to law firms holding funds on behalf of their clients.

We also offer more complex Virtual Account structures to cater to client requirements. Property management firms, for example, require multi-layered structures to reflect the way that they hold funds for property investment groups, portfolio owners, Special Purpose Vehicles, or individual addresses. These complex structures feature several layers of balance accounts – or ‘nodes’ – to provide full balance visibility and allow for the management and segregation of funds to facilitate reconciliation.

We’re therefore working with our clients in sectors ranging from utilities to wealth management, charities, accountancy and more to find innovative and effective use cases for the technology.

Time for a spring clean?

Maximising the value of EAVAs starts with establishing a clean and rationalised account landscape. By streamlining the company’s account structure so that it can better support the operating and financing of entities across the group, firms avoid transferring outdated, duplicate or dormant setups into the new virtual model, and prevent the inheritance of legacy inefficiencies. Ultimately, this ensures that the EAVAs are operating on a strong foundation.

This is where our role as a bank comes in. Lloyds’ relationship with clients extends beyond simple product provision and focuses on offering consultancy and support. “We are committed to collaborating hand-in-hand with clients to ensure that they can extract the most value from our solutions,” said James.

We’re focused not only on deploying digital-first treasury tools, but ensuring that they work harder, faster, and more effectively for every client.

James Mortimer Managing Director, Head of Corporate Sales, Transaction Banking Solutions, Lloyds Corporate & Institutional

Part of the bigger picture

Expectations of treasury functions may be high in the current climate, but boosting optimisation and efficiency is the key to both delivering on them and solving the problems faced by treasurers. In this context, EAVAs are one of the indispensable tools in the treasurer’s arsenal and can help complete the toolkit alongside other solutions.

By automating previously cumbersome tasks using straight-through processing, they represent an optimised and improved experience for treasury staff and customers alike. The versatility of EAVAs means that the list of use cases is nearly endless, and Lloyds can help you discover how and where they can add value to your organisation.

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