What is a Virtual IBAN? Ultimate Guide for Businesses

The Virtual Intern­ational Bank Account Number (vIBAN) is a modern banking solution that offers busin­esses greater flexi­bility in managing intern­ational transa­ctions. Unlike a traditional IBAN, which is assoc­iated with a physical bank account, a vIBAN is a virtual represe­ntation of an account.

Here we take a look at the meaning of a virtual IBAN in more detail, discuss its use cases and the key differences between an IBAN and a virtual IBAN.

Virtual IBAN vs IBAN

The vIBAN’s main purpose remains the same as an IBAN - to identify the sender and receiver during bank trans­fers. However, with a vIBAN, busin­esses can generate multiple IBANs connected to one bank account. This enables efficient fund segreg­ation, trans­action tracking, and simpl­ified reconci­liation, particularly for cross-border payments.

Virtual vs Physical

IBANs are important for international transa­ctions as they represent a physical bank account. They ensure that funds are directed accur­ately to the intended recip­ient's account.

Virtual IBANs, on the other hand, are virtual represe­ntations of those accounts. They provide busin­esses with the ability to generate multiple IBAN numbers that are all linked to one main account.

Use Cases

IBANs are typically used for simple international transa­ctions, where money is moved from one account to another.

On the other hand, virtual IBAN accounts are beneficial for busin­esses involved in cross-border trade or handling multiple currencies. They allow busin­esses to assign specific vIBANs for clients, projects, or depart­ments, simpl­ifying fund management and facili­tating the monit­oring of financial flows.

Security and Confidentiality

When it comes to IBANs, standard security measures are in place. An IBAN serves as a unique ident­ifier for transa­ctions.

In contrast, vIBANs provide even greater security by allowing busin­esses to share only the virtual IBAN with clients or partners. This helps keep the underlying physical account information confid­ential.

Efficiency and Cost

IBANs involve traditional banking processes, which might involve fees for international transactions.

On the other hand, vIBANs simplify the management of a physical account by offering a banking solution that supports multiple curre­ncies and jurisdi­ctions. This elimi­nates the need for maintaining numerous banking relationships, reducing compl­exity and costs.

IBAN vs SWIFT

IBAN and SWIFT play different roles in international banking. IBAN, which stands for Intern­ational Bank Account Number, is a standa­rdised format used to identify bank accounts in intern­ational transa­ctions. It ensures that funds are routed accur­ately to the intended recip­ient's account.

On the other hand, SWIFT, short for Society for Worldwide Interbank Financial Telecommu­nication, is a global network that enables communication between banks for trans­action processing. While IBAN focuses on account details, SWIFT deals with bank identif­ication and communi­cation.

How does a vIBAN work?

A vIBAN functions similarly to a regular IBAN but offers more flexib­ility. It serves as a virtual represe­ntation of an account, enabling busin­esses to create multiple IBANs connected to a single primary account. A  virtual IBAN number typically follows this IBAN structure:

• Country Code: A two-letter code identifying the country where the bank account is held.
• Check Digit Code: Two digits ensure the accuracy of the IBAN by validating its integrity.
• Bank Identifier Code: Alphanumeric characters representing the bank's specific details.
• Sort Code: Often used in the UK, it identifies the bank's branch.
• Account Number: The unique number assigned to an account holder within that bank.

This structure guara­ntees that funds are directed corre­ctly, whether the IBAN is virtual or linked to a physical account.

What are the Benefits of Virtual IBANS?

• Efficient Fund Management: Allows businesses to segregate funds based on clients, projects, or departments, streamlining cash flow operations.
• Multi-Currency Support: Facilitates cross-border payments by supporting multiple currencies without the need for separate physical accounts.
• Enhanced Security: Offers added confidentiality by allowing businesses to share only the vIBAN, keeping the underlying physical account details private.
• Cost Savings: Reduces account maintenance costs and offers efficient reconciliation, leading to overall financial savings.
• Scalability: Highly adaptable, allowing businesses to generate and manage multiple vIBANs as per evolving requirements.

vIBAN and Embedded Finance Explained

Embedded finance is the smooth integ­ration of financial services into platf­orms, apps, or processes that are not inher­ently finan­cial. Virtual IBAN providers play a crucial role in this integr­ation.

The conve­nience of trans­action management offered by vIBANs aligns perfectly with the goal of embedded finance – to provide seamless and fricti­onless financial exper­iences within existing user journeys, whether it's on e-com­merce platf­orms, social media, or other digital platf­orms.

How to Use vIBANs in Business

There are multiple ways in which businesses can leverage virtual iBANs in their operations.

Global Expansion

Expanding into global markets can create financial comple­xities for companies. However, virtual IBANs offer a solution by enabling busin­esses to receive local payments, enhance cash flow, and eliminate the need for multiple bank accounts in each country.

E-com­merce and Online Market­places

Managing payments across multiple platforms can be a complex task for online busin­esses and merchants. With virtual IBANs, they can easily track and identify incoming payments from different platf­orms, allowing for strea­mlined payment management and facili­tating data analysis for informed decision-making.

Client Fund Management

Many industries, such as real estate, law, or travel, handle client funds on a regular basis. To ensure transp­arency and simplify the reconci­liation of client transa­ctions, virtual IBANs provide an efficient solution. With virtual IBANs, each client or project is assigned a unique ident­ifier, making it easier to manage and track funds.

Currency Management

Managing multiple curre­ncies can be a logis­tical headache for busin­esses. However, virtual IBANs offer a solution by allowing busin­esses to assign a unique ident­ifier to each currency. This strea­mlines the process of receiving and conve­rting funds, elimi­nating the need for separate accounts for each curre­ncy.

Accept Online Payments with Noda vIBAN

Noda is a leading provider of open banking solutions, offering businesses a simpler, faster, and more cost-effective way to handle payments. With coverage across over 2,000 banks in 28 countries, including the UK, EU, and beyond, Noda makes it easy for merchants to accept payments directly from customers’ bank accounts and enhance the user experience.

With open banking, you can say goodbye to expensive card fees, chargebacks, and long settlement times. Noda’s pay-by-bank method delivers instant payments, lower costs, and better protection against fraud.

You can use your existing merchant account or Noda virtual IBAN for payment collection and refunds in multiple currencies.

If you’re looking to simplify your online payments, talk to us today – we’re here to understand your unique business needs and answer any questions you may have.