Virtual IBANs: How Do They Work?

November 10, 2021

Streamlining cross-border payments and revolutionising business finances; virtual IBANs offer an easy-to-use and potentially cost-effective system for international payments. 

Virtual IBANs allow businesses to send and receive cross-border payments effectively and with relative ease. An important tool to help stimulate growth in global businesses, virtual IBANs allow for seamless international transactions, better monitoring of finances, and provide an easy-to-manage platform that removes the need to set up multiple separate accounts. 

What are virtual IBANs?

An IBAN is an international bank account number, used as a reference to allow payments to be routed to different physical bank accounts. Virtual IBANs are similar to their traditional counterparts in that they route and receive international payments. The “virtual” nature of virtual IBANs is what differentiates them from “traditional” IBANs as businesses can direct transactions to online accounts rather than straight through to their sole physical account. The customer sees no difference between a traditional or virtual IBAN, but businesses can expect to see a positive change in their financial management and monitoring when they use them including monitoring transactions and reviewing and approving payments.

How do virtual IBANs work? 

Virtual IBANs are linked to a user’s physical master account into which funds are deposited and withdrawn. Virtual IBANs function similarly to traditional IBANs in terms of sending and receiving payments. The difference lies in their increased functionality compared to their traditional counterpart, connecting multiple different online accounts to one physical master account. The use of multiple, virtual IBANs allows businesses to closely monitor transactions by allocating specific payments to individual accounts. This is a major benefit of virtual IBANs; by creating sub-accounts for individual payments and customers, they simplify and streamline payments enabling businesses to easily identify and manage incoming and outgoing payments. 

Virtual IBANs can potentially simplify cross-country transactions as well. By seamlessly setting up virtual IBAN accounts for each area in which a business operates, businesses can bypass the long-winded process of creating individual banking relationships with a local bank whenever they enter a new region or market. By directing payments into different virtual IBAN sub-accounts, with each set up under a different currency, businesses have more control over international transactions with each virtual IBAN account linked back to their physical master account. This allows payments to be more carefully controlled and helps with reconciliation. 

Due to their “virtual” nature, virtual IBANs are created and stored securely on software systems, usually in the cloud. This makes virtual IBANs a safe and secure way of controlling business finances using an easy-to-manage platform. Furthermore, the risk of fraudulent activity can be lessened by setting up single-use pre-approved virtual IBAN accounts to use with new payees and unfamiliar merchants, allowing businesses to closely monitor ingoings and outgoings. 

How do virtual IBANs improve business finances? 

Virtual IBANs help international businesses that are looking to streamline their operations. With more functionality than their traditional counterpart, virtual IBANs allow businesses to monitor transactions closely by integrating payments into a streamlined system. 

Contact us to learn more about how setting up virtual IBANs with Baanx can potentially simplify your payments and accelerate your business plans.