Virtual IBANs Remove Friction From Cross-Border, B2B Payments

As eCommerce and B2B payments expand across borders, time zones and currencies, virtual international bank account numbers (IBANS) can pave the way for firms to capture online sales efficiently — and bypass the frictions of traditional banking relationships.

A virtual IBAN is a reference number issued by a bank that allows payments to be routed to a physical/regular bank account, and in terms of process, the virtual numbers act in the same manner as their brick and mortar variations. Lilia Metodieva, managing director at Monneo, told PYMNTS that the company offers a platform and a single point of access through which online merchants can access virtual IBANs provided through a network of European banks. The network, in turn, supports incoming and outgoing transactions across more than 130 currencies spanning a range of payment schemes such as SEPA and SWIFT.

Metodieva said that the virtual IBAN takes some of the basic concepts of making cross-border payments, streamlines the mechanics of those payments and makes compliance frictionless across B2B and eCommerce as companies enter the digital-first economy. That economy demands that banks, processors, acquirers and issuers be linked — with cardholders, of course — in an efficient manner. That can be done, she maintained, with the virtual IBAN.

Customizing The Accounts

But by using Monneo’s offerings, said Metodieva, multiple virtual IBANs can be provided to one company and separated for specific purposes or clients. Fund flows are clearly delineated (and not co-mingled), with more transparency into cash flow. Back-office processes are streamlined too. As she noted, all companies, regardless of verticals, opening a business account with a traditional bank can be marked by long, laborious and document intense processes.

“Especially in Europe,” she told PYMNTS, “a physical presence might be required to sort out the paperwork.” Once established, it takes time and resources to make sure banking relationships and accounts are maintained properly.

For nascent eCommerce firms, too, there is a bit of a chicken-and-egg problem when it comes to banking, she added, and in getting operations up and running. Many acquirers may not provide a merchant account for card processing unless a merchant shows that they have a bank account to receive their settlement funds from that acquirer. But in the meantime, the long onboarding, and document intense process of getting bank accounts in place can keep eCommerce firms from setting up their merchant accounts. That can mean companies lose out on sales.

“The banks need to be connected to the eCommerce world. And this is where the virtual IBANs come into play,” she said.

With Monneo, she said, eCommerce businesses can have as many virtual IBANs as they wish, and they can manage them through one platform at the same time they are connected to multiple banks. This gives additional advantages for day-to-day operations across borders and currencies.

In the current shift to distributed workforces she added, different levels of access can be provided to different team members to operate and maintain account-level activities. That can improve operational efficiencies for digitally-focused companies by segmenting workflows.

Virtual IBANs, she said, also improve compliance and know your customer (KYC) functions by connecting to software, databases and sanctions lists that ensure that parties are verified and payments are screened for any red flags. Ultimately, the virtual IBAN functions as an improved version of the traditional IBAN.

“Everything happens in an extremely secure environment,” she said. “This is definitely the future — where most companies, not only eCommerce firms — will start looking into virtual IBANs. Traditional banking slowly would be upgraded.”