How IBAN works

[chushpan]

IBAN (International Bank Account Number) is an international standard for identifying bank accounts. It was developed to simplify and standardize international bank transfers to minimize errors in payment processing. IBAN is used in most countries around the world, especially in Europe and other regions where the SEPA (Single Euro Payments Area) system is in effect.

Let's look at how IBAN works, step by step:

1. What is IBAN?​

• Objective: To simplify international bank transfers and reduce the risk of errors.
• Structure: IBAN consists of an alphanumeric code that uniquely identifies a bank account.
• Usage: Used to transfer funds within a country or between countries.

2. IBAN structure​

IBAN has a strict structure, which includes several elements:

1. Two letter country code:
   • Defines the country where the account is opened.
   • For example: DE for Germany, FR for France, ES for Spain.
2. Check digits (two digits):
   • Used to check the correctness of the IBAN.
   • Helps banks detect data entry errors.
3. Bank code (BBAN - Basic Bank Account Number):
   • Includes information about the bank, branch and account number.
   • The length of BBAN varies by country.

IBAN example​

• Germany: DE44 5001 0517 0445 6789 01
  • DE: Page.
  • 44: Check digits.
  • 5001 0517 0445 6789 01: BBAN (bank code and account number).
• France: FR14 2004 1010 0505 0001 3M02 606
  • FR: Country.
  • 14: Check digits.
  • 2004 1010 0505 0001 3M02 606: BBAN.

3. How does IBAN work in transactions?​

Step 1: Preparing the data​

The sender must know the recipient's IBAN to make the transfer. The bank's BIC/SWIFT code may also be required (depending on the country and type of transfer).

Step 2: Check IBAN​

• The sender's bank checks the IBAN for correctness:
  • The format is checked (compliance with the ISO 13616 standard).
  • The check digits are being calculated.

Step 3: Processing the transaction​

• The sender's bank uses the IBAN to identify the recipient's bank and routes the transaction through the appropriate payment systems (e.g. SEPA or SWIFT).

Step 4: Deposit funds​

• The recipient bank identifies the account by IBAN and credits the funds.

4. Advantages of IBAN​

a) Minimizing errors​

• A standardized structure reduces the risk of errors when entering data.
• Check digits help to automatically check the correctness of the IBAN.

b) Versatility​

• IBAN is supported by most banks in Europe and other regions.
• Used for both domestic and international transfers.

c) Acceleration of transactions​

• Thanks to the clear structure of IBAN, banks process transfers faster.

5. How to check IBAN?​

To ensure that the IBAN is correct, you can use the following methods:

a) Manual verification​

1. Move the first four characters of the IBAN (country code and check digits) to the end.
2. Replace the letters with numbers (A = 10, B = 11, ..., Z = 35).
3. Divide the resulting number by 97. If the remainder is 1, the IBAN is correct.

b) Automatic verification​

• Use online services or banking applications to check IBAN.

6. Example of using IBAN​

Example 1: International transfer​

1. Alexey from Russia wants to send €1000 to his friend in Germany.
2. He finds out his friend's IBAN: DE44 5001 0517 0445 6789 01.
3. In his bank, Alexey indicates the IBAN, amount and purpose of payment.
4. The sender's bank checks the IBAN and routes the transaction via the SWIFT or SEPA system.

Example 2: Internal Translation​

1. Maria from Spain wants to transfer €200 to her family's account.
2. She states the family's IBAN: ES91 2100 0418 4502 0005 1332.
3. The transaction is processed through the bank's internal system.

7. Important Notes​

a) Not all countries use IBAN​

• In some countries (such as the US or Canada), the IBAN is not mandatory. Instead, other identifiers such as the account number and ABA Routing Number are used.

b) IBAN length​

• The length of the IBAN depends on the country:
  • Germany: 22 characters.
  • France: 27 characters.
  • United Kingdom: 22 characters.

c) Security​

• The IBAN itself is not a secret information. However, its use should be limited to trusted persons.

8. Conclusion​

IBAN is a convenient and reliable tool for identifying bank accounts when making transfers. It simplifies international payments, reduces errors and ensures standardization of processes.

If you have additional questions or need help with a specific aspect of IBAN, write - I will try to help!

 

[Man]

IBAN (International Bank Account Number) is an international standard for numbering bank accounts, developed to simplify and unify international payments. Here's how it's structured and works:

IBAN structure​

Consists of 34 characters (maximum), including:

1. Country code (2 letters)
   Example: DE (Germany), FR (France), UA (Ukraine)
2. Control number (2 digits) - checking the correctness of the account
3. BBAN (Basic Bank Account Number) is the internal account number in the country

Examples of formats:

• Germany: DE89 3704 0044 0532 0130 00 (22 characters)
• France: FR14 2004 1010 0505 0001 3M02 606 (27 characters)
• Ukraine: UA57 328910 0000 0026 0056 7890 1234 5 (29 characters)

How does IBAN check work?​

1. Mathematical validation
   • The checksum (2 digits) is calculated using the MOD-97 algorithm
   • If the calculation does not match, the number is incorrect.
2. Bank verification
   • The bank checks the IBAN against its database before the transfer.

What is IBAN for?​

International transfers (SEPA, SWIFT)
Automatic payment processing (fewer errors)
Replacement of local details (instead of account number + BIC)

Where is it used?​

• All EU countries + UK, Switzerland, Norway, etc.
• Other countries: Ukraine, Turkey, UAE, Saudi Arabia, etc.

Important: IBAN is not used in the USA and Canada - they use SWIFT + account number.

How to find your IBAN?​

1. In online banking (usually indicated in the account details)
2. On a bank card (not always)
3. Calculate via IBAN generator (if local details are known)

Difference from SWIFT/BIC​

• IBAN - identifies the recipient's account.
• SWIFT/BIC – identifies the recipient’s bank.

Usually both codes are needed for international transfer.

Need an example of transfer from IBAN or analysis of a specific format?