The International Bank Account Number (IBAN) is a standardized global system used to identify individual bank accounts during international financial transactions.
It was originally developed by the European Committee for Banking Standards (ECBS) to simplify and speed up cross-border transfers within the European Union. Today, over 70 countries, including many in Europe, the Middle East, South America, Asia, and the Caribbean, use IBANs to streamline international transfers.
Purpose of an IBAN
- Ensures that money is sent to the correct account during international transfers.
- Reduces errors with built-in check digits.
- Simplifies global payments by placing all necessary bank details in a single alphanumeric code.
- Speeds up processing of cross-border payments, including global payroll.
What Does an IBAN Look Like?
An IBAN contains 15 to 34 alphanumeric characters (length depends on the country).
Structure of an IBAN:
- Country code: 2 letters (ISO standard)
- Check digits: 2 numbers (validation)
- Bank Identifier (BIC) and branch code: Letters/numbers identifying the bank and branch
- Account number: The customer’s domestic account number
The combination of bank code, branch code, account number, and check digits is also known as the Basic Bank Account Number (BBAN).
How to Find Your IBAN
You can locate your IBAN by:
- Checking your printed bank statement
- Looking it up in your online banking portal
- Contacting your bank or personal banker
- Using an IBAN calculator (ensure accuracy when entering details)
When to Use an IBAN
- Receiving international payments: Share your IBAN with someone sending money from abroad.
- Making international payments: You will need the recipient’s IBAN to complete a transfer.
IBAN vs. SWIFT (BIC) Code
- IBAN identifies a specific account within a bank.
- SWIFT/BIC identifies the bank itself.
- SWIFT: A global messaging system connecting banks worldwide.
- BIC: Another name for a SWIFT code.
For international payments, both may be required:
- IBAN = Where to send the money
- SWIFT/BIC = Which bank to send it to
IBAN and SEPA
- SEPA (Single Euro Payments Area) is a payment system used in the EU for Euro transactions.
- IBANs are required for SEPA transfers, but SEPA only works with payments in Euros.
IBAN Outside of Europe
Although IBAN originated in Europe, many countries outside Europe also use IBAN for cross-border payments.
- However, some countries (like the United States) still use other systems such as ABA numbers combined with SWIFT codes.
Key FAQs
Can I use an IBAN to receive foreign currency?
It depends on your bank. Some banks convert the funds automatically; others may reject the transfer.
What happens if an IBAN is entered incorrectly?
Incorrect IBANs can delay transfers or send money to the wrong account. The built-in check digits reduce these risks.
The IBAN system standardizes account identification globally, making international banking faster, more accurate, and more secure.
