IBAN stands for International Bank Account Number and is a number assigned to all accounts in the EU countries plus Norway, Switzerland, Liechtenstein and Hungary. The IBAN is made up of a country code which identifies the country the account belongs to, the account holder's bank and the account number itself. Allowing up to 34 alphanumeric characters, an IBAN consists of a two-digit country code, two check digits, and a Basic Bank Account Number (BBAN) that contains specific bank and account details.
Each country is responsible for its own BBAN structure and SWIFT is the official registrar of the national IBAN formats. The IBAN makes it easier and faster to process cross-border payments as well as reduces errors and delays in making international payments. An IBAN is always used in conjunction with a BIC (Bank Identifier Code), and is not a new bank account number: it uses existing sort codes and account numbers – but with extra information. Please note that for SEPA payments, only the IBAN is required rather than BIC and IBAN.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment. Business Identifier Codes (BICs, previously Bank Identifier Codes) are popularly known as "SWIFT codes".
The majority of international interbank messages use the SWIFT network. SWIFT is linked more than 11,000 financial institutions in more than 200 countries and territories, who were exchanging an average of over 16 million messages per day. SWIFT transports financial messages in a highly secure way but does not hold accounts for its members and does not perform any form of clearing or settlement.
A Swift Code is the standard format for Business Identifier Codes (BIC) and it's a unique identification code for banks and financial institutions globally. These codes are used when transferring money between banks, in particular for international wire transfers or SEPA payments.
The SWIFT Code (BIC) is usually a 8 to 11-character standardized international code that uniquely identifies a financial institution and is used to ensure a payment is routed to the proper bank, particularly for international transfers. The BIC consists of a 4-letter bank code, a 2-letter country code and a 2-digit code that indicates the location of its head office. The last three characters are optional if the bank wants to identify a specific branch.
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The check digits enable the sender bank (or its customer) to perform a sanity check of the routing destination and account number from a single string of data at the time of data entry. This check is guaranteed to detect any instances where a single character has been omitted, duplicated, mistyped or where two characters have been transposed. Thus routing and account number errors are virtually eliminated. A check digit will not ensure you have the proper account number for the intended recipient, it will only validate that such an account actually exists. The destination bank is responsible for calculating the check digits, as well as providing the IBAN.
The IBAN bank account numbering format was originally developed to facilitate payments within the European Union and has been implemented by most European countries and multiple countries in the other parts of the world (Middle East and in the Caribbean). As of March 2018, 75 countries are using the IBAN numbering system. North American, Australian, and Asian countries do not use the IBAN for money transfers unless sending a payment to a country that has adopted the IBAN. See the countries listed in the SWIFT IBAN Registry in the IBAN Country List.
The IBAN is not universally adopted by all countries. Account numbers, routing numbers, and SWIFT Codes may be required when sending an international money transfer to some countries.
An IBAN and BIC are required to send money internationally to countries that have an approved IBAN format. Most payment providers / banks will request the sender provides both the IBAN and the Swift Code (BIC) necessariry for the transaction whereas others will only require the IBAN because they can calculate/extract the BIC from the IBAN automatically, and validate it on the sender’s behalf. The money transfer recipient should get this information from their bank since it is responsible for generating the customer's IBAN. Both the IBAN and BIC can usually be found on a bank statement.
The Single Euro Payments Area (SEPA) is a payment-integration initiative of the European Union for simplification of bank transfers denominated in the euro currency. It represents a new format for cross-border Euro bank transfers that aims to make cross-border Euro transfers within the European Union equivalent to a domestic transfer within your own country. Banks are still able to charge a transfer fee for SEPA payments, however they are not permitted to make deductions from the amount transferred. SEPA consists of the 28 member states of the European Union, the four member states of the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland), Monaco and San Marino.
Yes, a recipient’s IBAN is needed for all SEPA payments because it represents the unique bank account identifier. Both the IBAN and Swift/BIC are currently required for cross border SEPA transfers but it is expected that many countries will be transitioning to the IBAN only rule.
In some countries, the local format of the bank account numbers are displayed differently (usually a shorter/subset format) than the IBAN format that would be used in an international money transfer. The destination bank can advise the proper format required to display an account number when sending a money transfer with an IBAN.
Example IBANs originate from SWIFT’s IBAN Registry and are for IBAN format and structure demonstration purposes only. More information about IBANs can be found on the SWIFT website at www.swift.com.