What is an IBAN Number? How do IBANs Differ from SWIFT Codes and BIC Numbers?

The United States does not currently use IBANs. As a result, bank accounts in the U.S. do not have IBANs. Instead, they use ABA routing numbers (for domestic transfers) and SWIFT codes (for international transfers). 

The key difference between an IBAN and a SWIFT code lies in what they’re used to identify.  Unlike an IBAN number, a SWIFT code only identifies a bank. An IBAN number shows both the bank and a specific account at that bank. Thus, an IBAN identifies the individual international account that a payment is heading to and a SWIFT code denotes the financial institution that holds the account.

Prior to the international standardization of IBAN and SWIFT codes, payments between countries and continents would frequently end up in the wrong location, complicating the lives of everyone involved.  Payments that were made in error, or ended up in the wrong locations, would frequently require extra sums of money to correct these issues.  Clearly, something had to be done.

One of the major benefits of the SWIFT system is the large amount of information it easily transfers between financial institutions.  Among the details contained in a SWIFT code are an individual’s debit and credit amounts, the status of an account, and specific information related to the individual money transfer.

A Bank Identifier Code (BIC) is the same as the SWIFT code. Technically, the network through which international transfers are sent is the SWIFT network, and the codes are BIC codes. 

Whereas an IBAN identifies a bank’s country of business and one’s precise account number within that institution, a BIC (Bank Identifier Code) breaks down into 3 more specific elements to aid a transaction.  Namely, a 4-letter bank code, a 2-letter country code, and a branch identifier composed of one letter and one number.

Think of an IBAN as the general compass that points an international payment in the right direction.  But even with a functioning compass, one still needs a more detailed map of the terrain through a BIC (branch code, etc.) to ensure that the money makes a successful journey overseas.  And of course, a BIC is important in helping to avoid post-transaction costs to fix a misdirected payment.

An IBAN number has a series of alphanumeric characters, all of which represent an important part of the money transfer process. The IBAN format is always the same for every country, although the number of digits may vary. For example, Norway uses 15 characters, while Liechtenstein uses 21. The maximum number that any country can use is 34.

In general, an IBAN number is divided into the following codes (sometimes in the order presented, although it does vary by country):

– Country code
– Check digit code
– Bank identifier code
– Branch code
– Account number

The last three (bank, branch, and account numbers) collectively make up the Basic Bank Account Number (BBAN).

To create an example, here’s a hypothetical IBAN from a bank in Cyprus:

CY45002003579876543210987654

Although IBAN’s are used without any spaces, for convenience we can add some here to make interpreting our fictitious IBAN a little easier.

CY 45 002 00357 9876543210987654

As you can see, Cyprus uses 28 characters across five sections.

1. The first two characters are the ISO country code. 
2. The two digits following the country code (45) are the check digits. They help to validate the account number and routing destination. 
3. The next section (002) is the bank code. Obviously, this identifies the specific bank that holds the account. 
4. The fourth string of characters (00357) is the branch code.
5. Finally, we get to the last string of characters, which is the account number. In this case, we used a hypothetical number. In Cyprus, it will always be 16 characters long. 

The IBAN registry is a catalog of those countries that are compliant with the most recent IBAN standards (ISO 13616). The registry is published by SWIFT and contains the details of each country’s IBAN format. For example, in the IBAN registry you’ll find the following details for Hungary:

– The nation’s country code is HU
– Each IBAN is composed of 28 characters
– The BBAN length is 24 characters
– Bank identifier is 3 characters long
– Branch identifier is 4 characters long
– Hungary is also a member of SEPA

The registry also shows the document’s update history and gives a brief description of important terms used in IBAN transactions.

The Single Euro Payment Area (SEPA), as the name suggests, is a payment network in Europe that provides digital transfers within the European Union plus Norway, Iceland, Switzerland, and Liechtenstein.

In total, the SEPA network works across 28 countries. By comparison, over 60 countries currently use the IBAN system. Multiple currencies can also be sent using IBAN, whereas only Euros can be used on the SEPA network.

Since its adoption throughout Europe in the late 1990’s, some countries in the Middle East and the Caribbean have also begun using the IBAN system for digital money transfers.

Before International Bank Account Numbers were adopted, different European countries had different bank account number formats, and this discrepancy led to errors in cross-border transactions. 

Then in 1997, the International Organization for Standardization (ISO) proposed a new system of global money movement. Today, this international standard is known as ISO 13616-2:2007. 

The result of the IBAN program has been fewer errors in international wire transfers and other financial transactions. Because multiple countries now operate within the same system, it’s also easier for people to send money from one jurisdiction to another. 

Despite these advantages, there are issues IBAN cannot address, such as foreign exchange rates.

The IBAN is located on every paper bank statement an institution prints. It may also appear inside your web-based account if you use online banking. If you can’t find it in either of those locations, you can contact your bank, who will be able to give it to you.