Creating a virtual IBAN account can provide users with a convenient way to access international transactions without investing large amounts of time.
These international money-transfer accounts can serve the purposes of many different businesses that engage in commerce with countries from outside of their borders.
In a world that’s becoming more inclusive of financial opportunities from all over the world, expanding businesses need a way to keep up with the demand of global commerce.
Opening a virtual IBAN account is a great way to serve these demands.
Before you learn how to open a virtual IBAN account, it helps to have some background knowledge about the process and dynamics that shape it.
Continue reading for some background information about IBANs and virtual IBAN accounts.
What Does IBAN Stand for?
IBAN is short for International Bank Account Number.
This bank account number is used to make and receive payments on a global scale.
The numbers that make up an IBAN aren’t just randomly put together.
These numbers are specifically grouped to identify certain elements about the sender or receiver.
These account numbers are comprised of up to 34 letters and numbers.
The numbers are structured with two letters that identify the account holder’s country, two check numbers to avoid errors, and 30 alphanumeric characters that point to a bank account number.
The History of IBAN Accounts
IBAN accounts were initially utilized by the European Committee for Banking Standards.
There were numerous errors in the international money transfer system.
Before 1997, transfers would not finalize, money would route to the wrong countries or accounts, and other issues.
After the ECBS adopted the IBAN system, the error rate dropped to .01 %.
Eventually, the IBAN system would spread throughout the entire European continent and into the Middle East.
However, the system is not used in the United States or Australia.
The original system that adopted IBAN would eventually lead to virtual IBAN accounts.
A good majority of European businesses that trade internationally use the convenience of virtual IBANs.
Virtual IBAN Accounts
Eventually, the traditional IBAN system gave way to virtual IBAN accounts.
A virtual IBAN is a reference number used to send incoming payments to a physical bank account.
Suppose a business processes a large number of international payments.
In that case, a virtual IBAN can be a practical solution to traditional money transfers.
Use this as an example as to why virtual IBANs are so convenient.
Let’s say you are a business owner in France. Your business transfers payments from different countries all over the world.
For the sake of the example, let’s assume you do business with customers in ten different countries.
Without a virtual IBAN, you would have to open bank or merchant accounts in all of these countries.
You would also have to spend the time to manually initiate and monitor these transactions.
For a company that does business on a global scale on a regular basis, this can be nearly impossible.
You would need one or two employees dedicated to strictly handling international transfers.
With a virtual IBAN, you can create a unique account dedicated to each separate customer.
These accounts can be created in multiple countries.
From there, you can reroute all transactions from these accounts into one main bank account for your business.
In reality, there’s no difference between a virtual IBAN and a traditional bank account.
The only thing that separates the two is that a virtual IBAN is much simpler and completely automatic.
Advantages of a Virtual IBAN
- Less expensive than a normal bank account. Traditional banks typically charge a transaction fee for each international wire. This is eliminated with a virtual IBAN.
- Each customer can be assigned a unique IBAN account. This allows for efficient organization.
- Every process of a virtual IBAN can be automated. The deposit, transfers, and settlements can all be automated. This saves business owners substantial amounts of precious time.
- Accounts and transfers can be funded with multiple currencies.
- Virtual IBAN accounts eliminate the need to set up multiple bank accounts in different regions and countries.
How to Set Up a Virtual IBAN Account
- Any business seeking to open an IBAN account must first establish a collection account. This is the account that all secondary and customer accounts will be routed to. The collection account can be considered a master account.
- After establishing the collection account, make a list of each customer you’ll need to open an IBAN account for.
- Submit a request for each IBAN account you’ll need with all the relevant details.
- Decide what type of payment processing works for you. There are different speeds and methods available, depending on what works best for your company.
Checking for Accuracy
One of the biggest problems with original money transfer systems in Europe was the information being logged correctly.
There weren’t as many resources available back then if you knew only a portion of the customer's account number.
The number of countries available to receive payments from is extremely long.
Between missing numbers and the huge range of country codes, it can be easy to end up with a missing piece of an IBAN account number for an account.
Use an IBAN calculator to help you with any missing pieces. This is an accurate way to recover account information.
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