In one of our previous articles, we already briefly discussed the necessity of an IBAN and how to obtain one. Today, we will cover this topic in more detail. In this article, we will explain how IBANs work and the differences between an IBAN and a SWIFT code.
What is an IBAN?
An IBAN or International Bank Account Number is an internationally recognized bank account number that can be used for transactions between different countries. Usually, an IBAN is used by banks that provide transactions including e-payments on an international level. Nowadays, an e-wallet or e-account with an IBAN can be opened in more than 70 countries. If you open an account or issue a prepaid or credit card, including virtual ones in EU countries, you will receive an IBAN for it. However, many countries including the US, China and Japan do not use the IBAN system for personal or business accounts. The IBAN is structured and its format of up to 34 letters and numbers has been agreed upon internationally. The characters that make up an IBAN for an e-wallet or e-account are broken down as follows:
- Country code: 2 letters.
- Control code: 2 numbers.
- Remaining symbols: up to 30 letters and numbers denoting the domestic bank identifier and account number.
As an example, if you open an IBAN account online in the UK, your International Bank Account Number may look something like this: GB33GEKV54846195463. You can find other examples of IBANs for different countries on this page.
How Do International Bank Account Numbers work?
Suppose you are planning to use your prepaid card with an IBAN to pay for services to a foreign company with a dedicated Euro IBAN account. Making the international payment using an IBAN is a fairly simple process that consists of several steps:
- Visit your local branch. An international payment can also be made online or over the phone.
- Ensure that you have all the required information (beneficiary’s name and address, their account’s IBAN, name and address of the beneficiary’s bank, their SWIFT/BIC number) and the amount you want to transfer.
- Make the payment and wait for confirmation of its success.
Differences between an IBAN and a SWIFT code
Both IBAN and SWIFT (or BIC) are banking standards that are internationally recognized. Before issuing a free virtual card you may still be confused by the differences between these abbreviations. Here are a few points that distinguish them:
- The SWIFT system was created before IBAN and today covers more than 200 countries.
- An IBAN identifies an individual account at a particular bank in a specific country. A SWIFT code identifies a financial institution in an international transaction. However, an IBAN and a SWIFT code actually complement each other when making payments between countries that use the IBAN system.
- Unlike a SWIFT code, IBANs are not centrally assigned. They are issued by banks and the format is outlined here.
- An IBAN has a maximum of 30 characters, while a SWIFT code has 8 or 11.
- An IBAN is provided to locate a recipient’s bank account, while a SWIFT code is required to process a transaction.
We hope that you now have all the essential information you need to know about IBAN. At PayFasto, we also provide payment services for business accounts with International Bank Account Numbers. If you are planning to open one, our team is always on hand to provide you with the best services for your business. If you have any questions, please don’t hesitate to ask us for assistance.