Virtual IBAN: all you need to know

In the fast-paced world of financial marketplaces—whether in crowdfunding, crowdequity, or crowdlending—identifying contributors, investors, and tracking their funding in an effective way is critical. Likewise, in B2B marketplaces, where large sums of money are transferred across multiple transactions, ensuring smooth and secure payments is a priority. However, traditional payment processes often introduce inefficiencies, errors, and delays.

Think of a crowdfunding platform where hundreds of donors contribute to a single project. Each transfer must be linked to the correct account, but manual entry errors or missing references can lead to processing delays and time-consuming manual reconciliations. The result? Frustrated users and inefficient fund flows.

A simple yet powerful solution exists: the Virtual IBAN (V-IBAN).

V-IBAN: meaning of Virtual International Bank Account Number

A Virtual IBAN (V-IBAN) is a unique reference number assigned to a specific payment account, designed to simplify the management of financial transactions. Unlike a traditional IBAN, which directly corresponds to a physical bank account, a Virtual IBAN functions as a dedicated identifier for a payment account within a platform, such as a crowdfunding or B2B marketplace.

Each user—be it a donor, investor, merchant or marketplace participant—receives a distinct Virtual IBAN. This allows for automated, error-free payment reconciliation without the need for manual checks or extra reference details, making transactions more efficient and secure.

How to read an IBAN number?

An IBAN (International Bank Account Number) follows a standardised format to ensure accuracy in routing international payments. It consists of:

1. Country Code: The first two letters to identify the country of origin (Example: FR for France)
2. Check Digits: These two-digits to validate accuracy of the IBAN
3. Bank Code: Series of numbers that represent the specific financial institution or bank branch
4. Account Number: The unique bank account numberThe IBAN (International Bank Account Number) is a bank account identifier. It is made up of a series of characters (numbers and letters) and is used to receive and send international payments.

Virtual IBAN vs traditional IBAN: key differences

While both Virtual IBANs and traditional IBANs serve as unique identifiers for bank accounts, they differ in how their use cases and their roles in transaction management:

• Traditional IBAN: This is a standard bank account identifier that links to a physical account. It is used for international payments and requires manual referencing for transactions.
• Virtual IBAN: A Virtual IBAN is assigned to specific payment accounts within platforms (like crowdfunding platforms or B2B marketplaces), ensuring each payment is automatically routed to the correct destination. It eliminates the need for reference numbers or manual reconciliation, streamlining transactions, improving operational efficiency and reducing errors.

The key difference lies in automation and efficiency. Virtual IBANs enhance transaction accuracy by directly associating each payment with an individual account, while traditional IBANs may require additional reference information, increasing the risk of delays or mistakes. 

Example of the virtual IBAN Application: the case of crowdfunding

Crowdfunding (also known as participatory financing) refers to financing a project via online platforms. It is an exchange of funds between individuals or businesses outside institutional financial channels. The call for donations is made on the basis of a project description on an online funding platform, which brings together project owners and donors who wish to support the project through a kitty system. This is where virtual IBANs come into their own!

Virtual IBANs are particularly useful since participative financing projects involve many transactions and participants. Many donors may invest in the same project, so making it as easy as possible for them to make transfers, identify these contributors and limit the risk of errors is essential. On a crowdfunding platform, each person wishing to invest in a project must have their own payment account. Without a virtual IBAN, all it takes is a mistake when entering the information for a transfer not to arrive as expected. Manual bank reconciliations are then required, which can be time-consuming. For a better understanding, the payment flow outline can generally be broken down as follows:

• Creation of a payment account for the project and for each donor
• Processing the receipt of funds from the donor to his/her payment account
• Protection of funds via a wallet (or ring-fenced account). This procedure involves keeping the money in a neutral account before it is released. The money is thus kept safe in a ring-fenced account until the project is financed.
• P2P transfer: Transfer of funds from the donor's payment account to the one of the beneficiary project.
• Transfer of funds from the beneficiary project's payment account to the project owner's bank account

At the Pay In stage, when the donors transfer the funds to their payment account, they must enter additional information to ensure that the bank reconciliation is done correctly and that the transfer is completed. If there is no virtual IBAN, the donors must provide the following information in the next order: the name of the platform, followed by a hyphen, and the external ID of their payment account. If an error is made in this entry, the transfer cannot be made, and the PSP is obliged to carry out a manual bank reconciliation, which lengthens the processing time and the execution of the transfer. Since, in this case, the transfer is made to an IBAN shared by several users, it is vital to know who has paid what to whom. To avoid these difficulties, participatory financing platforms are strongly advised to use the virtual IBAN.

Virtual IBAN: how does it work?

Rather than sharing a common IBAN, the virtual IBAN consists of allocating an IBAN to each payment account of a donor, lender or investor or merchant on a participative financing platform or payer of marketplace  to speed up bank reconciliation and the execution of transfers. All it takes is for the name of the sender of the transfer to match the name of the payment account, and the transfer is automatically credited. There's no longer any need to find for an external ID to enter it, which saves the user a lot of time! Whereas with a common IBAN, funds are first received on the PSP's IBAN before being transferred to the dedicated payment account. With the virtual IBAN, funds are received directly on the IBAN dedicated to a payment account. Since an IBAN corresponds to a single payment account, there is no room for error. So, transfers are automated, with a 100% success rate guaranteed!

This is essential for an equity crowdfunding platform that generates numerous investments (and therefore transfers) and needs the funds in multiple currencies to be transferred quickly.

Virtual IBAN: what are the benefits?

There are several benefits to using the virtual IBAN functionality:

• Faster bank reconciliation: reconciliation operations can be tedious: wrong wording, incorrect references, etc. Compared to regular IBANs, with virtual IBANs, identification is made easier with a unique reference, which simplifies the matching of transactions. Here, it is necessary to ensure that the name of the person making the transfer matches the name on the payment account. Since the virtual IBAN corresponds to a single wallet, there is no room for error.
• A better payment experience for users: for donors, lenders, investors, merchants, businesses or payers, using a virtual IBAN makes it easier to transfer funds in multiple currencies. They no longer must search for their ID number and fill it in at the risk of making input errors. Ultimately, the virtual IBAN also offers a better conversion rate, as it eliminates a step in the payment process (the need to look for the external ID to fill it in).
• Shorter transaction times and guaranteed transfer execution: thanks to the virtual IBAN, beneficiaries receive their transfers more quickly.
• Improved confidentiality and security: virtual IBANs guarantee the confidentiality of bank details, provide robust security measures and limit their exposure. Only the information on the virtual IBANs is displayed on the platform, so the real bank details are inaccessible.

Using the virtual IBAN feature with Lemonway

Lemonway offers the possibility of using virtual IBANs and associating an IBAN with a single payment account. By choosing to unlock this functionality, you will be able to:

• Avoid pending transfers
• Streamline the process of receiving transfers
• Accelerate bank reconciliation
• Provide users with a secure and simplified payment experience. 

Do you have a question about virtual IBAN? Would you like to offer these functions on your financial marketplace? Tell us about your project!