Virtual International Bank Account Numbers (vIBANs) are digital account numbers that connect traditional bank accounts with modern financial services. They can make transactions easier and improve efficiency. Therefore, they are likely to grow in popularity in the future. As a result, it is important for business owners to understand how to use vIBANs to complete transactions.
This article explains vIBANs, including their benefits, drawbacks, and regulations in Germany.

What’s in this article?

• What is a virtual IBAN?
  
• What regulations apply to virtual IBANs in Germany?
  
• What are the advantages of using virtual IBANs?
  
• What are the challenges associated with virtual IBANs?
  
• Who uses virtual IBANs?
  

What is a virtual IBAN?

An IBAN is an international bank account number that is standardized and can be used worldwide. Virtual IBANs, or vIBANs, are more complex. Generally, they are unique digital account numbers linked to a single, primary bank account.

Businesses can create a unique vIBAN for each customer or transaction. When completing a purchase, the customer transfers the payment directly to the designated vIBAN that is connected to a business’s main bank account.

What regulations apply to virtual IBANs in Germany?

In Germany, vIBANs are subject to various regulations. According to Section 24c, Paragraph 1 of the German Banking Act (KWG), the Federal Financial Supervisory Authority (BaFin) requires credit institutions to record all IBANs issued to payment service providers in a file system, including vIBANs. BaFin established this requirement in December 2020 through a general ruling based on Section 6 (3) of the KWG in conjunction with Section 24c (1).

Since then, credit institutions must promptly, accurately, and fully record all newly issued vIBANs in the file system. Credit institutions must also record the names of the individuals assigned to these vIBANs. This requirement aims to enhance transparency and prevent money laundering.

Additionally, the general provisions of the Payment Services Supervision Act (ZAG) also apply to vIBANs in Germany. This law governs how institutions can offer payment services and issue e-money. Providers of vIBANs must obtain the necessary authorization from BaFin and comply with the provisions of the Money Laundering Act (GwG). This requires them to take measures to prevent money laundering and terrorist financing, such as verifying customer identities and reporting suspicious transactions.

Finally, credit institutions must follow the general rules for generating and using IBANs, as specified by the German Bundesbank. IBANs consist of multiple parts, each serving a specific purpose. In Germany, an IBAN has 22 digits.

• The IBAN starts with the country code, such as “DE” for Germany. Each country has its own code.
  
• The next part is a two-digit check number, which helps detect errors. This is calculated automatically.
  
• Next is the bank code, which specifies the account holder’s bank. In Germany, this part consists of eight digits.
  
• The final 10 digits are the customer’s bank account number. If the account number has fewer than 10 digits, it is padded with zeros.
  

What are the advantages of using virtual IBANs?

Virtual IBANs have many advantages over using standard IBANs. For example, when companies sell products or services, they need to receive payment, but the payment process can vary. With a bank transfer, customers can choose when and how much to pay, unlike with card payments or the Single Euro Payments Area (SEPA) Direct Debit process. Bank transfers allow customers to keep full control over their accounts and credit card details, making them feel more secure.

However, this flexibility for customers can create more work for businesses using standard IBANs. Customers might enter incorrect amounts or mix up IBAN digits. Additionally, a business account typically processes payments from multiple customers. The accounting department must then manually match each payment to the corresponding customer or invoice. This process takes time and increases the risk of errors. Alternatively, businesses can set up separate bank accounts for different business areas or locations. However, this leads to increased administrative effort and higher banking fees.

Using vIBANs can eliminate many of these steps and help companies save time and money on payment processing while also enhancing security. Here’s a closer look at the key advantages of vIBANs:

Greater efficiency

Each transaction or customer is assigned a unique vIBAN. This allows for automatic and precise allocation of incoming payments, reducing administrative costs and lowering bank account fees.

Simple cash flow management

All vIBANs are linked to a main account. This helps companies maintain a clear overview of their finances and manage cash flow more efficiently.

Easier international payments

Virtual IBANs can be created in different currencies, making international payments easier and eliminating the need for currency conversions. They can also simulate local bank accounts, enabling customers to make payments within their own country. This could, in turn, enhance customer satisfaction.

Better security

Virtual IBANs provide increased security for businesses since they only act as receiving accounts connected to a main account. This means they cannot be used to make outgoing payments or transfers. Even if a vIBAN is misused, no money can be withdrawn from it. Businesses maintain full control and can instantly deactivate or replace suspicious vIBANs without risking their main accounts.

Data protection is another key benefit. Businesses can keep their actual bank details private and use only vIBANs for transactions. This makes fraud attempts more difficult since attackers have no direct access to the main accounts.

What are the challenges associated with virtual IBANs?

Issuing vIBANs presents several challenges for businesses. These involve regulation, technology, costs, and security.

Regulatory requirements

Businesses must ensure compliance with all legal requirements, especially those related to preventing money laundering. According to BaFin, the risk of money laundering and terrorist financing in 2025 remains high, requiring heightened vigilance. Using vIBANs can make transactions harder to monitor and trace, as identifying the sender, recipient, and geographical location becomes more challenging. This can complicate compliance with due diligence requirements under the 6th EU Anti-Money Laundering Directive.

A vIBAN can also have a different country code from the one associated with the main account. This can create the impression that the account is managed domestically and falls under domestic regulations and oversight. This can mislead customers.

Technical integration

Businesses need to incorporate vIBANs into their existing financial systems. This includes accounting software, enterprise resource planning (ERP) systems, and payment gateways. Businesses must ensure incoming payments are automatically matched to the correct customers or invoices using vIBANs. This requires application programming interfaces (APIs) that connect and communicate with existing systems.

Another technical challenge is ensuring synchronization with banks and payment service providers. Not all systems have built-in support for vIBANs. Businesses might need to make customizations or collaborate with a payment service provider that simplifies vIBAN management.

Cost structure

Companies should check whether banks or payment service providers impose fees for setting up vIBANs or processing transactions. The fee structure varies by provider and a given business’s needs, so it should be reviewed in advance.

Fraud prevention

Virtual IBANs are part of digital payment systems and can be targeted by cyberattacks, fraud, or phishing. Secure management of vIBANs on a central platform is just as important as having robust systems for tracking and allocating payments. Virtual IBANs should be managed in a secure environment that follows strict security protocols, such as two-factor authentication (2FA) and advanced encryption technologies.

How Stripe can support you

With Stripe Connect, traditional businesses, marketplaces, or platforms can manage virtual accounts for their users. Each outgoing invoice is assigned a unique vIBAN. Customers transfer payments to individual virtual accounts, which are automatically linked to a main account. Stripe can handle payments in multiple currencies, often offering better exchange rates than traditional banks.

If a customer accidentally overpays, businesses correct the error in the Stripe Dashboard. This method can also be used to simplify refund and return processes.

Additionally, Stripe Treasury offers an API-driven solution that allows businesses to integrate banking features into their platforms. Stripe Issuing enables the creation of unique account data for payment transactions. Stripe helps businesses seamlessly integrate vIBANs into their existing systems without the need to develop complex bank integrations themselves.

Stripe adheres to the highest security standards, including Payment Card Industry Data Security Standard (PCI DSS) Level 1 compliance. This is a global security standard for organizations that store, process, or transmit cardholder information, sensitive authentication data or both. Stripe Radar technology also uses machine learning to identify suspicious transactions in real time, minimizing the risk of fraud through fraudulent vIBANs and altered payments.

Who uses virtual IBANs?

In recent years, vIBANs have become an important and adaptable solution for businesses in the digital payments industry. In particular, online businesses, marketplaces, and platforms—such as Airbnb—use vIBANs to efficiently direct payments to multiple customers.

Subscription services—such as streaming platforms or software-as-a-service (SaaS) providers—also use vIBANs to manage their recurring payments. Financial service providers and payment providers enhance transaction security and transparency, and international companies simplify cross-border payments using vIBANs.