Virtual IBAN and Virtual Corporate Bank Accounts in Europe
There is a distinction between a virtual IBAN and a virtual account. Explained below is how businesses can use multiple virtual IBAN accounts to receive payments which are channeled to a physical bank account where the funds can be allocated to “subaccounts” or virtual accounts each earmarked for a specific purpose.
Both virtual IBAN accounts and virtual business accounts help to reduce costs, simplify administration and consolidate a company’s banking accounts.
What is IBAN
The IBAN (International Bank Account Number) banking system assigns bank accounts with their own unique number so that international transfers can be made with confidence knowing the funds will reach the correct account. When you transfer to an account with its own IBAN the funds are directed to that specific account unlike with BIC codes which direct funds to a specific bank rather than a specific account. If your business bank account has its own IBAN international transfers will be faster, easier and more secure.
What are Virtual IBAN Business Bank Accounts?
Businesses set up several virtual IBAN business accounts each with a unique account number and allocate each account for a specific purpose, product, supplier or client. When a customer pays into a virtual IBAN account the funds are immediately routed on to your master account and no funds are held in the virtual IBAN account. Once received in your master account you can clearly see where funds have come from by the unique virtual account number associated with each customer, supplier or product. This reduces costs, administration and makes managing your finances much easier.
A virtual IBAN business bank account has similar features to an account held at a brick-and-mortar bank but because it is online there is a significant reduction in costs. Virtual business accounts are linked to a physical bank account and used to streamline banking. Payments can be received by your virtual IBAN accounts and instantly forwarded to your main, account in a physical bank. Virtual IBANs are issued by a physical bank as a kind of dummy account that reroutes payments to the company’s actual physical bank account. To clients virtual IBAN accounts function as the “real” company account when in fact funds are routing from the virtual IBAN accounts to the associated physical bank account.
Benefits of Virtual IBAN Business Accounts
- Reduce manual post-processing of unmatched items.
- Reduce banking costs
- Decrease burden of administration with straight-through reconciliation
- Easily track where your payments have come from
What is a Virtual Business Account with IBAN?
Virtual accounts are administrative “sub-accounts” of the company’s master account in a brick-and-mortar bank. Virtual accounts do not need to have an IBAN as they are all part of your master account. Companies can earmark funds for a specific purpose and place them in a virtual account. For example, a payment reaches the master account and is placed in the savings virtual account; the office expenses virtual account or the virtual account for a particular project. In this way funds can be allocated without segregating them physically from the master account. In the future virtual accounts will probably be a part of all business banking and they may even be free but for now there are no free lunches (or virtual accounts) especially in banking.
Benefits of a Business Virtual Account
- Centralized funds making it easier to track receivables.
- Reduced costs of administering – no need to hold multiple physical accounts
- Simplify the accounts structure and reduce the need for cash management products
- Save time
- Lower administrative costs.
- Improve cash flow and make account reconciliation faster and simpler.
- Easily change virtual accounts and move funds between virtual accounts as your needs change.
Virtual Euro Bank Accounts
Do you Need a Virtual Euro Account?
A Euro account is useful to any business that makes and receives Euro payments. Euro accounts are sometimes called borderless accounts because you can hold multiple currencies in the same Euro account. Euro accounts can be managed online making banking convenient, flexible and fast. The advantages of a Euro account include being able to make transfers using the mid-market exchange rate and paying low transaction fees unlike with most banks and money exchange services where you’ll be charged a marked up rate and encounter hidden fees.
Who Needs an IBAN Virtual Euro Account:
- If your company is located outside the EU and deals in import/export but has clients and suppliers in Europe.
- If your company receives and sends payments in Euro to or from Europe.
- Expats living in a EU country
- Freelancers paid in Euros
- Entrepreneurs getting paid or paying suppliers in Euro
- Frequent travelers to Europe
- If you regularly pay utilities, salaries, administrative costs in Euro
- If you want to hold multiple currencies in one account
- Send Euros to friends and family in the EU
- If you get paid in Euro
- If you would like a debit card that you can use to pay in Euro when traveling to Europe.
Opening a Virtual Euro Account
A Euro account could be your solution to paying fees every time you move funds from one currency or country to another. Before opening a Euro account make sure you fully understand the fees and charges which could include a monthly fee, transfer fees and fees for receiving funds. Some Euro accounts require a minimum number of transactions each year. Some Euro accounts allow you to hold multiple currencies in the account while others do not.
You can open a Euro account at many high street banks as well as challenger banks; FinTech companies and foreign exchange companies. Most traditional banks will only offer Euro accounts to pre-existing established customers and some banks will only offer Euro accounts to those with a minimum income or minimum bank balance. Remember that if your bank fails you are protected up to 100,000 Euro per financial institution not per account. So it is a good idea to spread your funds around several accounts in different banks or financial institutions. Check that your chosen Euro account is with a bank covered by FSCS so that you understand the compensation you would get in the event that your bank goes bankrupt.
Some Advantages of a Virtual Euro Account:
- Receive payments in multiple currencies and hold multiple currencies in the one account (with most Euro accounts).
- Transfer funds to friends and family overseas at a low cost and within the Eurozone for free.
- Pay suppliers in the EU in Euro which could make purchases easier and cheaper.
- Bank Euro, transfer Euro and receive Euro payments with ease and low fees.
- No currency fluctuation.
- Seamless cross-border transactions in Europe.
- Choosing a Virtual IBAN Provider
When choosing a virtual IBAN provider there are certain points you should consider:
- What are your business’s specific financial needs? Consider the scope of your operation – will you be making payments, receiving payments, cash pooling, dealing in multiple currencies in multiple jurisdictions? Choose a virtual IBAN provider that can meet the financial needs of your company and be integrated smoothly with your other payment methods and existing bank accounts.
- Is the virtual IBAN provider regulated? A good virtual IBAN provider will be regulated by a respected authority. There are many offshore and unregulated virtual IBAN providers that should be avoided. Using a regulated virtual IBAN provider gives you a certain level of security and assurance that the provider is reliable and legitimate.
- What is the cost of the virtual IBAN? Consider the cost of each virtual IBAN you will need. Virtual IBAN providers may offer a range of services and the final cost of your virtual IBAN may end up more than you expected at first. Prices vary considerably between providers. It is best to shop around and consider the total package offered not just the cost of the virtual IBAN itself.
Business Virtual IBAN
With traditional banking one IBAN is used for each account. if you want a separate account of each client, market or currency you have to set up multiple physical bank accounts. This is a complex and costly process. The alternative is to use one physical master account and multiple “virtual” IBANs for each customer, currency, market or contract. All of the virtual IBANs are connected to one traditional bank account’s IBAN. You can easily track transactions with each specific source by using their unique IBAN.
You will know who has paid what, and no payments can get lost through incorrect bank references or wrongly filled in forms. Online banking is much easier when you just have one account to follow and not multiple accounts set up for each of your customers. Using virtual IBANs is cost-effective and you are only paying banking fees for one master account. It is possible to reroute incoming payments to a different master account using virtual IBANs. Business virtual IBANs all keep a zero balance as the incoming payments are immediately forwarded to your main account. Customer-specific virtual IBANs directly connect your customers to your business bank account. Your customers only need to remember their one personal IBAN to send money to you.
Virtual Business IBAN Account
By using multiple virtual IBANs and one business master account companies can simplify their complex payment flows. Virtual IBANs are a practical solution for businesses with a high volume of payments, from different sources and in different currencies. Companies can centralize their payments and reconciliation process. Businesses can choose to allocate a segregated virtual IBAN to each client or to have one virtual IBAN for each currency or market. The multiple virtual IBANs are all associated with one physical master account. Payments are rerouted to the master account.
Virtual IBANs allow businesses to send and receive payments internationally. vIBANs give companies control over their cash flow; save on transaction fees and improved liquidity. With virtual IBANs business reconciliation and settlement processes are more efficient, low-cost and streamline. The customer experience is the same but for the business virtual IBANs provide an easier way of monitoring incoming and outgoing funds. Virtual IBANs are a multi-currency, multi-jurisdiction banking solution without having multiple banking relationships.