Roche was one of the first companies to embrace the possibilities of using virtual IBANs to identify payments from different customers and channel them into one central bank account, without the need for having bank accounts in every country.
“We are taking advantage of the virtual IBANs for the collection side for certain affiliates,” Zampeta Fameli, cash manager at Roche, explains. “They allow us to allocate the funds we receive from the customers to the correct affiliates and automatically credit the funds on their IHB accounts. Our bank provided us with a virtual IBAN structure where we can freely apply the last seven digits of the virtual IBAN.”
This gives Roche the option of assigning the IBANs according to the affiliate’s needs (for example, one virtual IBAN for all customers or a separate IBAN for each customer). Once the customers make a payment to that virtual IBAN, Roche receives the incoming funds on its IHB account, with the IBAN providing payment information on the electronic bank statement. This text is then used in the company’s central treasury system to apply the funds to the respective affiliate.
Fameli explains that the allocation process is fully automated and the funds are visible on the affiliate’s books on the same day with the correct value date. “I would consider virtual IBANs and virtual accounts to be the same,” she adds. “We have business partners set up with an in-house account, so virtual account structure and for us the idea wasn’t so strange. With the virtual IBAN, there is of course a normal physical account as well. The virtual IBAN just re-routes the payments to the physical account.”
Roche’s Denis Reneau adds that the seven ‘assignable’ digits of the IBAN are what gives the technique real flexibility. “An IBAN has the bank code and the customer/ partner code to identify which account it belongs to. Then the seven digits on the end give us the possibility of having more control and visibility over the incoming payments, for example by pooling the funds into a central account.”
So how much detail is really contained in a virtual IBAN? Does it go as far as assigning one IBAN per invoice? “The beauty of the concept of the virtual IBAN is that the reference code and the standard payment details appear on the bank statements and are delivered to the affiliates,” says Reneau. “Thus, we don’t need to go to the level of setting up an IBAN per invoice.”
Sepa has brought the virtual IBAN into its own in the Eurozone, enabling MNCs to streamline their European bank account structures. Meanwhile, similar concepts and techniques are being used in other regions. Mosaic is using virtual accounts for its operations in China. Treasury manager Michael Crawford says they chose to use virtual accounts because they wanted to reach out to regional and local partners in China. The local Asian banks provided the account structure. “These accounts still have reporting requirements – it’s just the structure of the account that is simplified,” he says. “We use them mostly for collections and it facilitates the payments process from our end-customers in China.”
Omnicom also has its own version of virtual accounts. “We introduced using virtual accounts to reduce our disbursement accounts from 300 to one,” says group treasurer Dennis Hewitt. “The savings are an annuity, they reoccur every year and we’ve been doing it for five to six years. It made sense to gather all collections in one bank account, so each client has a virtual account number with the IHB.