Virtual IBAN – what is it and how can it help my eCommerce business?

Virtual IBAN

Banking services have changed a great deal over recent years. Technology has given companies more choice than ever before, enabling businesses to access banking service more easily and flex them to better suit their business needs.

Online merchants who need to receive money from acquirers and send funds to suppliers and partners around the world are among those who can benefit most by using alternatives to traditional banking services.

International Bank Account Numbers (IBANs) have been around for over 20 years. Through their construct of 34 alphanumeric characters, IBANs enable banking systems to route money to the correct country, bank and specific branch of a physical bank. It also includes other data to help the money move quickly and accurately. But like many things that were invented before the massive growth of eCommerce, traditional IBANs may not be ideally suited to the needs of online merchants.

What is a virtual IBAN?

As more business is now conducted online, an alternative to the traditional IBAN has emerged. A virtual IBAN is a number that does not represent an account in a physical bank. Instead, it enables incoming payments to be routed to an alternative account at a physical bank with its own IBAN. Virtual IBANs offer the same facilities as a traditional settlement with a number of additional advantages.

Benefits of a virtual IBAN account

The popularity of accessing banking services online has increased hugely over recent years. Virtual IBANs are part of this shift which is helpful to online merchants in terms of set-up speed, ongoing management and functionality.

Because they do not represent an account at a physical bank branch, virtual IBANS avoid some of the traditional bank processes required to set up an account. Applying for a virtual IBAN does not require the account holder to physically reside in the country of the bank offering the virtual IBAN. That means virtual IBANs can be set up online quickly.

In addition to simplifying set-up and implementation, opening a virtual IBAN accounts offer more flexibility regarding how merchants manage their accounts.

A traditional IBAN represents one single bank account into which all funds will be settled. However, today’s online merchants may receive payments from multiple countries and acquirers, several business lines or products. Using a virtual IBAN, merchants making B2B payments can route funds to different accounts, making accounting and monitoring business performance easier and more efficient.

You could set up separate sub-accounts and statements so you can easily identify each incoming payment and make financial management easier.

Choosing the right virtual IBAN provider

Depending on the provider of the virtual IBAN, funds can be held in segregated banks accounts which means they are more secure than if they were held in standard bank deposits. Segregated accounts mean your funds are always available instead of being used for investment or trading purposes.

While there are a number of organisations that have licenses to act as a financial institution and can provide virtual IBANs, they may not offer the reliability of traditional banks. Monneo has stringent security and regulatory policies that have enabled it to establish trusting relationships with a network of traditional banks across Europe. Monneo offers virtual IBANs from these banks directly to merchants or via third-party relationships such as leading Payment Service Providers (PSPs), Independent Sales Organisations (ISOs) or payment gateways.