IBANs, BICs and SWIFT explained

IBANs make the transfer of funds between different countries more efficient and inexpensive since they are usually STP. The main benefit of using IBAN particularly in Europe is that cross border transfers in Euros are fast, and free (or low cost)*, whereas previously they were often expensive and slow. The IBAN and BIC codes of the beneficiary must be used, and the sender pays their own bank transfer costs (if any). As cross-border payments in Euros using IBAN and BIC codes within the EU must now be charged the same fees as domestic transfers, the costs at either end of the IBAN transfer are usually either free or relatively inexpensive.

IBAN was first introduced in Europe prior to the introduction of the Euro currency to improve the speed and efficiency of cross border payments. IBAN and BIC codes are printed on all bank statements issued within the EU and EEA. IBAN will be introduced in other countries with the exception of the United States of America, as their archaic interbank payment system isn’t up to international banking standards. IBAN is currently not available in Canada, Japan, Australia, or New Zealand.

Banks (particularly European ones) take security very seriously and IBAN account details alone are not sufficient to debit, withdraw or transfer funds out from a bank account; they are used solely to credit or transfer funds into an account. However in the United States of America anyone can withdraw funds from a US bank checking account by issuing a demand draft using just the account number and bank routing number - information found on every US check.

The International Bank Account Number or IBAN is a bank account number structured according to ECBS standards. Every bank account number in a participating European country has an associated IBAN, which is clearly identified as such on all bank statements issued after July 2003.

The Bank Identifier Code or BIC identifies the payment beneficiary’s bank. It adds to the information provided by the IBAN code and usually consists of 8 to 11 characters. The BIC is also known as the SWIFT code or address. You can find bank payment codes via the SWIFT BIC online database.

IBANs and BICs help banks automate and speed transfers between domestic and/or international bank accounts. Existing European bank account numbering systems are strictly national and do not include any particulars indicating the country in which an account is located. The IBAN standard consists simply of each existing account number being prefixed by a group of four characters: two letters identifying the country (like an international telephone number), and two numbers as a checksum, i.e. GB64 for a United Kingdom account. IBANs comprise a maximum of 34 alphanumeric characters, and has a fixed length according to the country, i.e. 16 characters in Belgium, and 27 in France.

This information should be supplied by the payment beneficiary to the party sending the payment. You can find more details about how to use IBANs on the European Union website.

Note that since Denmark, Sweden and the United Kingdom are in the EU, but have not adopted the Euro, those cross border Euro transfers may cost more than corresponding domestic transfers in local currency. The BBC has an article on why UK to EU transfers cost up to 10 times more that Europeans pay. Details on United Kingdom domestic BACS transfers are also available.

* For amounts up to €50,000 within the 15 EU (European Union) Member States and EEA (European Economic Area) countries (Iceland, Liechtenstein and Norway) under EU regulations.

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