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IBAN, also known as International Bank Account Number, is a standard international numbering system developed to identify bank accounts internationally. The purpose of the IBAN is to reduce errors and delays in international money transfers by providing a unique and standardized way to identify bank accounts across borders.
Initially, IBAN was originally adopted by the European Committee for Banking Standards (ECBS) to facilitate payments within the European Union. As of May 2020, 77 countries were using the IBAN numbering system.
If you’re wondering what an IBAN looks like, read further.
What is the format of an IBAN?
The structure of an IBAN is globally agreed upon and standardized. All IBAN codes follow the same format and include only the numbers 0 - 9 and 26 letters (A-Z). However, because different countries have different methods for expressing basic bank account numbers, you’ll notice that IBAN length varies depending on where you’re sending money. The length of an IBAN ranges from a minimum of 16 to a maximum of 34 alphanumeric characters.
What does IBAN look like? An International Bank Account Number consists of:
- Two-letter country code: This identifies the country where the bank account is held (for example, ES for Spain, PL for Poland, etc.)
- Check digits: These are 2-digit numbers calculated with an algorithm and used to validate the correctness of the IBAN.
- Bank code: This identifies the bank. The length varies depending on the bank and the country.
- Branch code: This identifies the bank branch. The length varies depending on the bank and the country.
- Account number: Specifies the account number in alphanumeric characters, and the length is country-specific.
- Check digits: this identifies the account in a bank.
The bank and branch code, account number, and check digits make a Basic Bank Account Number (BBAN).
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How does an IBAN work?
When you make an international transaction, the payment system in the bank analyzes your IBAN. The system confirms the sender and recipient accounts by comparing the numbers and letters in the IBAN to their database. Special algorithms are used to comprehend and verify the account information. If the information is valid, the payment will be processed.
Is an IBAN secure?
The use of an IBAN to transfer funds is considered safe by Eurozone finance regulators and is commonly used to make international payments. While others can use your IBAN to make money transfers into your account, they cannot withdraw or transfer funds from your account. Hence, your funds are not at risk of being compromised when using an IBAN to transfer money.
How is an IBAN used in global payroll?
An IBAN solves the challenges of processing global payroll for global employers. The primary purpose of an IBAN in global payroll is to facilitate cross-border payments to employees and independent contractors located in different countries. When making payments to foreign bank accounts, an IBAN is used as a unique identifier for the recipient's bank account and other information, such as the bank's SWIFT code and the recipient's name and address.
Using an IBAN helps ensure that the payment is directed to the correct bank account and prevents data errors in the payment process. It also enables faster and more efficient cross-border payments to contractors and employees, as the IBAN format is standardized and recognized by banks worldwide. They help ensure accuracy, efficiency, and security in the payment process.
How can Skuad facilitate seamless payroll processing?
A global payroll platform like Skuad enables you to process multi-country payroll for your globally-distributed workforce seamlessly. With Skuad, ensure your entire team receives prompt and accurate payments every time.
To know more about Skuad, book a demo today.
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