What is an IBAN, or International Bank Account Number?
An IBAN (international bank account number) is a universally-accepted coding system used to identify overseas bank accounts, where each IBAN consists of 34 alphanumeric characters, and each character serves to help identify the specific bank account. An IBAN will always start with a country’s two-digit country code.
In the context of international banking, an IBAN (International Bank Account Number) is a critical piece of information. It serves at least three vital functions when an individual makes or receives any kind of international payment between banks.
1. An IBAN allows financial institutions to quickly and easily note the country of the bank that a payment is being sent to.
2. An IBAN is used to pinpoint the exact account number to which the money will be sent within that country. Clearly, if either of these aspects is missing, a successful international transfer of funds becomes an ordeal at best and impossible at worst.
3. Finally, an IBAN allows financial institutions a highly effective and easy way to double check the accuracy of an account’s details, to ensure that a successful transfer will be made prior to initiating it.
An IBAN is a number format that identifies a foreign bank account, especially one in Europe where the IBAN system is most frequently used. An IBAN, or International Bank Account Number, includes various numeric identifiers, such as account number and country code, which help financial institutions process international payments more quickly and without errors.
Does the United States Participate in the IBAN System?
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).
How Does an IBAN Differ From a SWIFT Code?
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.
How Does an IBAN Differ From a BIC?
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.
What Does an IBAN Look Like?
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:
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.
What is the IBAN Registry?
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.
What Is the Difference Between IBAN and SEPA?
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.
What is the Purpose of IBAN?
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.
How Do You Find Your Account’s IBAN?
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.
Additional Information about IBAN Numbers:
1997 saw the introduction of standardization for account numbers with the publication of ISO 136:1997. However, even after standardization, the European Committee For Banking Standards felt that there was still too much variety within each country’s code types, code lengths, and other vital factors.
To that end, ISO 136:1997 was updated with the stipulations that each country’s IBAN be a fixed length, and only contain uppercase letters when letters were used. This was a very important streamlined step toward truly international IBAN standards, and a huge step forward in the functioning of international markets.
One Option Among Many
Using an IBAN to send money to a bank that participates in such transfers is a convenient way to perform a funds transfer. But remember that not all banks have an IBAN, so in some cases you’ll need to use a different method.
IBAN, SWIFT and BIC
The overseas transfer of wealth (and therefore the wellbeing of international markets and trade) is inextricably tied to the numbers and international standards we’ve covered in this article.
An IBAN, a SWIFT code, and a BIC are each a vital component in making, receiving and processing international payments of all kinds.
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