What Is IBAN Number and Why You Need It To Transfer Money Abroad?

Ever wondered how international money transfer actually works? Have you been surprised at how easy and fast a global money transfer transaction occurs? IBAN a code combining Alphabets and Numbers in a special format is the simplifier behind Outward Remittance transactions. If you have ever sent money abroad, chances are you might have had to provide IBAN number or its other variations such as SWIFT code, BIC or Routing Number. So, let’s take a look at what is IBAN number and why you need it to transfer money abroad.

What is IBAN Number?

An International Bank Account Number (IBAN) is an internationally accepted system by banks in different countries to identify other overseas bank accounts to which the money is transferred. IBAN facilitates a global money transfer with ease. It allows you to exchange the required bank account details in a machine-readable form.

This piece of information identifies the country, the bank, and the particular branch where the bank account is located. As per the IBAN registry, 80 countries have adopted IBAN in their banking system (as of October 2021).

Download the List of IBAN Countries with complete IBAN format

Countries like US, India etc use other variations of IBAN such as SWIFT Code, Routing Number, IFSC Code to receive money from abroad. That is, when an Indian resident wants to send money to a country in Europe, they should be knowing the IBAN Number of the beneficiary. Likewise, when a person in Europe wants to send money to an Indian resident, they should be knowing the beneficiary’s SWIFT Code to transfer money to India.

How Does IBAN Number Help In Money Transfer Abroad?

IBAN has a special alphanumeric architecture. The number of alphanumerics in the IBAN number can range from a minimum of 5 to a maximum of 34. Each number and alphabet in IBAN embeds different details such as country code, bank identification number, bank account number and other data used to process an international payment. The length of the IBAN number depends on the national standards of the country in which it is issued.

A typical IBAN number of a bank account looks like;

IBAN number architecture is formed by many components and now let us see what each of them describes;

1. Country Code: A two-letter code published by the International Organization for Standardization (ISO) to represent a country. It is used to identify the country in which the IBAN was issued and where the IBAN account is held.Eg: GB in the above example represents the United Kingdom as per ISO.
2. Check Number: Check number or digit is calculated by banks for every account holder and its a two-digit number. Check number enables banks to complete an integrity check of the IBAN. Modulo 97 is used to calculate check digits in IBAN.
3. Basic Bank Account Number (BBAN): Contains up to 30 alphanumerics that are country-specific. BBAN is further broken down into 3 components as follows:Bank Code: It is a unique identification code to identify the IBAN account holder’s bank. It is the first four digits of a BIC (Bank Identifier Code). Any branch of the same institution can also be represented by the same bank code irrespective of the geographical location.Sort Code: It is a 6 digit number used by the British banking industry to identify the bank and branch where the account is held.Account Number: It is an 8 digit number that identifies the individual customer’s account to which funds should be transferred.

It is very important to write your IBAN in the proper format to ensure your money reaches the right destination. A wrong IBAN can cost you for an invalid payment. Hence the above-explained architecture is of utmost priority.

Where To Find Your IBAN

Not all countries use IBAN Number in their banking system. Different countries have different codes.

You can make use of this website which calculates the IBAN number of a person based on Country, Bank Code and Account Number.

Calculate your IBAN – iban.com

SWIFT Code/BIC and Routing Number

For example, The United States uses a combination of SWIFT Code and Routing Number to identify its bank, branch and account number. 

SWIFT code is nothing but a set of alphanumerics that identifies a specific bank and branch. It is made up of 8-11 characters and it is also known as Bank Identifier Code or BIC.

US banks also use a Routing Number to identify your specific bank and bank account or the location where your account is. It is used for domestic purposes in the US and is of 9 digits long.

A typical SWIFT code looks like;

Image Source: What is a SWIFT Code? – GOBankingRates.com

IFSC Code

India uses IFSC code instead of IBAN number to receive money from abroad. IFSC is the acronym for Indian Financial System Code, which is an eleven-digit unique alphanumeric code assigned by Reserve Bank of India to identify every bank branch in India.

A typical IFSC code looks like;

Conclusion

IBAN is basically a number that identifies an account holder’s country, bank, branch and account to which the funds transferred internationally are routed to. Not every country has made IBAN as a part of their money transfer system. Others use codes like SWIFT, Routing Number, IFSC etc. All these routing systems are designed to make international money transfers fast, easy and accurate for both banks and people.

Also Read; RBI Rules On Currency Exchange & Money Transfer Abroad

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