A virtual IBAN account offers a bank account alternative for international and local transactions, making it easier to open and use compared to traditional banking.
A Back Story Of A Virtual IBAN
The European Committee for Banking Standards introduced the IBAN system in 1997 to address the frequent errors and inefficiencies in international money transfers. While the IBAN system is widely used in Europe and some regions in the Middle East and the Caribbean, countries like the United States, Canada, New Zealand, and Australia still prefer the SWIFT code system.
Though both virtual and regular IBANs facilitate international transactions, they serve different purposes and offer unique advantages.
A virtual IBAN does not represent a traditional bank account. Instead, it acts as a reference number that directs payments to a physical "collection account." In contrast, a regular IBAN is linked to a real bank account that can hold funds and offer standard banking services.
Also virtual IBANs are primarily used to segregate and streamline incoming payments. Businesses can assign different virtual IBANs to various customers or departments, simplifying payment reconciliation.
Moreover, virtual IBANs offer flexibility where multiple virtual IBANs can be linked to a single physical account, optimizing the segregation and reconciliation of payments. Regular IBANs usually correspond to separate physical accounts.
Lastly, businesses that handle large number of transactions can use virtual IBANs to reduce the need for multiple bank accounts across different countries, thereby minimizing maintenance fees of separate bank accounts.
How To Open A Virtual IBAN Account?
Opening a virtual IBAN account can be explained in the following steps:
1. Set Up A Collection Account
- Purpose: The collection account serves as the central hub where funds from all virtual IBANs are consolidated.
- Action: Approach a banking or financial institution that offers virtual IBAN services. Discuss your business needs and initiate the process to set up a collection account. If you would like to get an up to date list of banking providers that can offer the mentioned set-up, fill out our contact form and we will share it by email.
2. List Your Customers
- Purpose: Keeping a detailed record of customers who will use virtual IBANs helps streamline the setup process.
- Action: Review your business operations and identify customers or partners who will be transacting through these virtual IBANs. Create a comprehensive list.
3. Submit Requests
- Purpose: Each virtual IBAN should be linked to a specific customer or transaction type.
- Action: Using the list from the previous step, submit individual requests to your provider for each virtual IBAN. Ensure you provide all necessary details, such as the customer's name and transaction type.
4. Choose Your Payment Processing Method
- Purpose: Different payment processing methods cater to various business needs, such as speed and international capabilities.
- Action: Research the payment processing options offered by your provider. Consider factors like transaction speed, fees, and international capabilities. Select the method that best aligns with your company's operational requirements.
Conclusion
Virtual IBAN accounts represent a significant advancement in the way businesses handle international payments. By understanding the benefits and following the steps outlined in this guide, you can use virtual IBANs to optimize your way of banking and handling payments.