What Is An IBAN? International Bank Account Numbers Explained

Euan Robb
Content Manager at Equals Money
min read
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Definition of IBAN

The International Bank Account Number (IBAN) is an internationally recognised numbering system used when identifying overseas bank accounts.

It was developed by the International Organization for Standardization (ISO) and the European Committee for Banking Standards (ECBS) to facilitate cross-border transactions and ensure accuracy in international money transfers. The IBAN is used in many countries around the world, including European countries, the Middle East, and parts of Africa.

However, it's important to note that both the US and Canada do not use the IBANs for identification, but still recognise and process payments according to the system. Asian countries do not use the IBAN system.

The format of the IBAN varies slightly from country to country, but typically consists of a country code, check digits, and the recipient's domestic bank details. IBANs are considered a crucial tool in international banking, as it reduces errors and ensures that funds are transferred to the correct recipient.

By adopting and implementing a standardised format, the IBAN simplifies the process of verifying and processing cross-border payments, promoting efficiency and transparency in the global financial system.

Purpose of the IBAN system

The purpose of the IBAN system is to facilitate and streamline cross-border transactions, international money transfers, and the automatic processing of payments. By introducing an international standard for bank account numbers, the IBAN system aims to reduce errors and ensure accuracy in online banking and global financial transactions.


Importance of IBAN in international banking

One of the key functions of the IBAN is to identify the country and account number of the recipient. By including the IBAN in transactions, banks, financial institutions, and payment providers can quickly determine the correct destination for funds, avoiding errors and delays. This eliminates the need for time-consuming manual checks and minimises the risk of transfers being sent to the wrong account.

Additionally, the IBAN serves as a verification mechanism to ensure that transaction details, such as the recipient's bank and account number, match the actual account holder. This helps prevent fraudulent activities and provides a level of confidence in the accuracy of the transaction.

Furthermore, the IBAN is extensively used in the majority of European Union (EU) countries, European banks, and other European nations. It has become a standard in these regions, enabling seamless cross-border transactions within the EU and promoting financial integration. The regularity of IBAN usage across countries within the EU has greatly simplified payment processing and enhanced the efficiency of international banking operations.

IBAN structure and format

The structure and formatting of an IBAN is a fundamental aspect of international banking. Used to uniquely identify bank accounts across borders, the IBAN is comprised of a standardised sequence of alphanumeric characters that convey important information about the account itself.

Every country has its own unique structure for IBANs, which includes specific elements such as country code, check digits, and bank identifier codes. Understanding the structure of an IBAN is crucial for international transactions, as it ensures accurate routing and prevents errors or delays in processing.


Breakdown of alphanumeric characters in an IBAN

The IBAN structure consists of four parts. First, there is a two-letter country code that indicates the country where the bank account is located. This is followed by two check digits, which are used for error detection and to ensure the accuracy of the IBAN.

The remaining characters, up to a maximum of 30, make up the Basic Bank Account Number (BBAN), reflecting the specific bank account details. Each country decides the format of the BBAN according to its own national standard for domestic payments. This means that the length and composition of the BBAN can vary from country to country.

In the UK, the BBAN reflects the standard for domestic transfers, compromised of the bank code, branch code, and bank account number (note, that in the UK, the branch identifiers and code denoting the bank branch is also referred to as the sort code).


To illustrate, let's consider an example. The IBAN for a bank account in the United Kingdom may look like this: GB26MIDL40051512345675.

In this example, "GB" represents the two-digit country code, "26" represents the check digits, and "MIDL40051512345675" represents the BBAN for domestic money transfers (with "MIDL" representing the bank code, "400515" representing the branch code, and "12345675" representing the bank account number).


IBAN country examples

IBAN country Length (characters) Example number
🇩🇪 Germany 22 DE89370400440532013012
🇮🇪 Ireland 22 IE29AIBK93115212345676
🇮🇹 Italy 27 IT60X0542811101000000123445
🇵🇱 Poland 28 PL61109010140000071219812885
🇵🇹 Portugal 25 PT50000201231234567890163
🇪🇸 Spain 24 ES9121000418450200051341
🇳🇱 The Netherlands 18 NL91ABNA0417164311
🇬🇧 The United Kingdom 22 GB29NWBK60161331926818

Overall, the alphanumeric characters in an IBAN serve to identify the bank and account numbers. They provide a standardised format for bank transfers, international transactions and ensure the correct routing of funds.


Virtual IBANs

Virtual International Bank Account Numbers, also known as virtual IBANs, are a modern solution for international numbering that simplifies and streamlines cross-border money transfers. While "traditional" IBANs and virtual IBANs serve similar purposes in the identification and facilitation of international transactions, they have distinct differences.

One of the key differences between the two, is that a virtual IBAN does not represent a physical account itself, but instead represents an additional reference number or "alias" assigned to a physical account. Additionally, virtual IBANs can offer enhanced security as they prevent direct access to the underlying physical bank account.


Multi-currency support

One of the major benefits virtual IBANs can offer businesses, especially those with a global footprint, is multi-currency support and capabilities.

Virtual IBANs, also sometimes referred to as multi-currency IBANs, enable users to receive payments from multiple sources and currencies, while keeping the transactions separate and identifiable. This flexibility allows businesses to efficiently reconcile their payments and track funds from different clients, territories, or business units.

International transfers are of great importance in today's globalised world, facilitating global trade and market activities. They allow businesses to engage in cross-border commerce, enabling the exchange of goods and services between countries. Multi-currency IBANs enhance this process by enabling payments to be made in the local currency of the recipient, reducing the need for currency conversion (along with any associated fees) and streamlining transactions.


In conclusion, virtual IBANs provide a reliable and efficient solution for managing international money transfers. Their purpose is to simplify payment processing, improve reconciliation, and enhance security. With virtual IBANs, businesses and individuals can easily receive payments from various sources and across various currencies, while keeping their financial operations organised and protected.


Benefits of using an IBAN

Using an International Bank Account Number has numerous benefits for businesses of all shapes and sizes, and is of utmost importance in international payments.

The key benefit of using an IBAN is that it helps in correctly routing payments and bank account identification. By including the correct IBAN, transactions are directed to the intended individual bank accounts, minimising the risk of payments being returned or sent to the wrong individual accounts. This eliminates any potential confusion or delays in the transfer process.

Additionally, the use of IBANs can offer organisations several advantages. Firstly, cross-border transactions become faster and more secure. With the use of IBAN, banks can easily identify the recipient's account and process the transfer quickly, saving time for both the sender and the receiver. Moreover, enhanced security measures are in place, reducing the risk of fraudulent activities during money transfers.

IBAN numbers also bring convenience and cost-effectiveness. With the ability to easily identify and verify bank accounts, errors in the transfer process are significantly reduced. This can potentially lead to lower fees as incorrect payments and their associated costs and extra charges are avoided.

In conclusion, utilising an IBAN number brings numerous benefits when identifying overseas bank accounts and making an international bank transfer. Correct routing, avoidance of payment issues, faster and more secure transactions, lower fees, and the ease of identifying bank accounts are some of the advantages that make IBAN an essential component in the global financial system.

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About the author
Euan Robb
Content Manager at Equals Money