Europebanks.Info

IBAN Payments in Europe

• What is an IBAN?
• How does IBAN look like?
• Quoting IBAN in Paper
• Sending and Receiving IBAN Payments
• Algorithm to compute IBAN
• Algorithm to check IBAN
• Most Frequently Asked Questions about IBAN
• Useful Links

Ever since from Dec 2001, EU Regulation 2560/2001 requires banks to provide the IBAN (International Bank Account Number) and their SWIFT/BIC (Bank Identifier Code) to their account holders in european union countries. IBAN is one single account to receive payments from europe or worldwide for cross border EU payments. The introduction of IBAN concept not only is simplified, and cheaper as well for all payments within EU countries.

The significant advantage of using IBAN is you will be charged at the rate of domestic, if you initiate the payment to any EU country within an EU zone.

Ever since july 2003, most of cross border european union payment transactions between european banks are processed and validated by means of IBAN account numbers. The significant advantage of sending payments using IBAN, the payment transaction between these countries are considered domestic and it would cost you less, but under the following conditions...

1. The Payment is made in EUR currency.
2. The total amount is less than EUR 12'500.
3. IBAN account number is specified along with BIC/SWIFT code of institution.

All you need is IBAN, SWIFT or BIC code and Account number of the beneficiary you pay for. If you dont quote your IBAN number and you submit only SWIFT code in the payment form, then the transaction will be considered foreign wire transfer and your bank will charge you the foreign transfer rate, eventhough it involves the banks in two neighbouring european countries. Some banks will charge USD 45.- or EUR 20.- for initiating a foreign transfer, which indeed is very expensive say if you want to pay somebody just EUR 10 to a person in neighbouring EU country like from France to Germany.

If you are not given an IBAN by your bank, then ask for it from your bank. EU Regulation 2560/2001 requires banks to provide the IBAN and their BIC (Bank Identifier Code) to their customers. This resulted in the requirement for Banks to display IBAN & BICs on customer statements from 1 July 2003. Most banking transactions, particularly those in the remortgage business, use IBANs nowadays so it shouldn't be too hard to ask for one from your bank.

What is an IBAN?

IBAN is an acronym, which stands for International Bank Account Number. It is a standard way of uniquely identifying an account for the purpose of improving the efficiency and speed of cross border european union payments.

1. IBAN stands for International Bank Account Number, a standardised way of identifying a bank account.
2. The length of IBAN can go upto 28 digits starting from 2 letter country code, specific to each country.
3. When a cross-border payment is made in Europe, an IBAN is used to identify the account to which the payment should be made.
4. An IBAN is always used in conjunction with a SWIFT/Bank Identifier Code (BIC).
5. An IBAN is NOT a new bank account number. It is a way of representing national account numbers in an internationally recognised standard format.
6. Used for quick and easy processing of payment orders.
7. If you are paying from outside EU zone (from USA) )to a beneficiary who has given you IBAN account number, then always enter that IBAN in account number field of your payment form.

The IBAN is made up of the following elements all stuffed to form a single one length format:

• Two-letter country code (CC).
• Two-number check digit (CD) for the entire IBAN account number.
• Basic Bank Account Number (BBAN), no more than 30 characters long, comprising Institution Identification (IID) and Bank Account Number (BAN)

How does an IBAN look like?

The IBAN is a series of alphanumeric characters that uniquely identifies an account held at a bank. IBAN always starts with 2 letter country code.

Example of IBAN used in UK.

GB29 NWBK 6016 1331 9268 19

Example of IBAN used in other countries in Europe.

Visit: ECBS for more information on IBAN

Quoting IBAN in Paper or Electronic format

An IBAN account number is always quoted is 4s separed by spaces when written in paper format, while written without spaces when written in electronic format.

Paper Format: GB29 NWBK 6016 1331 9268 19
Electronic Format: GB29NWBK60161331926819

Sending or Receiving Payments

Always try to quote IBAN along with BIC whenever you are sending or receiving payments. It is recommended that you quote the IBAN in account number field of the payment order. If you want to receive payment from EU zone, then you have to send the following bank coordinates to the sender. since IBAN has already your account number embeeded, there is no need to quote your basic account number to sender.

Beneficiary Name: Mr. John doe
Beneficiary Address:
22 Goethestrasse, Frankfurt, Germany,
DE 60222

Bank Name & Address:
Kaiserstrasse. 16, Kaiserplatz,
Frankfurt DE 60261, Germany

Account no or IBAN : DE89 3704 0044 0532 0130 00
BIC/SWIFT: COBADEFFXXX
Bankleitzahl (BLZ): 50040000 (optional for domestic payments only)

Amount: EUR 200.-

If you can accept foreign currency payments, then quote...

IBAN : DE89 3704 0044 0532 0130 01 (EUR Euros)
IBAN : DE89 3704 0044 0532 0130 02 (USD US dollar)
IBAN : DE89 3704 0044 0532 0130 03 (GBP Pound Sterling)

Algorithm to Generate IBAN Account Numbers

The most common algorithm that is used to generate or calculate IBAN account numbers is using Mod 10,97 (ISO 7064) model which is mostly applied in banking industry. This scheme produces two digits as a check or control digits. And as a result, it catches just about every possible error. The general formula is check digits are given by Control digit (2) = mod(98 - mod(data * 100, 97), 97).

Most banks in europe union countries like UK, Germany, France, Italy, Switzerland, Spain, Austria, Belgium and other countries use this algorithm to compute the IBAN number. The standard method to compute IBAN from existing domestic account number is explained in steps below..

Let us assume that we are given account number and other parameters so that we are required to compute IBAN for germany.

We know that for germany to compute IBAN, the following data are required to compute IBAN. Refer to ECBS for complete reference regarding IBAN for specific countries.

• Country code (2a)
• Control Digit (2n):
• Bank code or Bankleitzahl (BLZ) (8n)
• Account number (10n)
  ____________________________________________
  Total 22(an) in length.
  Note: 'a' means alphabets only, 'n' numbers only, 'an' means numbers or alphabets

Given IBAN Parameters:

1. Country code(2a): DE (ISO country code for germany)
2. Control Digit(2n): ?? (not available)
3. Bank code or Bankleitzahl (BLZ) 8n: 37040044
4. Account number (10n): 532.013.000

Total length of IBAN for Germany: 22 an

Goal: To order to compute the IBAN number we need all the 4 parameters as for germany. As you observe above, we still don't know the control digit, only then we can successfully generate IBAN. So our goal is to compute the check digit from above given parameters.

Step 1:

Stripp off all bank spaces and other special characters like dots, commas, hyphens of account no, bank code blz and country code are to be written continously. If the data given does not fit in length then padd zeros in front. This is must and important.

For Germany, Account no (10n) must have to be 10 digits in length. So account no is rewritten as

Account no: 0532013000 (10n)
BLZ (8n): 37040044
Country code (2a): DE

Step 2:

Concatenate (Join) bank code blz and account number without any spaces. This becomes

370400440532013000

Step 3:

Again join the step 3 value to: 'DE00'

370400440532013000DE00

Step 4:

In this step, you must convert the whole result from step 3into fully numbers, according the table given below, by eliminating any alphabet characters.

370400440532013000DE00 becomes 370400440532013000131400

Step 6:

Now, you have to perform a modulo 97 operation on the result derived from step 5 and find that result

370400440532013000131400 mod 97

The result = 9

Step 7:

In this step, we will catch hold of control digits, because once we get control digits, then the data required for iban number is complete.

Subtract 9 from 98:

98 - 9 = 89

This 89 is our control digit.

Now, fill in the IBAN slots with our data.

Country Code: DE (2a)
Control Digit: 89 (2n)
Bank Code or BLZ : 37040044 (8n)
Account number: 0532013000 (10n)

which becomes

DE89 37040044 0532013000

(An IBAN is always grouped in 4s separated by blanks, when quoted in paper format).

In Paper: DE89 3704 0044 0532 0130 00
In Electronic Format: DE89370400440532013000

Algorithm to Validate or Check IBAN manually

In most countries, banks use Modulo 97-10 algorithm for checking the correctness of the IBAN and the steps given below..

Let us consider the iban number that we just generated. We are required to check the correctness or validity of the given number we just computed.

DE89 3704 0044 0532 0130 00

IBAN format for Germany

1. Country code: DE - 2 characters (2a).
2. Control Digit (XX) 2 digits (2n).
3. Bank code 8n digits (BLZ).
4. Account Number (10n digits).

Note: 'a' means alphabets only, 'n' numbers only, 'an' means both numbers or alphabets. It is not necessary that, the iban may contain only numbers, but can also have alpha-numeric characters.

As you notice from the above parameters, we have all necessary data for iban but 'Control digit' is missing. For that see the procedure below.

Available IBAN Parameters:

1. Country code: DE
2. Control Digit: 89
3. Bank code: 37040044
4. Account number: 0532 0130 00

Total length of IBAN for Germany: 22 an

Goal: To check whether given IBAN is correct or valid.

Step 1:

Strip off all spaces to make IBAN a single 22 length format. The length of IBAN varies specific to countries. In this case it is 22 for Germany. Make sure that you padd zeros with bank code and account number if it does not fit the given length.

DE89370400440532013000

Step 2:

Detach first 4 characters(ISO country code & control digit) from IBAN and attach it at the end.

370400440532013000DE89

Step 3:

Now eliminate all those alphabets by converting to numbers from the table given below

That becomes 370400440532013000131489

Step 4:

Now, perform a modulo operation with 97

370400440532013000131489 mod 97

which gives 1

The result from the calculated modulo 97 must always be 1, only then the given IBAN number is correct.

Hence, the given IBAN number is correct.

WARNING! DO NOT attempt to generate or compute IBAN by yourself or using any third party tools. Only your bank can provide you true and accurate IBAN. If you use incorrect IBAN then either payment will be rejected or you will penalised extra for defaulted payments. The algorithm published aimed only for your better understanding on inside thoughts of IBAN and does not guarantee you true and accurate IBAN number.

Most Frequently Asked Questions about IBAN account numbers

What is the difference between an IBAN and my account number?

Your account number and branch details are the primary way in which the bank identifies your account. Your IBAN is used for receipt of cross border payments in your favour to identify your account in a uniform way. It allows the sending bank to validate that the IBAN data provided is in the correct format.

Where can i get my IBAN account number? Who issues it?

When you open an account with any bank in europe, the bank is required to provide you to the IBAN account number along with your domestic account number. It is the legal requirement for all banks in europe to issue you IBAN. You have to ASK your bank to give you one.

Caution: DO NOT attempt to generate or compute IBAN by yourself or using any third party tools. Only your bank can provide you true and accurate IBAN. If you use incorrect IBAN then either payment will be rejected or you will penalised extra for defaulted payments. The algorithm published only for your understand and may not guarantee you true and accurate IBAN number.

You should use your IBAN & BIC for invoicing and for instructing a foreign bank to make payments to your account. The IBAN & BIC should be used instead of account number and branch detail in cross border payments. Always quote BIC/SWIFT code of the institution along with IBAN.

What are the costs for using IBAN in bank transfers?

Ever since july 2003, most of cross border european union payment transactions between european banks are processed and validated by means of IBAN account numbers. The significant advantage of sending payments using IBAN, the payment transaction between these countries are considered domestic and it would cost you less, but under the following conditions...

1. The Payment is made in EUR currency.
2. The total amount is less than EUR 12'500.
3. IBAN account number is specified along with BIC/SWIFT code of institution.

Please consult your bank for charges involving IBAN as it varies specific to countries and currency involved.

Can i also quote IBAN if my payment is sent outside the EU?

If you are sending payments outside europe, for example to USA or Asia, it is unlikely that the payer's country banks will use IBAN system since IBAN is used widely only within europe. Therefore it is not required to send them your IBAN. All you need to give the payer is..

• Account number
• BIC/SWIFT code of Institution

How about receiving payments using IBAN ?

If you receive funds within EU & EEA, then you should give to payer:

• IBAN account number
• BIC/SWIFT code of Institution
• Bank name and Address

If you receive funds from outside europe, then you have to give the payer

• Account number
• BIC/SWIFT code of Institution

The only difference of using IBAN is your bank will levy you only domestic charges, instead of foreign transfer. If you prefer not to quote IBAN and prefer only account number and swift code, the payment will not be considered as foreign payment and appropriate charges will be levied. Some banks will charge EUR 20 to EUR 35 for foreign transfers.

Will Banks outside of the Europe area accept an IBAN?
An IBAN can be used instead of your account number. Any bank will simply pass on the 'account number' as they are given it. All banks in the International Payments community should be aware of IBAN initiatives, even if their country is not using IBAN formats at present. They should therefore accept your IBAN & BIC instead of your usual account number and sort code.

Useful Links

1. Wikipedia: IBAN Wiki definition on IBAN
2. ECBS European committee for banking Standards IBAN reference and published reference for all countries in europe.
3. IBAN checker and calculator A free IBAN calculator and validator (for German, Austrian and Belgian banks)
4. A free IBAN decoder (for all countries)
5. Official BIC/SWIFT code reference for Institutions Worldwide