IBAN (international bank account number)

IBAN (international bank account number)

IBAN The abbreviation IBAN stands for International bank account number. It is an international bank account number formed in accordance with ISO 13616 standard. This standard is officially supported by the Society for Worldwide Interbank Financial Telecommunications (SWIFT).

The large number of cross-border financial transactions has led to the need to unify and standardise banking procedures. For this purpose, a special system of labelling details was developed.

It was initially used to simplify and speed up payment processing only in the European Union (EU) and EEA countries, but is now being used outside them as well, for example, in Kazakhstan, Belarus, Ukraine, Moldova, Georgia, Azerbaijan, the United Arab Emirates, etc.

IBAN allows you to quickly identify the country, financial institution and payees (beneficiaries) in any currency.

Most states set their own number length, but the total number of characters should be no more than 34 capital Latin letters and digits.

  • First, the letter marker of the state in which the beneficiary’s financial and credit institution is located (one or two characters);
  • the next pair of symbols is a unique control number calculated from the rest of the IBAN symbols;
  • then the first four characters of the BIC (identification code).

The rest of the IBAN may contain additional data in varying sequence, which varies from state to state:

  • bank branch prefix,
  • customer account number,
  • his type,
  • balancing account number,
  • currency,
  • check characters.

With this data, the money transfer operator can quickly and accurately find the recipient.

For ease of perception, the identification number is usually written with spaces after every four characters. For example, the IBAN of France consists of 27 characters and has the form:

FRkkk bbbb bggg ggcc cccc cccc cxx,

where

  • FR is the ISO code of the state,
  • kk – control figures,
  • bbbbb is the national code of the bank,
  • ggggggg is the branch identifier,
  • ccccccccccccccccccccccccc – account number,
  • xx – check characters.

And this is what the French aiban looks like with the variables substituted:

FR14 2004 1010 0505 0001 3M02 606

(this is just an example, each bank account is unique).

Important: in payment documents IBAN is always entered without spaces and extraneous symbols.

The IBANs of some participants in the system do not have verification characters, but they have other information that may not be present in the codes of other countries. For example, to send funds to Iceland, the owner’s national identification number is specified, and to Guatemala, the account type is specified.

What is the IBAN number for

Since 2007, EU financial organisations have been entitled to refuse to accept payments if the IBAN-code is missing from the payment order. In addition, if a transaction is rejected, banks may charge a fee for the return of funds – and this is quite common practice.

Using the international format simplifies filling out documents (less data is required), speeds up and reduces the cost of payment processing, and eliminates the possibility of inaccurate crediting of funds.

History of IBAN creation

The history of IBAN (International Bank Account Number) dates back to the early 1990s and is part of a broad desire to unify and simplify international financial transactions.

  1. Background and need: Before the introduction of IBAN, international payments were relatively complex and error-prone due to differences in national bank account standards. This resulted in delays and additional costs for banks and their customers. There was a need for a standardised and reliable system to facilitate these transactions.
  2. Standard development: In response to these problems, the European Committee on Banking Standards (ECBS) and the International Organisation for Standardisation (ISO) began work on a unified account number. In 1997, ISO 13616 was published, which was the first version of
  3. IBAN structure: The IBAN was designed to be a unique bank account identifier that can be recognised and processed worldwide. It consists of a country code, check digits, and unique bank account details that vary from country to country.
  4. Implementation in Europe: After the introduction of the standard, European Union countries began to actively implement IBAN, especially after the launch of the Single Euro Payments Area (SEPA), which required the use of IBAN for all cross-border and national euro payments.
  5. Global diffusion: With the passage of time and proving its effectiveness in Europe, IBAN began to spread to other countries around the world. Banks operating internationally realised the benefits of unification and began to support the standard, which contributed to its international acceptance and use.
  6. Continuous evolution: The IBAN standard continues to evolve over time, including updates to improve reliability and ensure compatibility with new banking technologies and systems. Regular updates to ISO 13616 ensure that the standard remains relevant and effective.

IBAN has played a key role in simplifying and speeding up international payments, significantly reducing the likelihood of errors and delays. It has become an important element of the global financial infrastructure, facilitating closer integration and co-operation between banks and countries around the world.

IBAN format

The IBAN format consists of a maximum of 34 characters, including a two-letter country code, two check digits and the main account number. For example, for an account in Germany, the IBA format would look like this: DE89370400440532013000.

In which countries IBAN is used

IBAN (International Bank Account Number) is widely used in many countries around the world, primarily in Europe, but also outside Europe. Here are the main regions and countries where IBAN is actively used:

  1. Europe: Almost all European countries use IBAN, including all countries in the European Union and the European Economic Area. This includes, among others, Germany, France, Italy, Spain, the UK, and the Scandinavian countries. IBAN is particularly important in the context of the Single Euro Payments Area (SEPA), where it is the standard for all banking transactions.
  2. Middle East and North Africa: Many countries in this region have also adopted IBAN, including Saudi Arabia, UAE, Qatar, Lebanon, and Tunisia.
  3. Other regions: Some countries outside Europe and the Middle East also use IBAN, including Kazakhstan, Mauritius, and Seychelles.

It is important to note that the list of countries using IBAN is subject to change as new countries adopt the standard or change their banking systems. Some countries have fully implemented IBAN, while others may only use it for certain types of transactions or at certain financial institutions.

For the most up-to-date and accurate information on countries using IBANs, it is recommended to check the data with international financial organisations such as SWIFT or with the national banks and financial regulators of the respective countries.

What is IBAN

IBAN (International Bank Account Number) is an international account number of the recipient of funds and contains the following consecutive elements:

  •  the two-letter country code (capital letters of the Latin alphabet are used) where the bank or branch where the beneficiary’s account is located;
  •  two benchmarks;
  •  the beneficiary’s main bank account number: a sequence of letters and digits without separators, up to 30 characters. The length of the main bank account number is fixed for each country. The main bank account number includes the identification code of the bank or branch where the beneficiary’s account is opened.

Important! When sending payments in favour of recipients whose accounts are opened in credit institutions of the European Union, United Arab Emirates or other countries that use accounts in IBAN format, it is obligatory to specify IBAN. If the recipient’s IBAN is not specified / is specified incorrectly or the recipient’s account number is not in IBAN format, the application for transfer in foreign currency will be executed. However, in this case, the Bank is not responsible for possible return of payment by the beneficiary’s bank and withholding of additional commission from the transfer amount by third-party banks.

How a financial company can provide its customer with an individual IBAN number

A financial services company can provide personalised IBAN numbers to its customers through several key methods, while ensuring security and ease of use:

  1. Co-operation with banks: Financial companies often co-operate with traditional banks or other financial institutions that have the ability to issue IBANs. In this approach, the company updates its customers’ accounts with the assigned IBANs provided by the partner bank.
  2. Licensing as a bank or payment institution: Some financial companies may obtain a bank licence or EMI licence in Europe which allows them to issue IBAN numbers independently. This process requires considerable effort and compliance with regulatory requirements, but provides greater autonomy and control.
  3. Adoption of specialised platforms: Financial companies can use specialised platforms and technologies that integrate with banking systems to manage and assign IBANs. These platforms can automate the process of issuing and managing IBANs, ensuring efficiency and reducing errors.
  4. Use of APIs: Modern financial services companies can integrate their systems with banking APIs that allow IBANs to be issued and managed dynamically and in real time. This provides flexibility and quick response to customer requests.
  5. Personalisation and security: When providing individual IBANs, financial companies must also provide a high level of security and personalisation. This includes identity verification, transaction monitoring and fraud protection to ensure that customers’ accounts and funds are protected.
  6. Multi-currency account support: To serve customers with international operations, financial companies can provide IBANs that support multi-currency accounts, thereby facilitating international transactions and currency conversions.

Providing an individual IBAN to each customer requires a financial company to comply with regulatory requirements, provide a high level of technological infrastructure and reliable customer support. This ensures reliability, security and convenience for users when making international payments and other financial transactions.

What IBAN is needed for

Firstly, IBAN helps to reduce the risk of errors when making international payments. Thanks to its strict structure, including country code, check digits, and unique bank account details, the likelihood of funds being mistakenly transferred to the wrong account is greatly reduced.

Second, IBAN speeds up payment processing because banks can automatically verify its validity before processing transactions. This reduces delays associated with manual data verification and the possibility of refunds due to errors in details.

Also, the use of IBAN contributes to the unification of banking standards, simplifying the interaction between banks in different countries. This is especially important within the European Economic Area, where IBAN is actively used to ensure the efficiency and reliability of cross-border payments.

It is important to note that the use of IBAN alone does not guarantee complete transaction security, but it is a key element in a comprehensive international payment protection system. Users should also pay attention to other security aspects, such as credential protection and reputation verification of the receiving bank.

The new structure of accounts reduces the described risks, allows to check the correctness of the number before making a transaction.The speed and accuracy of operations is increased:

  1. By implementing technologies that work without human intervention. Straight-through processing (STP) provides this opportunity.
  2. By joining already existing global payment systems.

Both the first and second cases require new software that does not work with old banking standards, including 13-digit numbered accounts.

The new system is particularly favourable:

  • In the short term, to banks. Because of the acceleration of work and increasing its reliability.
  • Enterprises that regularly work with counterparties in the European Union and other countries that have adopted IBAN.
  • Organisations hoping for foreign investment. Not only because payments to them will become easier and faster, but also because the money circulation system will become clearer to foreigners.

In conclusion, IBAN serves as an important tool in the international financial system, providing standardisation, reducing errors and speeding up the processing of international payments. Its use contributes to the efficiency and security of cross-border financial transactions.

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