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Blog  /  Banking  /  What is an IBAN Number and How Does it Work?
SEPA, SWIFT & TARGET2: What’s the Difference?

What is an IBAN Number and How Does it Work?

Time to read: 6 minute(s)

Previously, when there was no such international account number (IBAN) for banks, there were a lot of errors and confusion during the identification of accounts of different banks in countries of multiple parts of the world. There were different standards, which became a source of errors in transactions. After the appearance of IBAN, in those countries where it was applied, transaction errors decreased to 0.1% of the total number of money transfers.

What is an IBAN Number for a Bank?

For a general picture of the origin of this system, let’s say that it was first introduced at the initiative of the European Banking Standards Committee (ECB) in order to reduce and completely eliminate transaction errors when transferring payments between countries. Since the system originates in the EU, it is logical to assume that its operation initially extended only to its territory. It did not last long and IBAN began to gain popularity among countries that are not included in the European Union and thus became an international standard in accordance with ISO 13616: 1997. What does IBAN stand for in banking? It is simple – it’s an international bank account number.

As everyone can see now, IBAN can be found in almost all EU countries and in other parts of the world in the same way, and more specifically: in the Middle Eastern areas and the region of the Caribbean. Strange as it may seem, there are still about 25 countries that have not adopted IBAN and have this system in partial or experimental use. There are also giant countries such as China, Canada, the USA, Japan, and Australia, where this system is not used, but it is recognized and payments are processed anyway.

Difference Between SWIFT/BIC and IBAN

All three of these systems are internationally recognized as the standard for cross-border payments. Below are the differences between them, despite the fact that they seem to serve the same purpose:

  • SWIFT is the predecessor of IBAN since it appeared long before attempts to unify money transfers between countries through IBAN. Today, the SWIFT system can be called the largest payment platform for international payments in the world.
  • Their main difference lies in the subject of identification by these two systems. In simple terms, each IBAN number designates an individual personal account in a specific bank in a specific country. At the same time, the SWIFT / BIC code indicates a bank or any financial institution in the course of an international transaction. These two systems complement each other if the payment is sent to a country participant in the international bank account number system: when setting the transaction route, a person enters both SWIFT BIC and IBAN codes in the payment details field to make sure that the money goes to the correct check.
  • BIC/SWIFT codes, which a central organisation assigns, while IBANs are not. This system has a special Registry that contains the format according to which banks issue international bank account numbers.
  • SWIFT/BIC is a code consisting of a combination of letters and numbers, which is 8 or 11 characters long.

In conclusion, it can be said that in order for his transaction to be processed, a person always needs to indicate the SWIFT/ BIC code, and IBAN is needed to identify the location of the recipient’s bank account in another state, but if it participates in the system of international bank account numbers. When it comes to international transactions, we can assume that SWIFT and BIC codes are interchangeable.

IBAN Requirements

This system has been developed taking into account different national standards for the definition of bank accounts. Due to the fact that earlier all banks used different combinations of letters and numbers to identify all the details: name of a specific bank, branch number, routing code, and numbers of the accounts, errors or misinterpretations of information about payments often appeared.

This is how the aforementioned ISO standard appeared, but it was preceded by a reduced version of ECBS, where only uppercase letters were allowed and the length was fixed differently in each country, but it was quickly replaced. The most recent version was released in 2007 and promised to facilitate, with the help of system elements, the processing of international data in finance and in other industries too. But at the same time, the IBAN does not specify any internal procedures, ways how to organise files, media data, or languages.

How Do I Find My IBAN Number?

With the search for and entering the IBAN code, as with everything, you need to be careful, since entering it incorrectly can be fraught with not the most pleasant consequences: the payment will be returned to the sender, but with a delay or will eventually be sent to the wrong account, and then you have to rely on the good faith of the recipient. But there is no reason to be upset because finding the right IBAN number is quite simple.

In order for the sender to find out his own international bank account number, you must log in to online banking or view his account statement. But it happens that a person is not sure enough that he is looking at the information correctly, and in this case, it is worth contacting the bank by phone or in person. When sending a payment abroad, simply ask the recipient to provide all the necessary data for the transaction, including the IBAN code. It happens that the recipient does not have an IBAN or simply does not know where to find it, but he can call the bank in the same way and find out all the necessary information there.

It is possible that there are situations when it becomes difficult to contact the sender’s bank, in which case it is possible to find the IBAN on the Internet. Now a person has access to online calculators on the network with which you can automatically transfer a bank account to IBAN. All the data you need is the account number and bank code. How long is an IBAN number? Some countries have introduced additional national control digits to refine the IBAN fixed figures, which are used in IBAN numbers on cards and are part of the national account number formats.

The way to determine the algorithm for assigning and checking national control figures in each country is different from each other because they rely on international standards, and they implement their own standards for their own nation. There are also those that allow each bank to decide which standards to apply and how. There are algorithms that can be applied to the entire BBAN network, and some – to its individual fields. Depending on the country’s rules, the obligation to consider the check digits as a part of the number that cannot be separated or as an external field that goes separately from the account number may vary.

Cross Border Payment Fees

The rule, which has been in force since December 15, 2019, states that the bank’s fees for international payments are the same as for domestic ones – it applies to outgoing and incoming payments and also to cash withdrawals from an ATM. It may happen that the bank will charge an additional fee, if the person does not indicate the IBAN of the payee, then the transaction may be refused.

How IBAN Codes Work

What does IBAN mean? IBAN is basically an International Bank Account Number. This is an international numbering system that is used to distinguish between different bank accounts in connection with international payments. Where can I find my IBAN number? In your account. Transferring an international payment to any person with an IBAN number will not be relatively difficult:

  • It can use different methods of sending: online, by phone, or contact your local bank branch;
  • It is needed to make sure that the sender has all the necessary information, more precisely, the recipient’s contact details and his address, his IBAN code, the bank details (name and address) of the recipient, as well as his BIC/SWIFT code and, of course, the amount necessary to complete the transaction.
  • The sender and the recipient can only wait for confirmation of successful payment and send the payment.

To make all needed cross-border payments, it is necessary to indicate IBAN and BIC also apply to it, but from October 31, 2016, a ban was introduced on requiring BIC from the beneficiary’s bank for international payments within the EU. However, in other countries, this information is still mandatory.

Creating a PayDo account is a simple way to get a European IBAN.  From anywhere in the EU or a non-European country, you may create and manage your IBAN account as well as send money to IBAN. Submitting the request requires just one application form to be completed. PayDo IBAN offers all the advantages of a European bank account to individuals and organizations without the requirement to create a European corporation.

Individuals and businesses may rapidly send and receive money, as well as store and convert currencies, using this account. A variety of different currencies may be sent to your account by companies, banks, and business partners. Register now!

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