What is IBAN? All You Need to Know

Ryan Patrick

• 6 min read
What is IBAN? All You Need to Know

As a business owner making international payments, you need IBAN to make payments within Europe. But what exactly is an IBAN? How is it structured? What is its purpose? This blog explains everything you need about IBAN's structure and where to get an IBAN account.

What's IBAN?

An IBAN means an International Bank Account Number is a standardised international bank account number. This unique number identifies your bank account. It identifies your name and account country. You need an IBAN anytime you want to receive an international payment from an individual in the EU or other countries using IBAN. More than seventy countries are using IBAN, but so many aren't. Countries that don't use IBAN include:

  • Canada
  • USA
  • China, which uses the SWIFT code or BIC

The countries that use IBAN include:

  • Andorra
  • Switzerland
  • Cyprus
  • Dominican Republic
  • Serbia
  • the United Arab Emirates
  • Germany
  • The UK
  • Luxembourg
  • the Seychelles
  • British Virgin Islands
  • etc

Most European banks need you to provide your IBAN and BIC for international payments. When you receive a payment within IBAN, the bank checks the numbers. If the IBAN structure is valid for payment, the recipient bank will receive the payment within minutes. You will need an IBAN when making payments by direct debit. You can make instant transfers with IBAN, but it may take up to two days for the money to be credited to the receiver's account.

The transaction won't be successful if you pay an IBAN that doesn't exist. But if you send the money to an incorrect IBAN that exists but belongs to the wrong person, they will receive the money. So, contacting your bank is advisable to cancel the transfer immediately. The recipient is not supposed to return the money.

IBAN Structure Explained

An IBAN differs depending on your country. In some countries, it is a mixture of numbers and letters, 34 digits. This number can have up to 34 digits, but the UK IBAN consists of 22 digits. The first two letters of the code are country codes; for example, the UK is GB, France is FR, and DE for Germany. The two digits are called the IBAN checksum, followed by the two-digit check number and your country account code, or the Basic Bank Account Number.

The check number helps identify your checking account and prevent mistakes when transferring money if you enter the IBAN incorrectly. The account code comprises the sort code and the account number. The European Committee for Banking Standards (ECBS) sets the rules for IBAN structure.

Example of a UK IBAN

Country code

Digit code

Bank identifier code

Sort code or branch code

Account number

GB

14

STYX

204345

26643278

Other countries' IBAN example

  • Albania: AL37 2323 1009 0000 0002 3569 87411
  • Norway: NO 95 8601 1117947
  • Kuwait: KW71CBKU0000000000001234560101
  • Luxembourg: LU 48 001 94006447500003
  • Cyprus: CY 19 002 00128 00000012005276002

How can I use IBAN to Find the Account Number?

The structure of IBAN is the same, meaning finding the account number is easy. If you have an account of less than ten digits, zeros will be added at the start of the number to fill in the missing numbers. If you cannot find your IBAN, check it at your online banking site. Alternatively, you can locate it at your bank or calculate your IBAN structure using an online calculator. You can also find your IBAN on your Bank card.

Additionally, if you want to ensure your IBAN is correct when making a bank credit transfer, use an online validation tool. However, many banks do IBAN verification as part of the online bank money transfer process, and you can also take advantage of IBAN calculators on your Bank webpage.

How can I Tell Which Bank My IBAN Belongs to?

There is a simple method to determine the bank associated with an IBAN: after the two-digit country code and two check digits, the sort code follows, beginning from the fifth digit of the IBAN. This sort code acts as a distinctive identifier for your bank.

Is IBAN Safe?

Using IBAN to make international payments is considered safe by European finance regulators. The main benefit of this number is that customers can transfer money into your account using your IBAN, but they can't withdraw or transfer the funds from your account. This means there's no risk of losing your money.

Can I use Multiple IBANs for the Same Account?

You can have multiple IBANs for one bank account, especially when dealing with different currencies. However, your bank must decide whether to issue you multiple IBANs for your account.

Are there Restrictions on the Number of Transactions I can make with my IBAN?

There may be restrictions on the number of transactions you can make with your IBAN, but this depends on your bank and account terms and conditions. Some accounts limit the number of deposits, transfers, and withdrawals you can make in a specific time.

What is the Difference Between IBAN and My Account Number?

Your account number and IBAN are not the same. While you use your sort code and account number for domestic transactions, your IBAN is strictly for international transfers. It's important to note that an IBAN is distinguishable from your UK bank account number. Remember, the IBAN begins with two letters, whereas your account number consists of an eight-digit number that forms a portion of your IBAN.

IBAN Vs. BIC

BIC or Bank Identifier Code is a term for a SWIFT code. That is why you may find the term paired as SWIFT/BIC. In technical terms, international transfers are facilitated through the SWIFT network, with the identifying codes being BIC codes.

An IBAN specifies a bank's country of operation and an individual's exact account number within that bank. A BIC provides further details to facilitate transactions. It is made of alphanumeric characters, including

  • A 4-letter bank code,
  • A 2-letter country code
  • A branch identifier consisting of one letter and one number.

A BIC is crucial in preventing additional costs associated with correcting a misrouted wire transfer after the transaction.

IBAN Vs. SEPA

SEPA, or the Single Euro Payment Area, is a European network payment providing digital transfers in the EU. SEPA is available in countries like the UK, Spain, Hungary, etc. It also covers countries outside the EU, like Switzerland, Iceland, Norway, and Liechtenstein, just like IBAN SEPA, which is overseen by ECBS and helps set the business identifier codes.

SEPA works in 28 countries, while IBAN works in over 70 countries. Another significant difference between IBAN and SEPA is you can use different currencies in IBAN, but only EURO is used in the SEPA network.

Can I Cancel my IBAN?

If you want to cancel your IBAN, contact your bank and follow the account closure procedures. The process may include clearing outstanding fees, providing written notice, and returning account materials like cards.

Can I manage IBAN Using a Mobile App?

Many banks in the EU offer mobile apps to manage your account. You can use the apps to transfer funds, monitor account activities, and check your account balances.

What is IBAN's Purpose?

Before the European countries adopted IBAN, they had different account number formats, leading to errors when transferring funds abroad. On many occasions, international payments ended up with the wrong individual and location, incurring extra fees and taking a long time to resolve the mistake. 1997, the International Organisation for Standardisation developed a new international money movement system.

This International Standard is referred to as ISO 13616-2:2007 today.

Advantages of IBAN

Businesses need to have payments that aren't interrupted, whether locally or outside Europe, no matter where they operate. Instead of looking for a bank that would suit your international transfers, IBAN offers a solution that provides these benefits.

  • Reduce payment processing time.
  • High-level convenience when making payments
  • You can make bulk international payments
  • Use of multiple currencies
  • Direct payment to a company within the European Union
  • Cost reduction associated with maintaining different bank accounts and cash transfers between them
  • Allow other financial institutions to note the county origin of the fund sender
  • IBAN shows the exact account number where you will send the money
  • It is easier to double-check the bank details accuracy to ensure the transfer is successful

Is it Costly to use IBAN?

How much of the transfer fee you will use for your international money transfer using IBAN depends on the exchange rate and your country. But you will be charged commission charges and the processing fee.

Final Thought

IBAN is a unique business identifier code that helps ensure smooth international payments in over 70 countries. It provides a standard way to identify bank accounts worldwide. It simplifies transactions by making them quicker and less prone to mistakes. IBAN's benefits, like convenience and support for different currencies, make it an excellent choice for businesses and individuals dealing with global transactions.

Do you want to register a company in the UK and start trading globally using IBAN? At Incorpuk we’re at the forefront, helping many UK residents and non-residents register companies in the UK. Explore the EU market and maximise the chances of your company's growth.