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virtual bank account

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late business concept

veryard projects formulated the concept of the virtual bank account some months ago. The concept is probably now obsolete, as a result of recent changes that have taken place among clearing banks.

So why is it still here on our website? Because it remains a good illustration of our approach to business concepts, and of the ideas that are the basis of the veryard projects Business Challenge.

The virtual bank account concept described on this page was intended to represent a new form of added-value - creating a potential new role in the banking market.

The virtual bank account concept developed from an analysis of the inflexibility of existing banking concepts. The development of the virtual bank account concept follows a repeatable pattern of business analysis.

veryard projects can help create, design and implement new business concepts.

virtual bank account - the business concept

Flexibility means: I want to be able to move or change with the minimum of fuss.

One way of achieving flexibility is through a mechanism known to computer scientists as indirect addressing. Best explained through some examples.
On the Internet, I can set up an email alias, for example through If I change ISP, I merely need to alter the redirection rule - I don't have to notify all my friends and associates.
Even the old postal system has the notion of box number. Only the postman needs to know where I actually live. As long as I keep the same box number when I move house, I can still receive all my mail.
Some telephone companies now offer a phone number for life. Anyone who dials this number will be automatically redirected to your current mobile phone.
(Some telephone regulators are demanding that telephone companies allow customers to keep their telephone numbers when they switch from one company to a competitor. From the customer perspective, this a different solution to the same requirement. However, from the telephone company's perspective, similar mechanisms may be involved.)

Let's look at another area where this kind of flexibility might be desired - personal banking.

If I want to move my account from one bank to another, it's a mess. Lots of my regular bills are paid by direct debit, which means that the money is automatically withdrawn from my account. And I receive some dividends and other payments directly into my bank account. My bank account number is stored on dozens of computer systems, perhaps even hundreds, and if I want to change my bank account I've got to notify everyone. It's very inconvenient, so I'm not going to change bank very often. Perhaps that's the way the banks like it.

But just imagine that I could move my account from one bank to another without changing my bank account number. And that all my existing direct debit and divident payment arrangements would continue to work reliably and securely. If this were true, I might well change bank more often, and end up with a much better service.

The virtual bank account contains no money. It merely contains a pointer to your real bank account. Instead of giving your real bank details to lots of utility companies and others, you give them your virtual bank details. Then when their computers generate a transaction, such as a direct debit, this transaction will be automatically redirected to your real bank account.

Once we've grasped a basic business concept, then we can start to explore the practical questions in detail:

Different stakeholders (bankers, banking regulators, utility companies, utility regulators, computer engineers, data protection regulators, consumer organizations) will have different questions and concerns.

flexibility - from standing orders to direct debits

Let's look at d|evelopments in banking services in terms of transaction costs and flexibility.
cheque standing order direct debit virtual bank account
making payment I pay each bill by a separate cheque 

payment is totally under my control

high transaction costs (for all parties)

unreliable cashflow

my bank pays a regular amount to selected creditors 

only allows for fixed amounts at fixed perods

I have reduced effort for paying regular bills 

creditor gets improved cashflow, and reduced risk of cancellations

selected creditors take what I owe them directly from my account 

allows for variable amounts or variable payment periods

some companies offer a discount to customers who pay by direct debit

as direct debit
changing bank I use a new cheque book I provide a list of standing orders to my new bank I have to notify dozens of companies that my bank details have changed I notify my virtual bank of my new bank details.
it's easy ... to change payment amounts and periods 

to change bank

to change bank to change payment amounts and periods to change payment amounts and periods 

to change bank

it's difficult ... ?? to change payment amounts and periods to change bank ??

Standing orders are less flexible than individual cheques, but may be more convenient for certain classes of payment, because the transaction costs are lower. Many companies prefer to be paid by standing order, because it reduces the risk of cancellation (for example, magazine subscriptions).

Direct debits appear to be flexible than standing orders - until you consider the inconvenience for the individual customer of changing bank. The virtual bank account seems to offer the best of both worlds for the individual customer.

objections and reservations

Any experienced banker or software engineer can think of many reasons why this won't work. Creative thinking may be required to think of ways that it could be made to work.
Some of the objections will be short-term - perhaps in terms of security and fraud, current banking regulations, cashflow or whatever.
Some of the objections will be longer-term - is this scaleable and sustainable over time?

To identify and address these objections seriously and systematically, we need creative thinking within a structured methodical framework.

methodical approach

We use a form of business relationship modelling to identify and explore the business opportunities.

Modelling direct debit

We start with an analysis of the current system - in this case, direct debits. This system has some features we'd like to preserve - such as the ability to vary payment dates and amounts, as well as the low transaction costs - and also some features we'd like to change - such as the difficulties of changing bank account details.

A single direct debit mandate can be regarded as a three-way relationship, involving three roles: payer, payee and bank.

I instruct my bank to pay my gas bill on direct debit. I send this instruction, not directly to the bank, but to the gas supply company. I don't actually know what happens to this piece of paper, or the information it contains. Perhaps the gas company passes it onto the bank straightaway; perhaps it is kept until there is a dispute. (Even on those occasions that I have disputed DD charges, this detail has not been visible to me.)

Let us suppose I wish to write a computer system to handle my domestic accounts. One of my requirements is to check the consistency between the gas bill and my bank statement. I specify this requirement by reference to the rules governing the three-way interaction known as direct debit.

Decompose into two-way interactions?

I cannot decompose this into two-way interactions, because I do not know or care the nature of the interaction between the gas supply company and my bank. (Of course, I could construct an artificial entity called gas-company-plus-bank, and specify everything as a set of interactions between myself and this entity. But I don't want to go down that road.)

Furthermore, my viewpoint on the direct debit situation hides several other agents, who might be visible from the viewpoint of the bank or the gas supply company. Perhaps the gas supply company holds its accounts with a different bank. Perhaps the direct debit transaction is passed via some clearing system. All of this is irrelevant to me.

In other words, although an omniscient requirements engineer might be in a position to work out the full interaction between all the parties, this is not necessary or relevant to solving my problem. In more complex cases, it may be impossible for anyone to have the complete picture.

Of course, two-way interactions are easier to implement than three-way interactions, for a variety of reasons. But that isn't a good enough reason to force all interactions to be expressed as two-way interactions at the requirements stage.

My position here is based on three key methodological principles:
I want to be able to express requirements based on partial information, or based on a particular user viewpoint. And I want to be able to test particular solutions against such requirements. I don't want a method that assumes I've got a complete picture of a closed system.
I want a notation that is as permissive as possible. I may then want to provide design guidelines warning designers that the full complexity and power of the notation is not currently supported by available tools and techniques. I don't want a notation that is unduly limited by current tools and techniques.
There are often several different ways of decomposing a three-way interaction into a set of two-way interactions. I see this as a design choice - several solutions to the same business requirement. Although I recognize that I cannot eliminate all design choices from the statement of requirements, I don't want to have more than I can help.

In other words, I don't want a requirements or design method that forces me to decompose three-way interactions, any more than I want a data modelling method that forces me to decompose many-to-many relationships. What I do want is a design method that helps me to implement such structures by converting them into more manageable structures, at the appropriate stage of the design process.

Modelling virtual bank account

The virtual bank account entails a four-way relationship. The roles are: payer, payee, virtual bank, real bank.

It turns out that this can be decomposed fairly easily into three three-way relationships.

Who pays for the service, and when?

To be commercially viable, any new service has to somehow cover its costs.

A bank might offer this service free as a short-term tactic for taking customers away from other banks. But this might not be sustainable in the longer term.

A separate commercial entity might charge a joining fee to consumers. I can imagine being willing to pay a reasonable fee to a bona fide company or agent, in return for providing me with this and perhaps other related services.

Is there a natural limit to the size of the market?

Many pundits predicted natural limits to the demand for various goods and services - and many of these predictions have been proven wrong. When almost every family has a car and a television, some families have an extra cars and television for each teenager. When almost every house has a phone line, some houses have multiple phone lines. Many offices have a separate phone line for each desk, instead of a single line to a manned switchboard. Very few people predicted the scale of the demand for telephone numbers.

If people get used to a single service, they may start to think of reasons why they want several differentiated services. Perhaps someone wants one virtual bank account for dealing in stocks and shares, and another for domestic bills. The particular reasons are likely to be many and varied, and we don't have to anticipate them in detail. But we should anticipate the trend: unlimited growth.

consultancy services

veryard projects can help create, design and implement new business concepts.

veryard projects can help identify, analyse and model business scenarios, opportunities and threats.


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This page last updated on November 12th, 1999 
Copyright © 1999 Veryard Projects Ltd