What Is an International Bank Account Number (IBAN) and How Does It Work

International Bank Account Number

Investopedia / Tara Anand

What Is an International Bank Account Number (IBAN)?

An IBAN, or international bank account number, is a standard international numbering system developed to identify an overseas bank account. The number starts with a two-digit country code, then two numbers, followed by several more alphanumeric characters. Note that an IBAN does not replace a bank's own account numbering, as it’s only meant to provide additional information that helps in identifying overseas payments. 

Key Takeaways

  • An international bank account number (IBAN) is a standard international numbering system for individual bank accounts around the world.
  • Banks in Europe originally developed the system to simplify transactions involving bank accounts from other countries.
  • An IBAN is used to identify an individual account involved in an international transaction.
  • The IBAN also acts as a method of verifying that transaction details are correct.
  • Society for Worldwide Interbank Financial Telecommunication (SWIFT) codes are another form of international identification systems, but they differ because SWIFT codes are used to identify a specific bank during an international transaction.

How International Bank Account Numbers (IBANs) Work

The IBAN number consists of a two-letter country code, followed by two check digits, and up to thirty-five alphanumeric characters. These alphanumeric characters are known as the basic bank account number (BBAN). It is up to the banking association of each country to determine which BBAN they will select as the standard for that country's bank accounts.

An IBAN number will be used when sending interbank transfers or wiring money from one bank to another, especially across international borders. In the register of countries currently using the IBAN system, several examples are as follows:

  • Albania: AL47 2121 1009 0000 0002 3569 8741
  • Cyprus: CY 17 002 00128 0000001200527600
  • Kuwait: KW81CBKU0000000000001234560101
  • Luxembourg: LU 28 001 9400644750000
  • Norway: NO 93 8601 1117947

The U.S. and Canada are two major countries that do not use the IBAN system. However, they recognize the system and process payments according to the system.

IBAN Example

An IBAN is made up of a maximum 34 alphanumeric characters. It is comprised of the following components:

  • Country code: The country code is the ISO (International Organization for Standardization) country code. Countries that participate have one code that designates their country.
  • Check digits: The check digits are provided by the issuing financial institution.
  • Bank identifier: Code that identifies the financial institution. (When appropriate, the bank identifier may also identify the specific branch of the financial institution.)
  • Basic bank account number (BBAN): This is a code that identifies an individual account at a specific financial institution in a specific country.

The chart below shows an example of an IBAN for a hypothetical bank in Finland. The IBAN number would be: FI21 1234 5698 7654 3210.

Country code Check digits Bank Identifier Basic Bank Account Number (BBAN) 
FI 21 123456  9876543210

IBAN vs. SWIFT Codes

There are two internationally recognized, standardized methods of identifying bank accounts when a transfer is being made from one country to another: the International Bank Account Number (IBAN) and the Society for Worldwide Interbank Financial Telecommunication (SWIFT) code. The difference between the two methods lies in what they identify.

A SWIFT code is used to identify a specific bank during an international transaction, whereas IBAN is used to identify an individual account involved in the international transaction. Both play an essential role in the smooth running of the international financial market.

The SWIFT system predates attempts to standardize international banking transactions through IBAN. It remains the method by which the majority of international fund transfers are made. One of the main reasons for this is that the SWIFT messaging system allows banks to share a significant amount of financial data.

This data includes the status of the account, debit and credit amounts, and details related to the money transfer. Banks often use the bank identifier code (BIC) instead of the SWIFT code. However, the two are easily interchangeable; both contain a mix of letters and numbers and are generally between eight and 11 characters in length.

Requirements for International Bank Account Numbers

The IBAN developed out of diverging national standards for bank account identification. Varying uses of alphanumeric forms to represent specific banks, branches, routing codes, and account numbers often led to misinterpretations and/or omissions of critical information from payments.

To smooth this process the International Organization for Standardization (ISO) published ISO 13616:1997 in 1997. Shortly after the European Committee for Banking Standards (ECBS) published a smaller version, believing the original flexibility allowed in the ISO version was unworkable. In the ECBS’s version, they allowed only upper-case letters and a fixed-length IBAN for each country.

Since 1997, a new version, the ISO 13616:2003, replaced the initial ECBS version. A subsequent version in 2007 stipulated that IBAN elements must facilitate the processing of data internationally, in both financial environments and among other industries. However, it does not specify any internal procedures—including, but not limited to, file organization techniques, storage media, or languages.

Who Uses an IBAN?

IBAN was first created to facilitate electronic payments between banks across the Eurozone. Since then, it has expanded worldwide, although not all banks and not all regions have joined the standard and you may still need to rely on an alternative system such as SWIFT. North American, Australian, and Asian countries do not use the IBAN for domestic money transfers, and will only do so when sending a payment to a country that has adopted the IBAN.

Why Was IBAN Created?

IBAN was developed to reduce errors and improve verification of cross-border payments by reducing rejected payments, transfer delays, and associated bank charges and fees.

What Does an IBAN Number Look Like?

An IBAN number contains up to 34 alphanumeric characters. It is prefaced by a two-character country code, two check digits, and a Basic Bank Account Number (BBAN) that contains specific bank and account details. The format of the BBAN portion varies from country to country, which will typically include a bank code and branch code.

How Can I Get an IBAN?

You can request an IBAN if you are a customer of a bank in an IBAN region. Note that an IBAN can only be used to receive payments, and is not used when making withdrawals.

The Bottom Line

An IBAN is only used during international financial transfers/transactions. The latest information states that there are 82 countries using IBAN. If your country doesn't use IBAN, it may use another system, such as SWIFT. Transferring money internationally can be tricky. These systems are designed to reduce issues with international transfers.

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