What are IBAN and SWIFT Codes?
Those, who want to make financial transaction across the border, they may face confusion between IBAN and Swift code as both are used for the international money transfer. Here the details of these two codes are given below:
IBAN stands for International Bank Account Number, which is used to transfer money to an individual account internationally. The IBAN reduces the risks of transcription error while processing money transaction. By using this code, an individual can directly send money to the account of another across the border. This code improves the way of transferring money internationally. It is standardized by the European Committee for Banking Standards (ECBS) due to the lacking of routing information in the SWIFT code and after that, it is also adopted by the ISO (International Organization for Standardization). At the initial phase, the code is necessary only for transaction within the European countries and then it spreads to the other parts of the world.
About the codes:
The IBAN code consists of 34 characters and it is alpha-numeric code.
Country code: it is 2 digits country code as per the ISO standard.
Check code: a bank institution uses this code to check the integrity of the IBAN that is why it varies with the user.
Bank identifier: this identifies the branch and the office of the financial institution for transferring the money.
Basic Bank Account Number: it is incorporated to add an individual account number under a certain bank of the country.
The use of IBAN code:
As stated above, IBAN code helps in transferring funds to a cross-border account number, but you should keep in mind some factors related to the using of the IBAN code.
- You need to insert the recipient IBAN code in the account number field while sending money to the recipient account.
- Make sure that you only add the IBAN code as you no need to state the bank account number of the concerned person. If you include both of the number, then money transaction may take time. So it is better to add only IBAN code in the account field.
- If the transferred money shares any national interest, then you can insert IBAN code along with the SWIFT code in the respected fields.
SWIFT code is the standardized format of ISO for transferring money between the banks internationally. Unlike the IBAN code, it cannot transfer the money into an individual bank account. This code is used for the money transfer between the banks across the borders. The registration for the SWIFT code is handled by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and under a standardized format of the ISO. This code works as a Bank Identifier Code that helps to communicate between banks, either for the financial reason or for transferring the message.
The SWIFT code comprises of 8 or 11 characters, the former one is used in active connection between primary offices and the later one is needed for the branches of the primary offices.
- First four characters: it defines the bank code and that consists of only letter.
- Next 2 characters: ISO-3166 alpha-2 country code.
- Next 2 characters: location code which comprises both the digit and the letter.
- Next 3 characters: branch code of the primary office.
SWIFT codes are responsible for transferring financial messages between the banks and this code is used more than the IBAN code worldwide as because the use of the IBAN code is mainly used in the European countries for money transferring.