Two of the most popular payment methods are IBAN and SWIFT, but what is the difference between them?
What is SWIFT?
SWIFT is a global financial messaging system that facilitates international payments and settlements between banks, corporations, governments, and other institutions.
It was created in 1973 by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to provide secure electronic messaging services to its members.
The Society is an independent not-for-profit membership association based in Belgium with over 11,000 member financial institutions from more than 200 countries and territories worldwide.
The SWIFT network has been around since the 1970s and is now one of the most widely used networks in the world.
However, it does have some limitations such as being unable to process transactions in real-time.
This means that if you want to make a payment within 24 hours then you will need to go through another channel.
How to find a SWIFT code
To find your SWIFT code, you can either search online or contact your bank directly.
If you are looking online, here are two websites that may help:
If you are contacting your bank, they should be able to tell you your SWIFT code.
You can also ask your bank for any additional information regarding SWIFT codes.
When do I need a SWIFT code?
You will usually need a SWIFT code when making a cross-border transfer.
For example, if you are transferring money from the UK to the USA, you will need to use a SWIFT code.
What does a SWIFT code look like?
A SWIFT code looks similar to this: BIC/IBAN/BIC CODE.
For example, Bank of America has a dedicated SWIFT code for incoming US Dollar transactions.
What do you need a SWIFT code for?
There are many different reasons why you would require a SWIFT code.
Here are just a few examples:
- When sending money overseas
- When moving funds between accounts at different banks
- When making transfers between companies
- To pay invoices
- To send money to someone who doesn’t have a bank account
- To receive money into an account that doesn’t have an IBAN number
- To get paid by a company that uses a different currency
Is a SWIFT code the same as a routing number?
No, a SWIFT code is not the same as a routing code. A routing code is only relevant for domestic transfers.
However, in some circumstances, routing codes are less preferable in domestic transfers if, for example, a country has an unstructured domestic transfer structure, and so instead of using local routing numbers, local domestic transfers would piggyback off the SWIFT network.
What is IBAN?
IBAN stands for International Bank Account Number.
It is a unique identifier assigned to each bank account holder which can be used as a reference number when sending or receiving money internationally.
Banks use this number to identify their customers’ accounts.
The IBAN system was introduced in 1991 and is still relatively new.
As a result, there are fewer restrictions on who can join the network.
There is also no fee to join the network so anyone can become a member.
How to find an IBAN code
An IBAN code looks like this: IBAN CODE.
For example: BARCODE2KG1X
Why do I need an IBAN code?
As mentioned earlier, IBAN codes are used to identify individual bank accounts.
They are used when sending and receiving money internationally.
Many people think that they don’t need an IBAN code because they already have a bank account.
Unfortunately, this isn’t always true.
Some people choose to keep their banking details private and therefore aren’t listed on public databases.
In addition, some banks won’t allow you to open an account without providing them with personal details including your IBAN code.
How to find out what my IBAN code is
If you want to check whether your current bank allows you to view your IBAN code online, then visit your bank’s website and search for ‘IBAN’.
Alternatively, you could contact your bank directly and ask them to provide you with your IBAN code.
However, it’s important to note that most banks charge a small fee for this service.
Where is my IBAN code located?
Your IBAN code is typically found on a piece of paper inside your bank statement.
This way, you can easily see all of your bank statements and make sure that you haven’t missed anything!
What does an IBAN code look like?
It should start with a letter (usually either K or L) followed by four digits. The first digit indicates the type of IBAN code.
For example, K represents a UK bank account and L represents a US bank account.
The second digit is usually a zero. This means that the IBAN code starts with 0 rather than 1.
The third and fourth digits indicate the branch code. These are often letters but can also be numbered.
What do you need an IBAN for?
You will probably need an IBAN code if you want to send money from one bank account to another.
You will need to provide your IBAN code when making international payments.
There are two ways to pay someone overseas.
The first option is to use a cheque. If you are paying an individual, then you can simply write down the amount that you wish to pay them.
Otherwise, you will need to get a blank cheque form and fill it in before handing it over to the person you are paying.
Alternatively, you can pay them electronically.
To do this, you will need to create a direct debit order.
When creating a direct debit order, you need to include your IBAN code.
Once you receive confirmation from the recipient that they have received the payment, you can stop the direct debit.
How much does it cost to send money abroad using an IBAN?
When sending money to another country, you will normally pay a fixed rate per transaction.
The exact price will depend upon which currency you are using and where you are sending the money.
In general, you will pay more to send money to countries outside the EU than to other parts of Europe.
However, there are many different factors that go into determining how much you will pay.
These include the size of the transfer, the exchange rates at the time of the transfer, and any fees charged by your bank.
Is an IBAN code the same as a routing number?
An IBAN code is not the same as a routing code.
A routing code is used by companies such as PayPal and Western Union to track transactions.
It is similar to the IBAN code because both are numbers that identify your bank account.
However, they are not interchangeable.
Do I need IBAN if I have SWIFT?
If you already have access to SWIFT, then you don’t need an IBAN code.
SWIFT is a global network that enables financial institutions around the world to communicate securely about their customers’ accounts.
That is until you recognize that most of your transactions are happening between IBAN institutions.
Doing IBAN transactions is more commonly accepted among accounts that are already using currencies used locally in SEPA, mainly the GBP and Euro.
Using IBAN-ready accounts to make local payments puts more power in the hands of businesses.
How Does an IBAN Differ From a SWIFT Code?
SWIFT codes are not always available. They only work for certain types of transactions.
In addition, SWIFT codes can change frequently.
That makes it difficult to keep up with changes made by banks.
On the other hand, IBAN codes are permanent.
They cannot be changed once set. However, they're quite normally accepted across the SEPA zone.
That makes them ideal for business purposes.
What is the Difference Between IBAN and SEPA?
The European Payments Council (EPC), an association of banks, has developed standard rules for cross-border transfers.
These rules are known as the SEPA regulations.
Banks must follow these rules when processing international payments.
SEPA stands for Single Euro Payments Area.
This means all member states are part of one single market.
As a result, banks in different nations can easily connect to each other.
To achieve this, the EPC created a system called SEPA Direct Debit.
All the major banks are required to offer this service.
Banks can also process SEPA Credit Transfer orders.
In fact, they are required to provide this service.
As for IBAN, it's short for International Bank Account Number.
It's a unique identification number assigned to every bank account.
IBANs are needed to facilitate international transactions.
If you want to send or receive money from another nation, you'll need an IBAN.
Which One Should I Use?
Now you know how to find your IBAN code. But what should you use? Swift code or IBAN?
In reality, both are equally useful but sometimes it makes sense to use one over the other.
However, IBAN codes are more secure. For instance, they are less susceptible to hacking like SWIFT codes, which rely on third-party software providers to serve SWIFT messages.
Another advantage of using IBAN codes is that they are much cheaper. You won't need to pay any fees to get them with the exception of certain circumstances.
So which one do you choose? It all depends on where your transactions are the most and whether or not going for the commonly used SWIFT code is worth the bother, or IBAN payments can give you more negotiation power in the SEPA zone.