What is an IBAN?

IBAN is a standard international numbering system used to identify individual bank accounts in cross-border payments.

Link to the author's page
November 20, 2023
Link to the author's page
What is an IBAN?

When dealing with international companies, you need to know how to send and receive cross-border payments properly. That’s because some countries require IBAN using an IBAN number. 

As of July 2023, 86 countries were using the IBAN number system, so it’s important you get up to speed on how this number can help your business make faster, more accurate payments.

This page will explain how IBAN numbers work, how to find yours, and how IBAN differs from SWIFT/BIC codes. We’ll also explain how Checkout.com can help your business leverage the IBAN system.

What does IBAN stand for?

IBAN stands for International Bank Account Number. It’s a standard international numbering system used to identify individual bank accounts in cross-border payments. It doesn’t replace a bank’s own account number, but rather provides more information that helps the identification of overseas transactions.

What is an IBAN in banking?

IBAN, or International Bank Account Number, is an identifier code used to make or receive international payments. An IBAN number starts with a two-digit country code, then two check digits, followed by up to 35 characters for the Basic Bank Account Number (BBAN). Each country chooses a BBAN format to signify its national standard for domestic payments.

Your IBAN is different from your regular bank account number and sort code. Instead, it’s  used specifically for identifying your bank from overseas so you can send or receive international payments. You can also use IBAN as a method to verify whether transaction details are correct.

IBANs are mostly reserved for European countries, but it’s different from the Single Euro Payment Area (SEPA), which is a payment network in Europe that only processes Euros.

It’s worth noting that the US and Canada don’t use the IBAN system, but they do recognize the system and process payments according to the IBAN rules.

How to find an IBAN number

To find your IBAN, follow these simple steps:

  1. Check online banking – login to your online banking and find the account information section, which will feature your IBAN.
  2. Check your statements – your IBAN is usually found on your bank statements, next to your account information and sort code.
  3. Contact your bank – reach out to your bank if you can’t find your IBAN using the above two methods.

Example of an IBAN number

IBAN numbers feature a two-letter country code, two check digits, then up to 35 alphanumeric characters. Below are some examples of IBAN numbers from different countries:

Austria: AT 20 AT483200000012345864

Belgium: BE 16 BE71096123456769

Bulgaria: BG 22 BG18RZBBB91550123456789

Kuwait: KW 81CBKU0000000000001234560101

Here’s a more detailed breakdown of the IBAN number examples:

  • Country code – each nation has one code that identifies its country, known as the ISO (International Organization for Standardization) country code.
  • Check digits – the issuing financial institution provides the check digits.
  • Bank identifier –this code identifies the financial institution, and may specify the branch within that institution.
  • BBAN – the Basic Bank Account Number identifies the individual account at a specific financial institution within a specific country.

Why is an IBAN number necessary?

You need an IBAN for cross-border payments to a payee whose bank is part of the IBAN system. For international or SWIFT transactions, you must provide the payee’s IBAN – along with their name and address – to ensure the funds reach the correct bank account.

When initiating the payment, you must enter the IBAN in the designated field for the payee’s account number, without any spaces. If you enter the wrong IBAN, your payment will be rejected by the payee’s bank, while your bank will also charge you a fee to retrieve it. 

Depending on your bank, you might also be asked for additional information such as the payee’s bank name, the bank's address, and the payee’s address.

Before IBAN numbers were around, different European countries used differing formats for bank account numbers, which often led to errors in cross-border transactions, causing payments to end up in the wrong destination, incurring additional fees and time to rectify.

In 1997, the International Organization for Standardization (ISO) introduced a new global system for money transfers. Today, this standard is recognized as ISO 13616-2:2007.

While IBANS don’t address issues related to foreign exchange rates, the IBAN initiative has resulted in fewer errors in international wire transfers and other financial transactions. With multiple countries now operating under the same system, it’s become more convenient for individuals to send money across different jurisdictions.

Are IBAN and BIC the same?

No. A Bank Identifier Code (BIC) identifies a bank or financial institution in an international transaction, while an IBAN shows an individual account in a specific bank in a given country.

BIC is basically another name for a SWIFT (Society for Worldwide Interbank Financial Telecommunication) code, which is why you often see them together as SWIFT/BIC. The network used for international transfers is called SWIFT, and the codes used are BIC codes.

An IBAN shows which country a bank is in, and your specific account number, while a BIC gives even more detailed information to help with a transaction. It consists of a four-letter bank code, a two-letter country code, and a branch identifier, which is one letter and one number.

Having a BIC is crucial to avoid extra costs that can come from fixing a wire transfer that went to the wrong place.

Is IBAN the same as SWIFT?

No. The key difference lies in what they identify. A SWIFT code is used to identify a specific bank in a cross-border transaction, while IBAN numbers are used to identify an individual account in cross-border transactions. Both help make international payments more seamless.

Unlike BIC/SWIFT codes, IBAN numbers aren’t assigned by a central organization, but are issued by banks according to a regulated format.

Before attempts to standardize international banking with IBAN, the SWIFT system was already in use. It's still the main way most international transfers happen because SWIFT lets banks share a lot of financial information.

This information covers things like account status, money in and out, and specifics about the transfer. Banks commonly use the bank identifier code (BIC) instead of the SWIFT code. They're similar and can be used interchangeably. Both have a combination of letters and numbers, typically between eight to 11 characters long.

How to make international transfers with Checkout.com

As your payments partner, Checkout.com can help your business scale, boost conversions and reduce payment processing costs in all your markets. 

We support over 150 processing currencies, nearly 20 settlement currencies, and domestic processing in nearly 50 countries, meaning international payments have never been easier.

Talk to our sales team about how Checkout.com can help you get faster, more reliable payments in all major markets today.

Stay up-to-date

Get Checkout.com news in your inbox.

Back to top button
November 20, 2023 18:02
November 20, 2023 18:02