Key Advantages of a Virtual IBAN

The world is becoming more and more digitized. The banking industry is already making full use of new technologies. According to Statista research, the number of online banking application users is growing rapidly year after year. Experts believe that the tendency is going to continue. Almost 80% of bank clients use digital banking products at least once a week. They are also keen on exploring new financial instruments. 

The appearance of virtual IBANs has been welcomed by bank clients and it has been an outstanding break-through in the FinTech industry bringing unprecedented flexibility, security, and cost-effective payments. The number of countries that use this opportunity is constantly growing. Let’s discuss what a virtual IBAN is all about and how it can help business operations

What is a virtual IBAN?

IBAN stands for International Bank Account Number. If an individual or a legal entity has an account with a payment system or a traditional bank in any country, he/ she/ it also has an IBAN. It is a unique alphanumeric code that can contain up to 34 symbols. With this number, the bank knows where to transfer the money.  

An IBAN allows making bank transfers throughout the world. If you want to transfer money to somebody, you have to indicate his/ her IBAN and the money will be transferred to the recipient’s account (unless you make a mistake). 

A virtual IBAN (vIBAN) serves the same purpose but it has an important difference from a regular IBAN. One bank account has one IBAN. A virtual IBAN acts as a master account: it can have an almost unlimited number of sub-IBANs linked to a single account. These sub-IBANs can be assigned to individual clients, individual financial flows, or departments, which gives additional flexibility to international money transfers and enlarges the opportunities for payment management and monitoring.

In other words, a virtual IBAN allows for routing and monitoring payments made via sub-accounts that have sub-IBANs. When making a money transfer, you have to indicate the remitter’s details in addition to the recipient’s IBAN if you want the latter to know where the money comes from. If you have to make (or receive) many payments, it can be a nuisance. Mistakes in the account details are also possible.

However, if you use a unique vIBAN for each transaction, you don’t have to indicate any additional details. The transfer recipient will clearly see who has sent the money. 

What data does an IBAN reflect?

The number is a sequence of numbers and letters. Here’s what they show:

• First two letters are the country code.

• Next 2 digits are check digits provided by the bank.
• Next 4 letters (or digits) identify the issuing bank.
• The remaining digits are the individual bank account number. The length of this section of the IBAN depends on the particular country. For example, in Malta, the bank code contains 5 digits and the account number contains 19 digits. In Great Britain, the bank code contains 6 digits, and the account number contains 8 digits. 

What business industries use virtual IBANs?

Companies that receive multiple payments use vIBANs. Internet shops and service providers with customers from all over the world can serve as examples. The more clients such a company has, the higher is the value of virtual identification numbers for the company. It needs an account infrastructure that would be separated from its own everyday transactions (payment of taxes, money transfers to suppliers, partners, and other counteragents).

Financial organizations also benefit greatly from virtual IBANs. A crypto exchange, for example, has millions of users, millions of personal wallets, and millions of requests for money withdrawal and account topping. Moreover, the transactions are made in various crypto as well as various fiat currencies. Reconciling this volume of payments is time-consuming and resource-intensive. However, if the crypto exchange has a virtual identification number for each client, the transfers go to separate sub-accounts. This makes monitoring the payments a simple task.

A multi-currency account can also have a vIBAN, which is valuable for companies receiving money from different countries. If you use a single-currency account, you have to pay for currency conversion every time. A multi-currency account can have a single IBAN that allows receiving payments in different currencies without having to pay the exchange commission.  

The use of virtual identification numbers is popular in the following business spheres:

• Online business;
• Electronic payment systems;
• Exchange offices;
• Insurance companies;
• Service providers;
• Cryptocurrency companies.

Virtual IBANs can make life easier indeed. Suppose you have to cover a utility bill. You put it off until the last day but then you make a mistake in the account details and the payment does not go through. Penalties are often accrued for late payments so you might get yourself into hot water. With a virtual IBAN, such troubles are impossible.   

Advantages of a virtual IBAN for business

Both private individuals and commercial companies benefit from vIBANs in many respects. We will point out 6 main advantages that such numbers have: 

1. An opportunity to have an unlimited number of vIBANs. Multiple virtual identification numbers brings better flexibility in managing financial flows. Each number is unique and the company managers can easily track payments from different clients and direct them to various departments or projects.
2. An opportunity to lessen the costs of international transactions. The possibility of opening a multi-currency account allows saving on currency conversion. It also allows receiving payments in different currencies.
3. Time saving. Transactions from hundreds of thousands of users go through almost instantly.
4. Simpler and more efficient finance management. A virtual identifier allows for quick reconciliation with financial institutions, regulatory agencies, and counterparties. It also helps to optimize the business processes related to finance management. It can also lessen the company’s operational costs.
5. Transparent financial operations. Thanks to virtual IBANs, international money transfers can be easily tracked. Unique identifiers make it easy to monitor financial flows and provide exact payment details, which simplifies controlling them. Companies that have multiple incoming payments such as e-commerce companies, for instance, can easily identify any transaction from any client or a platform. These data make record keeping much simpler. Accurate information, in its turn, facilitates business planning.
6. Fast acquisition of a virtual IBAN. You can obtain a virtual IBAN online within a few minutes. You can manage your account from a computer or a mobile device. You don’t have to register a legal entity in Europe to be able to use an international business account. You can send payments wherever you want in different currencies without worrying that the payment might fail to go through. Any company with a financial license can activate a virtual IBAN system. 

The use of a virtual identifier widens the horizons for a company or a bank client. It significantly increases the efficiency of financial operations, makes transactions faster, and makes multi-currency operations safer. Besides, a vIBAN allows reducing the cost of international transactions as well as the cost of currency conversion. You can receive multiple payments and manage them in a simple way. The use of virtual IBANS makes international money transfers transparent, which increases the popularity of the technology in various business spheres.