Everything You Need To Know About IBAN!

The Internet has revolutionised the banking sector, and it is no hidden secret that we are enjoying this quick and easy payment processing space. Long gone are the days when you had to go to the bank each time for any purpose, stand in a long queue, fill up multiple forms and wait for hours to get your work done. Even depositing or withdrawing money was laborious. But, with the advancement of technology and online remittance facilities, it is now a piece of cake!

It has now become a matter of moments to make bank transfers to anyone you want across every corner of the world. Isn’t that astounding? All you need to provide are some major details, like the bank account details of the beneficiary. For international transactions, one more essential thing you will require is an IBAN. So, let’s dive into what it is and how it helps.

IBAN: What does it mean and stands for?

International Banking Account Number, or IBAN, is a unique identifier used for overseas payments. The IBAN system was originally developed and administered by the European Committee for Banking Sectors (ECB) to simplify international transactions. It was proposed to facilitate the cross border payments and ensure safety and security in the process. 

An IBAN is formed by combining a maximum of 34 characters, all of them indicating varied details. An IBAN architecture has the following components:

  • A two-letter country code, published by the International Organisation for Standardisation (ISO). Its main purpose is to identify the country where the IBAN belongs.
  • Two-digit check number issued by the banks, which enables them to complete the integrity check of an IBAN.
  • An IBAN contains a branch code that has 6 characters.
  • There is a unique identification code in an IBAN that can help to identify the account holder’s bank. This code is made up of 4 digits and is known as the bank code.
  • It also includes the bank account number of the beneficiary which can be up to 30 characters.

The length of an IBAN may vary according to country, but it can never exceed 34 characters. Some countries like France have an IBAN of 27 characters, while in Spain, they have 25.

Which Countries Use IBAN Numbers?

All European Union Countries like Norway, Iceland and a majority of the European Countries use IBAN. Countries like Brazil, Algeria, Pakistan are also among the few validating IBAN verification.

It is worth pointing out that countries like the United States, New Zealand, Australia and Canada do not use the IBAN system.

What role does IBAN play in International Money Transfer?

Having acquired the details of what an IBAN is, we should understand the purpose it serves. 

An IBAN is an internationally recognised code that helps to avert routing errors while making global transactions. It verifies the beneficiary account number with special algorithms, thus letting the transaction occur in a reliable and secured manner.

An IBAN contains all the details of the person to whom the payment is to be made, and hence you can identify the right beneficiary while entering the IBAN without having to cross-check the details. If a person wants to transfer money to someone residing in a different country, he can simply get all the necessary information like his country code, account number, bank code, and branch code from his IBAN. Once you find all the details to be appropriate, you can be assured that you are making the payment to the right person.

Many countries haven’t adopted the IBAN system. It is most popular in European countries. In India, the banks have an IFSC code for domestic money transfers. International money processing differs for several countries and banks in these countries have an alternative way to process payments.

Where can you find your IBAN?

Using the correct IBAN for transactions is crucial to avoid routing your money to an incorrect person or location. If you use the wrong IBAN  while transferring money, it will be transferred to somebody else or you may be penalised for invalid transactions. Thus, finding the right IBAN is of utmost importance. 

You can find your IBAN by simply logging in to your online banking portal and looking for it at the top corner of your bank account statement. There are online tools too that can help you to generate your IBAN. Hence, be careful while using it to ensure successful transactions.

IBAN Vs. SWIFT- Where lies the Difference?

Both of these codes are internationally agreed upon, but they hold some differences when compared. One of the major distinctions between the two is the type of information they convey.

SWIFT is more like an instant messaging system used by international banks in international transactions. The banks use it to communicate transfers easily and securely.

A SWIFT code is used to recognise a bank for an international transaction process, whereas An IBAN is used to recognize an individual account associated with the international transaction. These codes play a vital role in making the overseas transaction process smoother and faster.

With the advancement of technology, worldwide transactions are getting easier day by day. Thus, having an IBAN can be worth it if you want to make cross-border payments quickly and accurately.

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