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If you are involved in any international business, you are well aware of how important it is to process payments in different currencies correctly. Ideally, you would send and receive payments in whatever currency you or your partner uses, and maintain a balance in whatever currency your business requires.
However, due to the complexity and cost of supporting such financial solutions, their use can be quite limited or expensive. In the modern financial world, an IBAN account is considered a very convenient way to process payments in different currencies.
We also believe that this tool brings great benefits to those companies that want to go global and manage their financial transactions from one account.
Why You Should Open an Account in a Payment System and Use IBAN?
What is IBAN?
IBAN or International Bank Account Number is an internationally agreed code consisting of 34 letters and numbers that allows banks to process international transfers. Each set of symbols represents different details of your bank account. The IBAN comprises a code that identifies the nation where the account was issued, the bank that manages the account, and the account number.
You can create an IBAN business account and the IBAN will enable anybody in the world to easily discover the nation in which the bank is based and the account number of the beneficiary of money transfers. The IBAN also serves as a technique for confirming transaction data. The number normally begins with a two-digit country code, followed by two numbers and up to thirty-five alphanumeric characters.
Structure of Creating an IBAN
If you intend to act as a provider of payment services, digital banking institutions, or e-wallets and open current accounts for your clients, you must generate IBAN codes for them. There are several ways to obtain these IBAN codes.
- Become a SEPA member and create special IBANs for your clients;
- IBAN sponsorship;
- Receive virtual IBANs from your banking partners;
- Become an EMD agent and create IBAN accounts through your partners.
But if you don’t intend to create an IBAN for others, then your business may still need an IBAN if you want to expand internationally.
Why is an IBAN Account Useful for Your Business?
International companies processing transactions in multiple currencies often face significant challenges in manually reconciling all incoming payments. With an IBAN, they can allocate a unique virtual account to accept payments from each customer, for each currency or product line, or even for each payment, which is then routed to the company’s main account.
In addition, IBAN allows companies to hold reserves in different currencies and create a cash pool to optimize the efficiency of foreign exchange management. As a result, you can send payments in foreign currencies, saving on currency exchange costs and reducing the company’s foreign exchange risk.
Who Can Use an IBAN Account?
This tool allows you to centralize all transactions and avoid the complexity of reconciling them across bank accounts across multiple jurisdictions. As a rule, IBAN accounts are used by such categories of clients as:
- International corporations;
- Exporters and importers;
- Freelancers and international service providers;
- Companies that receive international payments;
- International traders;
- Companies with directors who are EU residents and non-EU residents;
- Shipping and logistics companies;
- Companies providing legal advice.
We would also like to draw your attention to the fact that this financial instrument is an effective solution for businesses with significant volumes of international payments. With its help, businesses simplify transaction processes and increase control over their foreign exchange transactions without spending additional time and money.
How to Open an Account in a Payment System and Get an IBAN?
Common scenarios offered by traditional banks when it comes to multi-currency transactions are as follows. You can receive funds in only one currency, convert incoming funds upon receipt, or have a separate account for each currency.
The most common way is to work with separate accounts by currency. This means that you need to manage multiple accounts at the same time and provide correct funding information every time, which in turn is very inconvenient for reporting and monitoring funds.
The main advantage of an IBAN account is the ability to have one account prepared to work with dozens of different currencies. Regardless of the currency your client pays in, you can receive and automatically store funds in the correct currency account. Just imagine how beneficial this is if you are an international player operating in different countries and markets.
This solution saves significant amounts regarding bank fees and foreign currency exchange. In addition, the fact that you work with one account saves a lot of time, and effort and prevents confusion and mistakes from your clients and company employees.