Leveraging Virtual Account Numbers To Reduce Compliance Requirements

Leveraging Virtual Account Numbers To Reduce Compliance Requirements
Rohit13 April 2024

Working with international clients can enhance profitability and global visibility. However, it also brings about challenges such as cross-border payment complexities, export documentation, and tax compliance. To address these hurdles, financial institutions and payment platforms offer virtual accounts and generate unique vIBANs (virtual international bank account numbers) for each international transaction.

In this blog, we delve into the concept of international virtual accounts and explore how virtual account numbers streamline compliance management.

What is a Virtual Account?

A virtual account is an electronic account that does not have a physical presence. They are typically used for specific purposes, such as online transactions, corporate banking, and cash management. 

What is a Virtual Account?

A virtual account number is an 18-digit unique number linked with each virtual account to avoid sharing the account number associated with the real bank account. VANs are used while executing online transactions to ensure that the real bank account is not shared with the other party. 

You can consider virtual accounts as passthrough accounts that assist in clearing transactions to the real account rather than holding any balance. Banks, payment platforms, and other financial institutions provide virtual account numbers to customers for quick transaction processing and better reconciliation. 

Even though virtual accounts transact on behalf of traditional bank accounts, they offer unique features and benefits. For example, opening numerous virtual accounts is easier and quicker in comparison to opening traditional bank accounts which requires extensive documentation. 

Furthermore, virtual accounts are cost-effective, easy to manage, and flexible compared to traditional bank accounts. They allow businesses to separate cash flows from multiple payers within the account. 

How Do vIBANs Work?

If you want to receive international remittance in USD from a foreign entity, your international payment platform generates a vIBAN. You can quote this vIBAN to the sender to receive the payment. 

vIBANs help businesses comply with regulatory requirements, such as the Payment Card Industry Data Security Standard (PCI DSS), by reducing the storage and transmission of sensitive cardholder data. Furthermore, in case of disputes or fraudulent charges, VANs and vIBANs provide a clear trail of transactions, making it easier for customers to identify and dispute unauthorised transactions with their card issuer.

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