What is an IBAN?

IBAN is an acronym that stands for ‘International Bank Account Number’, which is an international numbering system used to identify bank accounts for cross-border transactions. The IBAN is a unique code that is used to identify a specific bank account, regardless of the country or currency used.

Each IBAN is made up of a series of letters and numbers, which identify the country, financial institution (FI) and account number of where the customers’ account is held, plus two digits that are used to verify the integrity of the IBAN.

What is a dedicated IBAN – and what’s the benefit of having one?

A dedicated IBAN is one that’s assigned to a specific customer or business, rather than being shared among multiple customers or accounts. Dedicated IBANs are sometimes also referred to as virtual IBANs or segregated IBANs.

The main benefit of having a dedicated IBAN is that it allows more efficient and streamlined management of international payments and collections. With a dedicated IBAN, incoming payments can be automatically credited to the correct account without the need for manual reconciliation, which can save time and reduce errors. Dedicated IBANs can also help to improve transparency and tracking of payments and provide greater control over funds.

Another benefit of dedicated IBANs is that they can help businesses to expand their international operations more easily. By providing customers with a dedicated IBAN, businesses can facilitate international transactions and make it easier for customers to send payments in local currencies. This can help to reduce costs and improve cash flow, as well as providing a better customer experience.

Overall, dedicated IBANs can be a useful tool for businesses and individuals who frequently make or receive international payments, as they provide a more efficient and secure way to manage cross-border transactions. However, it’s important to note that dedicated IBANs may not be available from all FIs and may come with additional fees or requirements.

How can using local IBANs help reduce costs?

Using local IBANs can be a cost-effective way to receive and make international payments, as it can help to avoid the fees and delays associated with international wire transfers.

For example, if you are a business or individual who frequently receives payments from customers in different countries, you could benefit from having local IBANs in each of those countries. With a local IBAN, your customers can send payments in their local currency, and the funds will be credited directly to your local bank account, without the need for international wire transfers or currency conversions.

This can help reduce transaction fees and currency conversion costs, as well as improving the speed and efficiency of payments. By having local IBANs, you can also take advantage of local payment systems and services, such as direct debit or local e-wallets, which can further reduce costs and simplify payment processing.

However, it’s important to note that obtaining and maintaining local IBANs may come with additional fees and administrative requirements, depending on the country and the financial institution. It’s also important to ensure that you comply with any local regulations and tax requirements when using local IBANs for international payments.

How do you decide on the right IBAN strategy?

The right IBAN strategy will depend on your business’ specific needs, the countries you are transacting with, the frequency and volume of your transactions, and any regulatory or compliance requirements.

You should consider:

1. Your payment patterns and growth plans: Determine what types of payments you will be receiving and making, and where. Consider the volume and frequency of these payments, as well as any currency conversion or international wire transfer fees. Looking ahead to your future growth plans is also helpful, so you cater for both your immediate and mid-term needs.
2. Available IBAN options: Research the available IBAN options for the countries where you will be transacting. Determine whether a dedicated IBAN, a local IBAN, or a combination of both would be the most effective for your needs.
3. Regulatory and compliance requirements: It’s important to understand if there are any regulatory or compliance requirements that must be met in the countries where you will be transacting. For example, some countries may require certain types of bank accounts or IBAN formats for international transactions.
4. What your current bank or FI can provide: Discuss your payment needs and goals with your bank or financial institution and see if they can support with the right makeup of IBANs and costs. It’s important to remember that not all FIs can provide local IBANs, or the right currencies or fee structures, so you may need to shop around for the right fit for your business.

How can Andaria help?

Andaria is a licenced EMI and Financial Institution. We offer dedicated IBANs and local IBANS in several countries, as well as multicurrency accounts. Whether you need a single currency account with a domestic IBAN, or a multiple accounts and IBANs with multicurrency options, we can provide easy-to-manage, cost-effective solutions that work for your business. And, as you scale your business, we can adapt in line with your needs.

If you’d like to discuss your business current account or cross-border payments needs, get in touch with a member of the team.

You can read more about our digital payment accounts here.