Connecting the physical, digital and financial world

One of the most innovative and far-reaching technologies that has emerged in recent years is the Internet of Things (IoT). Thanks to the Internet of Things, it is possible for industrial and household appliances, machines and devices to communicate and to send and receive data. But the potential of the Internet of Things goes beyond enabling a machine to order its own replacement supplies and parts.

In particular, by combining the communication value of the Internet of Things with innovative payment options using virtual accounts and blockchain technology, a powerful and potentially disruptive cash management proposition is created. Moreover, this is not a vision of the future, but a proposition that can already be realized today.

Project background
In order to offer their business customers the most effective digital solutions, banks are increasingly collaborating with emerging financial technology companies (“fintechs”). For example, there are many banks that set up initiatives such as digital labs, boot camps and accelerator programs for fintechs.

An example of this is Global Transaction Banking at UniCredit, who use innovation to create a new customer experience and support existing challenges and enable new business models in a cheap way. At UniCredit’s Global Transaction Banking, they see these types of partnerships – based on customer problems and fueled by banking expertise and fintech innovation – as an important way to achieve this goal, with the potential to provide customers with better solutions. They are therefore actively looking for fruitful partnerships.

Using trusted solutions
Many corporate treasurers are already familiar with virtual accounts. These are often set up as part of a “collections on behalf of” (COBO) structure within a house bank. One entity collects money on behalf of a group of companies, eliminating the need to hold and manage accounts per entity. This is a valuable way to centralize collections and helps reduce the number of bank accounts. However, when large numbers of direct debits arrive in one account, problems can arise with both the connection and the booking of the incoming flows. In addition, there may be customers who are unwilling to transfer money to an account abroad.

A virtual account solution allows companies to provide their customers with local account information (the “virtual” account), but it is linked to a central collection account. These virtual account numbers can be assigned to any entity, to individual customers, product lines, etc. This makes it easier to reconcile the collection account, and automatically post incoming flows to the relevant intercompany account and customer credit account.

A powerful combination
However, the potential of virtual accounts extends well beyond internal banking, as evidenced by the new solution from Quantoz and UniCredit. In this collaboration, the concept of virtual accounts is taken a step further by combining it with the Internet of Things.

In the past, an “identity” could only be assigned to a person or organization. By using Quantoz’s blockchain technology, a device, machine or object can be given an identity. But a device cannot have a bank account. Therefore, the device or machine is associated with a virtual account, which basically acts like a digital wallet. This completes the value chain and combines cash management and IoT in one solution. In this way, a completely new value proposition is created and the business models of the future are already made possible today.

Innovation in practice
An interesting application of this is in shared cars. Cars with IoT support have become commonplace these days, for example by means of black boxes and trackers. The car can transmit data about its location, the number of kilometers traveled, the toll costs, the fuel level, etc. By linking this data to a rate structure and providing the car with a virtual account number, a company that offers shared cars can provide users with complete user statements and invoices. delivery based on the car’s information.

The concept of machine identity through a blockchain represents a step forward in the IoT. When this machine identity is integrated with virtual accounts, these machines can be connected to a payments and cash management infrastructure, including micropayments. This extra step is critical to integrate the IoT into viable and efficient business models and monetize these business models.

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