Virtual IBANs: centralising cash and transaction management


Posted on November 16, 2021
Virtual IBANs: centralising cash and transaction management
Virtual IBANs are one of the forces that are unlocking cross-border payments and multi-currency payments for growing businesses. All through a single API integration.
OpenPayd Editorial Team
OpenPayd Editorial Team
November 16, 2021

Payment technology has improved. Long-held problems, particularly relating to cross-border payments, have become increasingly solvable, allowing many businesses to expand internationally and trade at a larger scale. However, not all companies have become aware of what can be achieved by changing their approach, and are continuing with high levels of overhead and unnecessary costs.

Virtual IBANs represent an easy-to-use, cost-effective solution to the logistics of receiving international payments. In our previous article we explained ‘what is a virtual IBAN?’ , now we’re going to explore the solutions they offer. First, let’s examine how things currently work.

Payment reconciliation and cross-border payments

You probably know this story all too well, but here is how payment reconciliation usually works for businesses receiving a high volume of customer transactions from multiple countries.

Payment reconciliation is the process of agreeing the total payment transactions between individual bank accounts and the business’s general ledger. When you take into account transaction fees that may arise from sending money overseas, FX costs, any refunds that also need to be issued, chargebacks and more, it can become a logistical nightmare to keep track of.

As such, the complexity of cross-border payments not only requires significant operational overheads, it opens the door to simple mistakes and human error. Enterprise Resource Planning (ERP) systems do exist, but this underlying issue is still a pain point for many growing companies.

How do virtual IBANs work?

A virtual IBAN (virtual International Bank Account Number, or vIBAN) works similarly to a normal IBAN. It is a number allocated to an account, virtually, by a banking or payments provider to provide payment options and route payments to a business. Crucially with virtual IBANs, local payment options can be provided in multiple territories.

In other words, a business can give each of its customers their own virtual IBAN. The customer pays using that IBAN which is automatically linked to the business’s multi-currency account. This means that the business can accept payments in the customer’s local currency, with the amount being automatically reflected in their central ledger.

How do virtual IBANs make payment processing more efficient?

Virtual IBANs can speed up payments processing, as well as making it more secure and cost-effective. This is due to a number of reasons:

Alleviating manual reconciliation issues: By directly embedding virtual IBANs into a business’s back end, customers don’t need to include a Unique Reference when instructing payments to the company from their bank account. As such, these Unique References do not have to be processed manually, which severely decreases the risk of operational errors.

Assisting compliance: In order to operate in other countries, your business needs to meet the compliance and regulatory requirements of each country or territory. Historically, this would have involved establishing banking partnerships in those areas, which is often a drawn-out process with lots of moving parts.

Virtual IBANs offer instant access to international markets, allowing you to accept as many cross-border transactions as you’d like, knowing that you are fully compliant with local payment regulations.

Greater flexibility in accepting payments: The lightweight nature of virtual IBANs means you can offer greater variety in your payment options. Additional vIBANs can be set up which are linked to different bank accounts, allowing you to customise your payments infrastructure and processes to match your needs and those of your customers and stakeholders.

The important thing is that you’re in control. Setting up a virtual IBAN can be done in a matter of minutes through a single API.

Seamless UX: The benefits vIBANs can bring a business are clear to see, but how do they fare in terms of UX? Companies will be fully aware that any friction in their payment flow is likely to see potential customers treat the service with suspicion or frustration – 88% of all purchases are abandoned at the checkout as it is. Anything that is remotely complicated to use is highly undesirable.

Fortunately, another advantage of vIBANs is their customer-centricity. They are designed to be as user friendly as standard P2P payments and B2C purchases, which makes them a useful addition when you’re considering how to give as many possible payment options to your customers.

How OpenPayd’s virtual IBAN solution works

OpenPayd is a Banking-as-a-Service (BaaS) provider, meaning that businesses can receive full stack financial and banking services from us via a single API. Virtual IBANs are just one of the many products and services we offer as part of BaaS and Embedded Finance.

The vIBANs are directly embedded within your ecosystem. Your customers will not be taken out of your site or even see OpenPayd mentioned anywhere. We simply provide you with the technology and compliance support.

You have the ability to assign virtual IBANs to each new customer, with all accounts and payments displayed on a master account – this can be linked with any internal dashboard you currently have.

As you grow, you may decide that other services may be useful as well such as acquiring, FX, debit cards and much more. Working with OpenPayd sets you up for the future, with a partner that can integrate the financial services you need as your business expands.

Examples of how virtual IBANs can be used

Virtual IBANs are just one of the forces that are unlocking international payments for growing businesses. They’re helping to build a world where the transfer of money is faster, safer and more flexible than ever before.

OpenPayd’s collaboration with SwissBorg is a real-life example of how virtual IBANs can speed up payment processing and reduce errors. Swissborg is a cryptocurrency wealth management platform which needed to support a huge spike in users. Through integrating with OpenPayd’s API, SwissBorg were able to enhance their offering without changing any of their existing technology – the entire integration process took less than a fortnight.

Using virtual IBANs, SwissBorg were able to automate their processes for receiving fiat top-ups and initiating fiat withdrawals. The vIBANs also meant Swissborg’s customers no longer had to create a unique reference for sending money from their bank account to their SwissBorg account, which has helped reduce reconciliation errors and speed up the payment processing time.

Virtual IBANs are very straightforward, they allow businesses receiving international payments to save a lot of time and a lot of money. They are discreet, flexible and easy to integrate into a business’s ecosystem. They are arguably one of the most exciting elements of BaaS and are a big step towards international payments finally being a similar experience to domestic payments.