Virtual IBAN : all you need to know

24 October 2023


On a financial marketplace (crowdfunding, crowdequity, crowdlending, etc.), it’s essential to identify the contributors and investors in a project and the level of their funding. This information is also needed on a B2B marketplace platform, which involves transferring large sums of money and making multiple transfers. To meet these challenges, the virtual IBAN offers several advantages. Here’s how.


In their payment experiences on marketplaces, donors, lenders, and payers must enter certain information when making a transfer. In the event of input errors or oversights, this mode of operation results in processing delays and manual bank reconciliation operations. Ultimately, the execution of transfers is delayed, and payment flows are less fluid. There is a simple solution to avoid these pitfalls: the virtual IBAN.


Virtual IBAN and traditional IBAN: what are the differences?

The 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. The IBAN code is broken down as follows:

  • Two letters to identify the country of origin (Example: FR for France)
  • A two-digit control key
  • The bank account number

The virtual IBAN is an alternative IBAN dedicated to a single payment account.

Once generated and sent to a recipient, the latter can make a transfer using these bank details, and on receipt, the transfer will be automatically credited to the payment account.

Virtual IBANs guarantee the confidentiality of bank details, make it easier to identify and track payments, and streamline the transfer process.


Application of the virtual IBAN: 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 companies 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

Payment flow - Donation

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.

Read also: Alternative financing: how to secure transactions and matchmaking on your platform?

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 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 to be transferred quickly.

Virtual IBAN: what are the benefits?

There are many advantages to using the virtual IBAN functionality:

  • Faster bank reconciliation: reconciliation operations can be tedious: wrong wording, incorrect references, etc. Thanks to 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, or payers, using a virtual IBAN makes it easier to transfer funds. 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 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! et lemonway - PSP migration