IBAN is used to identify the bank account to which funds are deposited. Combined with the SWIFT code identifying the bank and its branch, the IBAN prevents errors in international transactions. A number of companies doing business in the European Union use the IBAN system to reduce costs and speed up transfers in euro. This article will examine what an IBAN is, and how business persons can use it for international business.
What Is IBAN?
Before international bank account numbers (IBAN) were adopted, different European countries had different bank account identifier formats, and this discrepancy led to frequent errors in cross-border payments.
Then, in 1997, the International Organization for Standardization (ISO) proposed a new system for the global monetary movement. This launched a process aimed at harmonizing international payments. So in 2014, IBAN became mandatory in the EU.
Its main purpose is to reduce the cost of international transfers, especially within the EU, the Single Euro Payments Area (SEPA) that makes wire transfers as easy as cash transactions within Europe.
IBAN does not replace a regular bank account number, but works together with it, speeding up international payments, interbank transfers, and cash remittance.
After IBAN was introduced, the number of errors in international bank transfers and other financial transactions has decreased significantly. Banks received additional instruments to simplify the transfers, namely the IBAN Registry from which one can easily find the necessary information on this or that country.
What Is the IBAN Registry?
The IBAN Registry is a directory of those countries that meet the latest IBAN standards (ISO 13616). It is published by SWIFT and contains detailed information about the IBAN format in the context of each country. For example, in the IBAN Registry for Malta will contain the following data:
- The national country code, or the IBAN prefix country code, which for Malta is MT.
- The Basic Bank Account Number (BBAN) which is 27 characters long.
- Two check digits and a two-letter country code that precede the BBAN, and thus the IBAN is formed.
- The bank identifier that is 4 characters long, and the bank branch five-digit code.
- The bank account number that consists of 18 digits.
In addition, the Registry displays the history of document updates and provides descriptions of important terms used in the IBAN transactions.
What Countries Use IBAN?
IBAN is used in all countries of the European Union, as well as in most other European countries. However, such countries as the USA and Canada do not use IBAN, yet at the same time they recognize and process payments in accordance with this system’s requirements. Today, more than 70 countries of the world use IBAN, including countries as diverse as Andorra, Switzerland, Cyprus, Dominican Republic, Serbia, the United Arab Emirates, Germany, the UK, Luxembourg, the Seychelles and the British Virgin Islands.
Benefits of Using European Bank Accounts
Regardless of the type of your business, the availability of undisrupted payments is an important component. It does not matter whether a company operates locally, in the SEPA or outside Europe.
Conventional banking solutions often cause a number of difficulties for businesses. This can be a lengthy search for the right bank account that would suit the needs of your business, issue of invoices to partners from different countries in different currencies, as well as the time-consuming processes of reconciliation of multi-currency operations.
IBAN is a convenient alternative for exporters, international companies and other businesses that receive a large number of payments in different currencies.
Such a financial instrument provides:
- high level of convenience when dealing with settlements;
- reduced payment processing time;
- the opportunity to issue invoices to customers located in different countries;
- the opportunity to make bulk payments;
- online currency conversion;
- direct SEPA payments to any company located within the European Union;
- the opportunity to focus on growth and expansion of your business;
- control of cash flows and liquidity;
- the reduction of costs associated with maintenance of different accounts and transfer of funds between them.
Doing international business is inextricably linked to numbers and international standards. That is why opening a business account with the direct IBAN with a reliable bank is a vital component in making, receiving and processing all kinds of international payments.
What Accounts Are Favored by Business?
Despite the obvious steps aimed at making instant global money transfers a reality, many obstacles remain to be overcome. Business persons want to get the same speed and convenience in international banking as in domestic banking, but technology cannot yet facilitate this, and regional solutions are rarely compatible with other countries.
That is why local businesses, freelancers, and companies related to the export-import operations and international trade choose an alternative to conventional banks and open their direct IBAN business accounts with payment systems.
Lithuania and the UK are among the most popular jurisdictions for opening direct IBAN business accounts. Please do not hesitate to request a free consultation on selecting a foreign account, and get up-to-date information on opening the account with a European payment system.
Most foreign banks offer the international payments processing in two to five banking business days. But such terms do not always suit company owners who usually need to make payments urgently:
- settle accounts with foreign partners, counterparties, personnel, contractors;
- make bulk payments with a single transaction;
- save time on processing cross-border payments;
- reduce the cash settlement costs;
- expand the network of partners;
- protect EBIT from currency risks;
- diversify the online payment channels.
Stop wasting your time on unreasonably expensive international payments. Order a bank pre-approval to start the process of opening your direct IBAN business account today!