Watch sessions from Transfer 2024. Featuring Joe Montana, Ben and David from Acquired, and more.Watch Now →


What are Virtual Accounts?

Welcome to Learn, where we provide straightforward, easy-to-understand definitions of the payments industry.

Follow us

Virtual accounts are unique account numbers assigned within traditional, physical bank accounts, which are also known as settlement accounts. They can be used to send and receive money on behalf of the settlement account, where the funds are ultimately held. Businesses tend to create multiple virtual accounts, with each one designated to a specific client, transaction, entity, or any other business reason.

How do virtual accounts work?

Virtual accounts function similarly to standard bank accounts. They have their own account numbers, streamline incoming and outgoing transactions, and help users maintain their balances. The most notable difference is that virtual accounts cannot actually hold money. They receive it, collect necessary information about the sender, and pass it over to a primary account.

Your business bank account functions similarly to your primary email address. Virtual accounts are essentially the equivalent of email sub-aliases linked to your primary address. While sharing one inbox, you can create multiple email sub-aliases to differentiate your activity.

Let’s say that your primary email address is You want to sign up for different subscriptions but don’t want to directly use your primary email address. To remedy this issue, you create a list of separate sub-aliases for each subscription:,, and All of the emails will still accumulate in your main account, only now they can be sorted by the alias. A virtual account works similarly. It is a sub-alias of your primary account, allowing you to monitor and manage the lead, or source, of a payee in a single location: your main settlement account.

Why do I need a virtual account?

Many types of businesses, including neobanks and enterprises with complex funds flows, have many streams of cash all flowing into one large bank account and need the ability to attribute each cash flow to an individual user. Virtual accounts seamlessly help businesses track individual payments and automate the reconciliation process, which otherwise would be a time-consuming, manual process.

Manual reconciliation requires businesses to review every transaction and report the numbers by hand, which makes the process vulnerable to human error.

Virtual accounts, on the other hand, are fully-automated and function in real time. Therefore, they’re able to present the most accurate bank account balance. With no margin for error or unnecessary management, they’re streamlined and efficient.

Can virtual accounts hold balances?

Because virtual accounts are extensions of a physical, primary bank account, many of them cannot hold balances for themselves. It’s advantageous to pair them with a ledger, which is a book-keeping system that tracks all of your business transactions. When used with a virtual account, a ledger can further optimize balance tracking and monitoring for users. With virtual accounts powered by the features of a ledger, granting you access to every minor and major transaction, you can expect a painless, fully-digital banking experience.

Try Modern Treasury

See how smooth payment operations can be.

Talk to sales
More from


Learn topic image

Bank accounts are monetary repositories maintained by a financial institution.

A clearing account acts as a temporary account that holds transactions before they are finalized or allocated to the correct permanent account.

Read more

Lockboxes are secure bank-run mailing locations where businesses can redirect their paper-check payments, allowing banks to take over the depositing process.

Read more

Virtual accounts are unique account numbers assigned within traditional, physical bank accounts, which are also known as settlement accounts. They can be used to send and receive money on behalf of the settlement account.

Read more

Implementing a multi-bank strategy is vital for companies looking to reduce risk exposure. In this article we explain how to reduce financial risk by implementing bank redundancy.

Read more

The Federal Deposit Insurance Commission was created in 1933 to reinforce the public’s trust in the American banking system. Since the Great Depression, it has successfully prevented widespread loss of consumer deposits in the event of a banking crisis.

Read more

The Federal Deposit Insurance Commission (FDIC) was created to protect deposit holders in the event of a bank failure. In this article we explain how FDIC receiverships work.

Read more

A Client Money Account (CMA) is an account opened by a UK and European Economic Area regulated firm to hold money that belongs to one or more of that institution’s clients.

Read more

When businesses borrow funds, their lenders have options for protecting against the risks of extending credit.

Read more

Popular in the banking and finance world, penny tests are a simple way to verify the validity of a bank account or bank integration, prior to a large finance transaction taking place.

Read more

Sweep accounts are a particular type of bank account where funds are automatically transferred between different accounts to optimize the use of available cash and maximize returns

Read more

An FBO account, or a For Benefit Of account, allows a company to manage funds on behalf of—or for the benefit of—one or more of their users, without assuming legal ownership of the account.

Read more

Subscribe to Journal updates

Discover product features and get primers on the payments industry.




Modern Treasury For

Case Studies





Popular Integrations

© Modern Treasury Corp.