If you’ve transferred money internationally, you may have heard of IBANs. IBANs, or International Bank Account Numbers, are used worldwide for international and sometimes domestic transactions. But what exactly are these numbers and how do they work? In this post, we’ll be discussing everything you need to know about IBANs.
Read on to learn more or schedule a demo with Dots to learn how you can improve your international payout process.
A Quick Overview
An IBAN (International Bank Account Number) is a unique identifier that can identify a particular international bank account. IBANs help facilitate secure and efficient cross-border transactions. These numbers are composed of up to 34 alphanumeric characters, a country code, check digits, a bank identifier, and a basic bank account number. Let’s take a look at what each of these identifies:
- Country code - The country code defines the particular country in which a bank account is located. Each participating country in the IBAN system has a unique two-letter country code.
- Check digits - The check digits are added by the financial institution issuing the payment. This provides an additional layer of security as well.
- Bank identifier - A code that identifies the financial institution or the branch of a financial institution
- Basic bank account number - A code that identifies the account of the individual receiving the payment
IBANs are one of the best ways to make electronic money transfers between countries. They continue to grow in popularity and are used by more than 70 countries. While there are some countries like the US and Canada that don’t use IBAN, they’re still necessary to send to countries that have adopted the system.
How Does it Work?
IBANs are primarily used to make international payments speedier and simpler. When you send or receive IBAN payments, banks can use the number to make the payment go through quickly. By identifying specific accounts, there’s less confusion and delays in the payment process.
The way IBAN payments are processed is fairly straightforward. When someone initiates an international payment, whether they’re sending or receiving money, the IBAN numbers are received by the bank processing the transaction. The bank can then verify the IBAN and account details of both the sender and recipient. Once the algorithms confirm the numbers match up, the payment is processed.
IBANs payments are secure because they are unique for each individual account and giving out your IBAN number is safe. Since the number is only used to verify accounts, people can’t steal your IBAN number and use them to make payments without your consent.
In short, IBAN numbers allow international transactions to happen securely and efficiently.
Who Uses It?
IBANs are used around the world, especially by banks throughout Europe. Along with Europe, some Middle Eastern and African countries also use the IBAN system. It’s likely that IBAN payments could continue to grow in usage as international commerce becomes more and more accessible.
IBANs can be used for individuals who want to make international payments, as it’s an easy and straightforward way to send money directly to a recipient's bank. With an IBAN, there’s no need to enter individual account details manually, so payments can be made quickly and securely.
IBANs are also commonly used by businesses that need to send or receive payments from customers in multiple countries. It simplifies the accounts payable and receivable process, as there often aren’t any issues or delays when using an IBAN to send or receive a payment internationally.
Individuals, financial institutions, and businesses around the world all use IBANs to conduct international transactions. However, the United States and Canada are notable holdouts in IBAN adoption. However, businesses or individuals in the US or Canada still need to adhere to the IBAN system when sending a payment to a country that has adopted IBAN. Countries that use the IBAN system will not need IBANs to send money to the US or Canada.
Where Can You Find Your IBAN?
If you’re in a country that uses the IBAN system, there are a few different places where you can find your IBAN. Your IBAN will be a unique identifier for your individual bank account. Usually, you can find your IBAN by logging into your online banking account or by visiting your local bank. Here are a few different places you might look for your IBAN:
- Talk to your bank. If you’re in the area, your banker will usually be able to provide you with your IBAN with little issue.
- Check your bank statements or your checks. Some banks will print your IBAN on your checks or on your bank statements. You can also look at your online bank statement to find them.
- Check your debit card. Some banks will have your IBAN printed on your debit card to make it easy to find.
- Log in to your online account or your banking app. There should be an easy place to find your IBAN on your online account or your banking app.
Finding your IBAN shouldn’t usually be a difficult process. Since there’s no danger of someone accessing your funds if they have your IBAN, it’s not highly sensitive information.
If you’re needing someone else’s IBAN to send them money, you will need to ask the recipient to obtain their IBAN for you and give you the number. You can also double-check if you have the right IBAN by asking the bank to validate it or by using an IBAN validation tool online.
Are There Any Fees Associated with Using an IBAN?
There are no fees associated specifically with using an IBAN. An IBAN is simply a way to identify a bank account, so the fees for sending or receiving money will be the same whether you use an IBAN or not. Keep in mind that the fees you pay for sending or receiving money will vary from bank to bank and it may depend on the type of transaction you’re initiating. International payments may also have currency exchange fees, so you’ll need to check with your bank to find out what fees will be charged when transferring money across borders.
How is it Different From SWIFT Codes?
Although they both serve as identifiers, IBANs and SWIFT codes are two different types of banking codes. SWIFT (Society for Worldwide Interbank Financial Telecommunication) codes are used to identify banks and other financial institutions while IBANs are used to identify individual bank accounts. If you’re in the US, SWIFT codes are similar to routing numbers, but are used for international transfers instead of domestic transfers.
A SWIFT code, also called a Bank Identifier Code (BIC), consists of between 8 to 11 alphanumeric characters that identify a particular bank or financial institution. These numbers indicate the country the bank is in, the bank’s location in the country, and the unique identifier for the bank. Some larger banks will have multiple SWIFT codes, with unique codes for each branch. SWIFT codes are not specific to individual accounts and merely identify the bank.
SWIFT codes are used around the world, while IBANs are more widely used in Europe. You can usually find SWIFT codes on your bank statements or on a bank’s website. If the bank is smaller, they may not have their SWIFT codes readily available online. You may need to call these banks to obtain the SWIFT code for transfers.
What are the Requirements?
Generally, the requirements for using IBAN codes are pretty straightforward. First, the bank you’re transferring money to must be an IBAN-compliant financial institution. Not all banks are IBAN-compliant, so you’ll need to check with the bank first. Generally, banks in Europe are IBAN compliant. You will need to use SWIFT codes if you’re sending money to the US, Canada, or other countries that aren’t IBAN-compliant.
Second, you will need to ensure you have the right IBAN for the person you’re sending a payment. You don’t want to send money to the wrong IBAN, so make sure you verify the information with the recipient. As mentioned, you can also usually verify an IBAN with an online verification too,l or by talking to the bank and asking them to validate the IBAN. If you’re the recipient of the money, you can follow the steps outlined above to find your IBAN.
Finally, some banks may require you to provide additional information along the IBAN to process the transfer. These details are usually fairly general, such as the full name of the recipient. Once the information the bank requires is provided, the transfer can be initiated, and the funds will be processed securely through the IBAN system.
How Safe is It?
As with any process that involves money, people and businesses want to have peace of mind. If you’re wondering if IBAN transfers are safe and secure, you can rest easy. The IBAN system is used on a regular basis by millions of people worldwide and is considered safe and secure by financial governing bodies. It is a trusted system for sending and receiving money to other IBAN-compliant countries.
Also, since IBAN numbers are unique to each individual account, it is easy to track these transactions and ensure funds have been transferred. An additional security benefit is the fact that you typically don’t have to enter any other specific financial information. Providing your IBAN and basic identifying information is usually enough to send or receive an IBAN transfer. This helps reduce the risk of accidentally sharing sensitive information.
IBAN numbers also provide a key benefit of only allowing people to send money to an IBAN number. No one can withdraw money from your account or transfer money to their own account with just your IBAN number.
The IBAN system is a secure and trusted way to send funds internationally. Individuals and businesses can feel safe sending or receiving funds through the IBAN system.
If you’re looking for a frictionless, secure and efficient way to send international payouts, Dots can help.
Simplify Your Payouts With the Dots API
Businesses that need to pay international contractors and freelancers typically have to deal with the hassle of an inefficient payout system. International contractors want to have options when choosing how they’re paid, but building a payout infrastructure with multiple payment rails can be time-consuming and difficult. With Dots, it doesn’t have to be.
The Dots API allows you to add multiple payment rails to your payout workflows with minimal code. This allows your payees to choose their preferred form of payment without any extra effort on your part. This is invaluable for businesses that work with international contractors. You can offer the payout option their country uses most, while also allowing them to get paid in their local currency. Even better, Dots also takes care of KYC, KYB, and compliance measures for paying your international contractors. Dots even collects and generates your tax forms for international payouts.
Of course, Dots can also be used for domestic payout workflows too. In short, the Dots API is the best way to automate your payouts wherever you do business. Ready to learn more? Schedule a demo with Dots today to see how we can change your payout infrastructure for the better.