written by | November 3, 2022

Ultimate Guide On IBAN Numbers And How they Work

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A revolution is taking place in the banking sector at a phenomenal pace. There are no longer long lines to deposit or withdraw money. Nowadays, you can transfer funds within a bank in seconds and between banks in minutes. You can send money anywhere in the world through online remittance facilities. These transfers require specific details, including bank and beneficiary information.  IBAN number has been a unique code used for identifying a specific bank account for the purpose of cross-border payments.

Did You Know? With 15 characters, Norway has the shortest IBAN. At 31 characters, Malta's IBAN is the longest. 

IBAN Full Form and Its Meaning

International Bank Account Numbers (IBANs) are codes for sending or receiving international payments. Your IBAN comprises 34 letters and numbers and is a standardised representation of your account number and sort code. With IBAN, you can make cross-border money transfers faster, easier, and cheaper by automating the process. The only acceptable account identifier for SEPA (Single Euro Payments Area) which makes cross-border electronic payments as inexpensive and easy as payments within one country.

An IBAN confirms that the transaction details provided are accurate. As a result, international and domestic payments are processed with fewer errors.

Also Read: Guide to Payment Gateways and How They Secure E-Commerce Transactions

What Does IBAN Include?

There are generally four codes that make up an IBAN (sometimes in the order presented, but it depends on the country):

  • Country Code
  • Check Digit Code
  • Bank Identifier Code
  • Branch Code
  • Bank Account Number

Basic Bank Account Numbers (BBANs) are composed of the last three numbers (bank, branch, and account) and are used to identify banks. While the number of digits may vary from country to country, the IBAN format is always the same. As an example, Norway uses 15 characters, whereas Liechtenstein uses 21. Any country can use a maximum of 34.

Most European Union countries, as well as other European countries, use the IBAN method. When in doubt about an international transfer, contact your bank.

Examples of IBAN

Here are a few examples of countries that currently use an IBAN code:

  • In Albania, the IBAN is AL47 2121 1009 0000 0002 3569 87411. 
  • The Luxembourg IBAN is LU 28 001 94006447500003
  • In Cyprus: CY 17 002 00128 00000012005276002
  • In Norway: NO 93 8601 1117947
  • In Kuwait: KW81CBKU0000000000001234560101

Overview On IBAN

The IBAN developed out of diverging national standards for bank account identification. Payments contain many alphanumeric representations that may result in misinterpretations and omitting vital information.

In 1997, the International Organization for Standardization (ISO) published ISO 13616:1997 to smooth out this process. ECBS published a minor version after the ISO was deemed impractical, believing the original flexibility was unworkable. The ECBS allowed only uppercase letters and a fixed-length IBAN for each country.  

A new version, ISO 13616:2003, has replaced the original ECBS version since 1997. In 2007, a subsequent version stipulated that IBAN elements should facilitate international data processing in financial environments and other industries; however, no internal procedures are specified, such as how to organise files, store data, or what languages to use.

Also Read: What are the Different Digital Payment Methods?

Process Of IBAN 

Further, you will need an IBAN if your beneficiary's bank is located in a country that participates in the International Bank Account Number system.

To instruct the payment, enter the beneficiary's account number without spaces in the field reserved for it. Besides the IBAN, you also need the following information:

  • Account Name
  • SWIFT or BIC Code

Your bank may ask you for additional information, such as the name of the beneficiary's bank, the address of the beneficiary's bank, and the beneficiary's address.

How do IBANs work?

  • Your IBAN is run through your bank's payments system when you make a cross-border transaction. 
  • The system confirms the recipients and sender by checking the numbers and letters against their database. 
  • To prevent and contain account information, unique algorithms are used. 
  • The payment will be processed if it is valid.

Finding Your IBAN

You can find your IBAN by following these tips:

  • Make sure you have a valid debit card! Some countries display IBANs directly on their bank cards, while others don't.
  • Your bank can provide the necessary details if you're in a dedicated region.
  • You can find this information on your bank statement or your bank's mobile banking app. 
  • N26 account holders in Belgium or France, for example, can access their bank IBANs right from the app.

IBANs Role In International Money Transfer

After explaining what an IBAN is, let's explore why it is crucial for international money transfers. An IBAN code is an internationally recognised code that prevents routing errors in international money transfers. Due to the IBAN, the beneficiary account number can be validated reliably.

In the IBAN, all the information needed to identify the account to which payment should be made is included. For example, if A needs to transfer money overseas to B, he can use his IBAN, which contains information such as his country code, bank code, and account number. Doing this allows A to identify B's bank account and send funds to the correct version.

Some countries have not adopted IBAN for their international payment systems. As many European countries do, the Indian government has not yet adopted the IBAN system for overseas monetary transfers. Depending on the country, there is a maximum length of 34 characters for IBANs. Several countries use alternative methods for transferring money internationally.

In India, What is used Instead of an IBAN Number?

SWIFT has been a global payments system, used by more than 11,000 financial institutions and companies around the world, across over 200 countries. In India, SWIFT code is an alphanumeric code comprising bank code, country code, location code and specific branch code. A SWIFT code (Society for Worldwide Interbank Financial Telecommunications) identifies international bank transfers. SWIFT codes are used to identify banks where payees have accounts. IBAN has not been adopted by India but many other countries use it for their international payments systems.

Also Read: UPI Payment Apps: List of Apps That Allow UPI Payments

Difference Between IBAN and SWIFT Code

When a transfer is made from one country to another, two internationally recognised and standardised methods are used to identify bank accounts: 

  • The International Bank Account Number (IBAN) and 
  • The SWIFT code

Both ways identify different things, but there is a difference between them. 

SWIFT codes are used to identify banks in international transactions, while IBAN codes are used to identify individual accounts. Global financial markets depend on both to function smoothly. 

IBAN is not the first attempt at standardising international banking transactions. SWIFT predates this attempt. The majority of global funds are transferred using this method. SWIFT messaging allows banks to share a large amount of financial data, which is one of the main reasons for this.  

 A description of the account status, debit and credit amounts, and money transfer details are included in this data. The bank identifier code (BIC) is often used instead of the SWIFT code by banks. Both are easily interchangeable; both contain a mix of letters and numbers and are generally eight to eleven characters long.

How Safe Is An IBAN?

The finance regulators in Eurozone consider IBANs a safe way to transfer funds and routinely use them for international payments. Eurozone is a geographic area that consists of the European Union (EU) countries that have fully incorporated the euro as their national currency.  It is impossible to withdraw money from your account or transfer funds without using your IBAN, which is a crucial security benefit. As a result, your funds are secure.

Conclusion

Even though IBAN has not yet been introduced in India, it is safe to say you can make great use of it if your family is spread out worldwide. NRIs residing in the UK who have children studying in France or Germany will require the IBANs to make payments to their accounts in those countries. It is more convenient and hassle-free to remit money with IBAN. 
Follow Khatabook for the latest updates, new blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and account. 

FAQs

Q: What is the process for transferring money from an IBAN?

Ans:

The recipient needs to know the IBAN code before you transfer money. An IBAN must have the same number of characters within a given country, no matter how long it is. The length of the IBAN depends on the country where it is opened.

Q: Is it possible to find the SWIFT code from the IBAN?

Ans:

Despite the similar information and formatting, an IBAN cannot be used to find a SWIFT code. Regardless of where your IBAN is displayed, you will never be far from your BIC or SWIFT code.

Q: What is the reason for my invalid IBAN?

Ans:

If the IBAN you're entering in Bankline does not accept it, double-check that you've entered the information correctly and try again. Check with the beneficiary to ensure the information is correct if it's still not working.

Q: Is it possible to change my IBAN?

Ans:

Visit the Expatrio User Portal. Select the Blocked Account section on the left side of the menu. Click "Request IBAN change" on the right and enter the new IBAN and BIC.

Q: Can I share my IBAN with others?

Ans:

Providing your IBAN is not dangerous since banks require it when setting up a transfer or direct debit. It is entirely secure for a bank to use this code.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.