The International Bank Account Number Iban Explained

The International Bank Account Number, or IBAN, is now a common feature of European Payments. Designed to standardise and simplify the transfer of international payments, it is a unique number that identifies individual bank accounts no matter with which bank the account is held, or in which country. The IBAN is also set down in European Law to force all member nations to take up the formatting.

In many ways the name International Bank Account Number is a misnomer, it is not a new account number. It is purely a standard formatting of account numbers to identify bank accounts across national borders and minimise errors and delays. Currently that it is all it is. The IBAN cannot be used for routing and payments still require the use of SWIFT or BIC codes to make payments. Routing though is the EU ideal, if or when the Single European Payment Area (SEPA) becomes reality.

Routing will though require a worldwide take up of the IBAN system. At the moment it is limited to the 25 EU member states, Turkey, plus Iceland, Liechtenstein, Norway and Switzerland, and some African nations

The standardised format of the IBAN consists of a two letter country code followed by a two digit number. The country code is vital as in addition to showing the country issuing the IBAN, it also regulates the structure of the account number that follows. Following these first four digits is an alphanumeric code, the BBAN (basic bank Account Number. The BBAN can be up to 30 digits in length. Each nation’s banking community will decide on how many digits their country will use.

I have included two sample IBANs to show the standard formats from two different countries.

The first of these is GB54BARC20102312345678-
GB is the two letter country code for Great Britain. 54 is the two digit check number. BARC is the alphanumeric code identifying the British Bank, Britain uses the first four characters of the BIC code. The last fourteen digits are the bank account sort code and account number.

The second example is AT611904300234573201-
AT is the two letter country code for Austria. 61 is the two digit check number. 1904 is the alphanumeric code and then there is twelve digits making up the Austrian bank account details.

These two examples show the standardised format of the IBAN, but equally show that the differences in appearance between countries. The differing length of the IBANs is the most striking of the anomalies.

It should also be noted that it is common practice to show the IBAN in printed format with breaks e.g. IBAN GB54 BARC 2010 2312 345678, though in electronic format it will be compressed. Bank customers do not need to worry about this as bank systems will regulate the input to ensure that the IBAN has been input in the correct format.

To make a Euro payment it is necessary to quote the IBAN and SWIFTBIC (Bank Identifier Code) for all countries previously stated. As well as an improved service, with less chance of a payment being misapplied, customers may also received reduced charges for making the payment. Some UK banks currently do not charge for payments under EUR 50,000 when the correct IBAN and SWIFTBIC are used.

Most banks now have websites where you can find out your own IBAN number, although if you look closely at your statements it should be printed on them as well. There are also numerous websites that are available to check whether the format of an IBAN received on an invoice is correct; although these will not be able to tell whether the account number itself is correct.

In essence the IBAN adds little to the payment process currently. It is though a future step to the safe routing of all payments in a standardised format. In the event that there is a Single European Payment Area in the future, IBANs will enable the safe, speedy and secure payment of funds.