What is an IBAN number? [IBAN vs BIC vs SWIFT]

Sending and receiving money across Europe is now easier than you can imagine. All this with a little something called an IBAN number. This number is very specific, though, and it plays some important functions in transferring funds on the continent, and even beyond. 

Let’s find out what IBAN is and how it works!

Table of Contents

1. What is an IBAN?
2. How do IBAN numbers work?
3. How to find your IBAN number?
4. How to get an IBAN number?
5. IBAN vs BIC vs SWIFT

What is an IBAN?

If you’re wondering “what does IBAN stand for?”, the acronym is a shortened version of the words “International Bank Account Number.” It is an alphanumeric number that can have up to 34 characters.

These characters are set out in such a way as to help a financial institution identify an individual, their country, bank as well as bank account number. 

An IBAN number is therefore a “unique identifier” of your account at your bank, which indicates “which bank and country your account belongs to and includes your account number and sort code.”

The verification of IBANs is used across EU countries, EEA countries, and most of the other remaining European countries. However, other countries outside Europe also use it.

These include Brazil, the UAE, Algeria, Lebanon, etc. Meanwhile, the USA and Canada don’t use IBANs, but they do “recognise the system” and process payments accordingly. 

How long is an IBAN number?

This number is an “internationally agreed code” that can be as long as 34 letters and numbers combined to help facilitate financial transfers around the world. Every letter and number represents a different detail. 

How do IBAN numbers work?

This number enables financial institutions to quickly determine the country of the bank where a payment is being transferred. In addition, an IBAN can help specifically identify the exact account number where money will be sent in the country.

As a last function, these numbers help financial institutions double-check the precision of a bank account’s details. All this is done to make sure that a successful transfer takes place, to improve verification of cross-border payments, avoid rejected payments, transfer delays, errors, bank charges, fees, and more. 

Here’s an example of a UK IBAN, which is typically 22 characters long:

• GB: Country code for Great Britain.
• 29: Check digits.
• EXMP: The first four letters of a Bank Identifier Code (BIC) that every bank is assigned. 
• 123456: A sort code to identify the branch of the bank at which an account is held.
• 78901234: The last eight numbers are your bank account number.

How to find your IBAN number?

There are several ways to find your IBAN number. And it’s really important that you use the right one so that you don’t send money to the wrong person, so that you avoid extra charges for failed payments and that the transaction is as accurate as possible. 

You can find it on your bank statement, usually on the top right-hand side, or when you log into your online banking platform. 

There are also IBAN calculator tools, but you can also ask your bank or financial institution to help you locate yours. 

How to get an IBAN number?

Getting one involves becoming a customer of a bank that’s in an IBAN region. It may be important to note at this stage that you can only use it for the receipt of payments and is not used for making withdrawals. 

Create a free merchant account at myPOS and you’ll get an IBAN that works with all multi-currency accounts you decide to create on the platform. Send and receive international bank transfers with no hassle.

Once you have one, be mindful of IBAN discrimination. The term describes a situation in which an institution within SEPA doesn’t accept the international bank account number issued by a payment solution provider and instead requires a domestic or a local code.

IBAN vs BIC vs SWIFT

Is an IBAN number the same as a BIC or SWIFT code? In short, the answer is no. But it’s important to look at the details of each one to determine where the differences lie.

For example, while IBAN and SWIFT are both “internationally recognised”, standardised “methods of identifying bank accounts” when transfers are made between different countries, there is a difference in what they identify. 

For example, the Society for Worldwide Interbank Financial Telecommunication or SWIFT is “used to identify a particular bank” during an international transaction.

Meanwhile, an IBAN identifies an ”individual account” involved in the same transaction. The SWIFT system is one through which we make a majority of international fund transfers. The reason for this is that it uses a messaging system that enables banks to share a large number of financial data.

A Bank Identifier Code (BIC) is usually used interchangeably with a SWIFT code, as both have a mix of letters and numbers that are between eight and 11 characters long. BICs are the codes, whereas the network through which international transfers are sent is called the SWIFT network. 

Conclusion

From reading this post, you now know what an IBAN number is as well as its meaning. It’s important to determine what yours is if you’re expecting to receive a payment from an EEA country. The accuracy of this information will ensure a smoother process of funds transfer and avoid hassles and headaches associated with inaccurate information and details. 

Disclaimer: Please be aware that the contents of this article and the myPOS Blog, in general, should not be interpreted as legal, monetary, tax, or any other kind of professional advice. You should always seek to consult with a professional before taking action, since the particulars of your situation may materially differ from other cases.