- SEPA, IBAN, and SWIFT – common terminology for international money transfers
- What does IBAN stand for in banking?
- What is the SWIFT system and code?
- IBAN, SWIFT, and BIC bank codes – a brief summary
When they make global transactions, the individuals involved inevitably encounter bank terms like IBAN, SWIFT, SEPA, and BIC. To be on the safe side, make sure you are familiar with the IBAN, SWIFT, SEPA, and BIC bank codes and abbreviations before you open a bank account.
The type of bank account you hold with a foreign financial institution and the direct access to the SWIFT system impact the range of feasible transfers, both inbound and outbound, as well as the currency options for your bank transactions.
Supported by International Wealth experts, you have the option to open a foreign bank account either in person or remotely. Fill out the application form and reach out to the International Wealth team to enjoy personalized assistance in finding the most suitable bank account and banking institution that align with your specific objectives and goals. Start the process today to unlock the benefits of banking abroad.
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SEPA, IBAN, and SWIFT – common terminology for international money transfers
There exist 2 methods to identify a bank account for fast international transfers:
- International Bank Account Number (IBAN)
- Society for Worldwide Interbank Financial Telecommunication (SWIFT) code.
The key difference between IBAN and SWIFT lies in the information encoded within the respective codes. While the SWIFT bank code identifies a specific financial institution and country, IBAN includes additional details about the individual bank account.
IBAN plays a crucial role in facilitating transfers through the SWIFT system. It is independently used for transfers outside of the SWIFT banking system. For instance, you may use the IBAN bank code for transfers within the European SEPA system or between accounts within the same bank.
SEPA, on the other hand, is a transfer system that operates within a limited international scope. SEPA is exclusively available for participating countries within the European Union and select nations, totaling 36 countries. Transfers within the SEPA zone primarily occur in EUR, although bank transactions in other currencies are possible with an additional conversion fee.
What does IBAN stand for in banking?
Although not universally applicable, IBAN serves as an international bank account number for money transfers across various countries.
An IBAN comprises a two-letter country code, a two-digit checksum, and a BBAN (Basic Bank Account Number).
Is IBAN used in all countries?
In response to the question, the answer is negative. Countries such as the United States and Canada, for example, do without IBAN bank codes in their banking systems. Conversely, a significant number of European countries rely solely on IBAN for money transfers. Besides, more than 70 non-EU countries have embraced the use of IBAN for bank transfers to date.
Find the jurisdictions that use IBAN for bank transactions and money transfers in the table below:
|Bosnia and Herzegowina||BA||No||20|
|São Tomé and Príncipe||ST||No||25|
|Republic of Seychelles||SC||No||31|
FYI: Not all countries are part of the SEPA banking transfer system. As of January 2023, SEPA encompasses 36 member states, along with 3 EEA countries (Norway, Liechtenstein, and Iceland), as well as Switzerland, Monaco, and the United Kingdom.
What is the relationship between IBAN and SEPA?
SEPA or Single Euro Payments Area is an integrated payment system. Established within the Eurozone, SEPA aims to streamline and standardize digital transfers among member nations. IBAN is the preferred method to identify bank customer accounts and their corresponding banks when conducting transactions through the SEPA system.
The primary goal of SEPA is to make cross-border transactions as affordable, uncomplicated, and seamless as domestic transfers. However, this objective applies exclusively to EUR bank transactions within SEPA. If the SEPA transaction currency differs from EUR, a conversion fee is incurred.
What is the distinction between IBAN and a bank account?
It is not entirely accurate to state that IBAN is equivalent to a bank account. The principal difference between IBAN and a regular bank account is that IBAN adheres to international (specifically European) standards and encompasses more than just bank account information. Here’s what it consists of:
- country code
- 2-digit checksum
- bank identification code, which may also be a SWIFT code
- branch code
- actual bank account number.
In contrast, a conventional bank account includes only numbers.
Is IBAN alone sufficient for international transfers?
In addition to the IBAN for bank account identification purposes, international transfers usually require a specific channel such as SWIFT or SEPA.
- When you send money within Europe using SWIFT, the recipient’s IBAN and the name of their bank are sufficient. The SWIFT code for the bank remains the same for all transactions. You may find the SWIFT bank code you need either online or on the bank’s website.
- For transactions within the SEPA system, the IBAN is mandatory. In certain cases though, you may also need to provide the Bank Identifier Code (BIC) along with the IBAN to make a SEPA transaction. This is necessary, for example, for payments to Monaco, Switzerland, and San Marino. In most cases, the IBAN alone is sufficient for bank transfers and direct debits through SEPA within the European Economic Area.
What is the SWIFT system and code?
Established in 1973, the SWIFT system is colloquially referred to as a payment system, although its official definition does not categorize the SWIFT system as such. For the sake of convenience, we will continue to refer to it as the SWIFT payment system in this article.
By default, the SWIFT payment system is used to neither make any settlements nor perform mutual clearing functions for its participants. Rather, the SWIFT system serves as a communication conduit, facilitating the exchange of information about the sender and recipient. Thereby, the SWIFT system enables interbank financial transfers.
A SWIFT code is a numerical identifier that contains encoded information about the bank. SWIFT bank codes do not encompass customer or personal bank account details. As a result, each bank in a specific country is assigned a unique SWIFT code, which is the same for all customers.
The SWIFT payment system makes it possible to make and receive money transfers across all countries worldwide. It encompasses a code that aligns with the bank’s Bank Identifier Code (BIC).
FYI: The BIC (Bank Identifier Code) is a unique alphanumeric code used for bank identification purposes. It contains such vital details as the bank’s name, correspondent account, and regional location.
IBAN, SWIFT, and BIC bank codes – a brief summary
For you to gain a quick understanding of banking terminology, here is a concise reference guide on international and interbank transfers:
- IBAN, SWIFT, and BIC are the bank codes used to facilitate international money transfers.
- IBAN identifies an individual’s bank account. When you send money through both the SEPA and SWIFT systems, it is combined with other details.
- SWIFT and BIC serve as unique identifiers for banks and other financial institutions, and SWIFT is synonymous with BIC.
- The SWIFT network is responsible for assigning BICs to registered organizations. Besides, it functions as a registry for IBANs.
- SEPA is a payment system exclusively handling EUR electronic payments. Within SEPA, IBANs are used for all bank transactions, regardless of their nature, be they domestic or international.
Should you have any questions regarding international money transfers or require assistance with opening an offshore bank account, please don’t hesitate to contact the International Wealth team of experts using the contact information above. They will be more than happy to provide you with personalized guidance and support.
Are IBAN and SWIFT bank codes the same?
They aren’t. The IBAN and SWIFT bank codes are distinct and serve different purposes. While both SWIFT and IBAN are used for international banking transactions, they have separate functionalities. The SWIFT bank codes, also known as BIC or Bank Identifier Codes, identify specific bank branches and consist of alphanumeric characters. The SWIFT or BIC bank codes provide information about the bank and its location. The IBAN, a.k.a. International Bank Account Number includes details about the bank, country, and the customer’s personal bank account. It is a standardized numerical code used to identify bank accounts in international money transfers.
What is the difference between the IBAN bank code and the SWIFT bank code?
The IBAN and SWIFT bank codes play a crucial role in international money transfers as they identify the bank and customer account. However, the IBAN and SWIFT bank codes differ in the type of information they provide. IBAN acts as a unique identifier for an individual account, encompassing details such as the account holder’s country, bank, and specific account number. The SWIFT bank code primarily indicates the country and bank involved in the transaction, without specifying the individual account details.
Which code is better to use – IBAN or SWIFT?
IBAN and SWIFT are unique identification codes that serve different purposes. You may not substitute SWIFT for IBAN and vice versa. For example, when you use the SWIFT system, IBAN is required for successful transfers. Similarly, within the SEPA system, you need IBAN to complete a transaction.
IBAN functions as a specific identifier for an individual’s bank account, while the SWIFT code solely identifies the bank based on its location or registration. It is not unique within the same institution at a particular address. In simpler terms, each bank has a single SWIFT code, whereas IBANs vary for each customer of the financial institution.
Do I need both IBAN and SWIFT to make an international money transfer?
For international SWIFT transactions, you only need to know the IBAN. The SWIFT code is unique to each financial institution. You may obtain it from the bank’s website or official sources. The bank’s address and name are essential details, so you should have them by any means.