What are IBANs?
(August 22, 2020) — Millions, billions, and trillions of money exchange hands everyday between countries through bank transfers. It is but imperative that standard methods should be adopted and recognized internationally to facilitate the smooth flow of money in the international financial market. Two standards are officially recognized and currently are in use.
International Bank Account Number (IBAN)
The International Bank Account Number, or IBAN, facilitates ease of identification of the country where the transacting bank is located and the account number of the one receiving the money transfer. The IBAN implements a method of checking the correctness of the transaction details. IBANs are widely used mostly among European Union countries including Hungary, Liechtenstein, Norway, and Switzerland.
It was in 1997 that the International Organization for Standardization, or ISO, created a systematized standard for IBANS. Too much flexibility within the standardization became a banking concern for Europe’s decision-making and coordinating body, the then European Committee for Banking Standards (ECBS), now known as the European Payments Council,
The revised standard ruled an IBAN requirement for every country to have a fixed numeric length with uppercase letters only. The number starts with a 2-digit country code, followed by 2 numbers, then alphanumeric numbers up to 35. IBANs, however, are not a replacement to a bank’s own account number but, rather, only a means to provide added information that will help identify overseas payments.
For the sake of example, this is how an IBAN looks like:
Italy IBAN IT60X0542811101000000123332
Society for Worldwide Interbank Financial Telecommunication (SWIFT) Code
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) Code is a secure message transmitting network widely used by financial institutions to convey instructions and other information via a standard coding system. Each financial institution is assigned a unique code containing around 8 to 11 characters which enables banks to share important details regarding the money transfer which include account status, debit and credit amounts, and other significant financial data. Since its inception in 1973, the SWIFT system has become the standard method upon which most international fund transfers base their operations.
IBANs and SWIFT codes are essential identifiers required by any bank or financial organization engaging in international transfers that without any or two of which, there would be little or no chance that a money transfer can succeed.
Bank Identifier Code (BIC)
The Bank Identifier Code, or BIC, is used to identify the recipient’s bank in a quick and easy way. The BIC system is owned and administered by SWIFT and they have the same address used by the bank.
There was a time when there were yet no IBANs or SWIFT code sort of things that money transfers were in near chaos. Delays were the norm since confirmations rely on identifying details entered which were either missed or mistaken, incurring costly additionals for both the sending and receiving banks. This lack of a standardized system of payments gave no assurance whether money transfers were correctly sent to the right individuals or entities. Sending countries were also at a quandary as their transacting banks or accounts may not be recognized by recipient countries.
The IBAN and SWIFT systems of identification are crucial methods of streamlining to ensure a robust money transfer industry running flawlessly within the global financial village.
eQAPITAL covers the Italian financial landscape with services ranging from Trust to Custody to Exchange. Give us a call for any financial advice you need from fiat to digital asset account management to secure a digital future.