Virtual IBAN is one of those pioneering advancements that drive the growth of B2B payment. Virtual IBANs present a much more flexible, fast, and agile payment method.
How does it differ from a regular IBAN?
Virtual IBAN stands for Virtual Identification Bank Number.
All bank accounts have an International Bank Account Number (IBAN) - a standardized reference banking international numbering system of 34 alphanumeric characters used to identify your bank account.
Virtual IBAN does not represent an account in a physical bank. While traditional IBAN account is matched with regular bank account the virtual IBAN, instead, enables incoming payments to be routed and received to an alternative account at a physical bank with its own IBAN.
Traditional brick-and-mortar settlement accounts involve long, laborious onboarding processes during setup, with ongoing complicated processes needed to ensure all banking relationships are maintained appropriately. The reason is the outdated and old system that used to be highly rated in the 90s and ’00s. Fintech and digitalization had their disrupting effect and the new option called Virtual IBAN has emerged on the market.
A virtual IBAN is similar to traditional IBAN but presents a more unified model for payments implementation, and provides payments companies with opportunities to possess a multi-currency solution without the need for several different banking relationships.
In simple terms, you can have multiple VIBANs to handle and send payments under one master payment account.
VIBAN is created in bulks allowing the allocation of multiple customers and linkage of various currencies. Thus, Virtual IBAN expands the reach of financial institutions and reduces the costs associated with executing a large number of settlements.
Despite the common nature and general similarities with traditional IBAN, Virtual IBAN presents a more comprehensive platform with a rich range of opportunities for incoming and outcoming payments.
Benefits in business
Virtual IBANs present a vast field of benefits for businesses executing cross-border transactions. For instance, if you need to settle transactions in different currencies and jurisdictions at the same time, with virtual IBAN benefits, it’s simple and easy.
Virtual IBANs automate this process and optimize workflow. Businesses operate flexibly and save costs by sending payments in multiple currencies and to different locations on multiple VIBANS integrated under one account eliminating the problem of additional resources, time, and fees spent on FX.
Payments sent in bulks are segregated on the VIBAN accounts according to currency or region type, saving time fees during settlement and reconciliation.
In general, the whole system is aimed at facilitating reconciliation and thus the potential administrative costs are further reduced, allowing businesses to operate in a more efficient way on a global scale.
Facilitation in regulation
The specific hierarchical structure enables centralized management transactions eliminating the challenges of regulation.
As multiple transactions in multiple VIBAN go through an endpoint - master account, the regulation and compliance myriad is kept to one master account management
to end-to-end transparency and funds segregation, with some financial providers offering compliance-as-a-service to customers as well.
The role in embedded payments
Virtual IBANs are very flexible in the context of BaaS services platform, fitting perfectly with the notion of embedded financial services by providing a platform-like opprtunity to release businesses of the complexities of negotiations, regulation matters with providers at different locations.