International Bank Account Number (IBAN) Definition
An IBAN or International Bank Account Number is necessary to identify your bank account if you wish to send money to a foreign country within the EU. But what is an IBAN? The European Banking System developed the IBAN as a standard way of numbering and identifying bank accounts from other countries.
A Little More on International Bank Account Numbers
Contrary to what most people believe, having an IBAN does not mean that the code replaces the bank account number given by your banking institution. In fact, an IBAN simply offers a way for other people to identify payment and payment sources that are made from a foreign country.
The IBAN has a certain format that is characterized by a two-letter country code followed by two check digits. It then has alphanumeric characters that can be as long as 30 characters. These 30 characters after the check digits is known as the Basic Bank Account Number (BBAN). The BBAN is unique to each country as the banking system in a country chooses the BBAN that they use for their bank accounts. It is, however, worth noting that the IBAN standard is mostly used in European countries but its popularity has been on the rise.
Some examples of countries that use the IBAN system include:
- Albania: AL35202111090000000001234567
- Cyprus: CY21002001950000357001234567
- Kuwait: KW81CBKU0000000000001234560101
- Luxembourg: LU120010001234567891
- Norway: NO8330001234567
One of the main reasons for the formation of the IBAN standard is the different standards of identifying bank accounts in each country. Since there are different variation in account numbers, routing codes, bank branches and even codes that represents the banks, it was easy to misinterpret as well as omit information when processing payments. The need to integrate al this information brought about the need for the IBAN.
Following these logistical challenges, the International Organization for Standardization published the ISO 13616:1997 in 1997 to align the process. While this was the start of developing the IBAN, the European Committee for Banking Standards believed that it was impossible to work with the 1997 ISO version. This made them publish a smaller version that was later replaced by ISO 13616:2003. However, the current ISO standardswere revised in 2007. It mainly provided that IBAN elements should be uniform to allow data processing in finance as well as other industries. These revised standard did not outline how internal procedures such as file organization, language and media storage should be conducted.
References for International Bank Account Numbers
Academic Research on International Bank Account Number (IBAN)
- Re-engineering Payment Systems for the E-world, Leinonen, H. (2000). A lot of changes are being experienced in the financial payments industry due to an improvement in network technology and real-time processing of transactions. This paper recognizes this trend and explicates the need for introducing international payment standards and content of payment. It proposes that any subsequent development of payment systems in future should consider the need for an international payment system. To achieve this, the author proposes that financial institutions and other participants should cooperate. Regulators are also expected to re-engineer the current payment systems and ensure they max out the potential of contemporary.
- Optimised to fail: Card readers for online banking, Drimer, S., Murdoch, S. J., & Anderson, R. (2009, February). In International Conference on Financial Cryptography and Data Security (pp. 184-200). Springer, Berlin, Heidelberg. The high amount of losses incurred from online banking fraud prompted the introduction of the Chip Authentication Programme (CAP) by European banks. With this programme, a vendor uses a handheld reader to generate a one-time code for log in and transaction approval authentication. While people believe this is a safe technology, we reverse engineered the card readers and offer the first public scrutiny of this technology. In this scrutiny, a lot of challenges and design errors were found including reusing authentication tokens, overloading data semantics etc. A couple of policy errors were also found such as the move from signature to pin that shifted the liability from banks to clients. CAP also brings about this problem.
Developments in retail payment systems, Leinonen, H. (2001). Information, Press & Library Services CH-4002 Basel, Switzerland, 61.There has been significant changes in retail payment systems over the last few years. All these development bring about easy and effective payment options but also have some challenges facing them. This paper highlights some of the crucial developments that have been experienced in retail payment systems.
Electronic finance and monetary policy, Hawkins, J. (2001). BIS papers, 7, 98-105. This is a report on the workshop on eletronic finance that was convened in 2nd and 3rd july 2001. The mentioned workshop was convened due to the increased influence of technology in how financial services are delivered. It is believed that e-finance will improve efficience in the technology industry but it also faces some challenges to financial stability. The workshop brought together people friom diverse backgrounds including practitioners, central bankers and even academics. The workshop covered the current and potential changes in financial institutions, payment systems and exchange systems. Other important topics covered include virtual banks, emerging competition and wholesale financial services.
IT-based usury-free financial innovations, Bidabad, B., & Allahyarifard, M. (2010). In Proceeding of ECDC 2010, 5th International Conference on e-Commerce in Developing Countries: with focus on e-Banking & e-Insurance. While there have been various developments experienced in financing both conventional and islam financing, the use of EFT as borrowed and non-borrowed methods of finance has not been explored fully. The use of Real Gross Settlement System (RTGS), Scripless Security Settlement System (SSSS), Automatic Clearing House (ACH) and International Bank Account Number (IBAN) is not sufficient to enhance global payments transfer. The paper looks at the current types of project financing and proposes the introduction of a new e-financing mechanism with non-usury instruments in the form of a Profit and Loss Sharing (PLS) banking. The Non-Usury Scripless Security Settlement System (NSSSS) can help build non-usury financial innovations including future certificate in Jualah Financing System (JFS), Musharekah and Pazirah certificates in PLS banking and Non-Usury Bonds (NUB).
Competition and regulation in European retail payment systems, Kemppainen, K. (2003). This study explores the relationship between competition and cooperation and regulation of retail payment systems. This nexus is assessed from the theory of network industries since the payments industry is seen to have a lot of similarities with network industries. The primary function of regulators in the payment systems industry is to ensure there is a level playing field for all operators. The study also proposes that regulators should offer incentives for both investment and innovation into the industry. Kemppainen also proposes that cooperation between different players in this industry should also not be restricted.
Eurocode 7 Workshop–Retaining wall examples 5-7, Simpson, B. (2005).In Proceedings of International Workshop on Evaluation of Eurocode (Vol. 7). This is an analysis of three retaining walls designs that were being compared. The research reveals that there are massive disparities in the results even when there were deliberate efforts to use the same design approach. Some of the possible explanations given include different interpretation of the problem. Errors made during the calculation and the use of different calculation methods. It appeared that even the smallest variations in earth pressure coefficients often lead to large differences in the final outcome. This outweighed the effects of choice during design.
The impact of ATM transactions and cashless payments on cash demand in Austria, Stix, H. (2004). Monetary Policy & the Economy, 1(04), 90-105. One of the main reasons for conducting this study was to find out the amount of cash inventories among austrians and how ATM transactions affect the demand to cash. It found that the amount of money held by the sample was only 10% of the money that is in circulation. It was also found that this group had smaller amounts of cash than those who do not use ATMs. Another objective of the study was to find out the impact of cashless payments on the use of cash. Despite the rise in use of cashless means of payment, it was found that cash payments still made up 70% of the share of payments. While it was found that cashless payments and use of ATMs will grow in the future, it will take a while for cash withdrawal and payment habits to change completely.
The Role Of Uncitral Texts In Promoting A Harmonized Legal Framework For Cross-Border Mobile Payments, Castellani, L. G. (2012). Wash. JL Tech. & Arts, 8, 265. It is essential to set up a legal environment to support mobile payments and other financial services. It is also vital to build a legislative environment that supports the legal status of electronic communication and even banking. This paper highlights some of the existing UNCITRAL texts on payments while looking at how these can be revised to accomodate electronic commerce as well. The paper also proposes that the needs of SMEs should be put into consideration since these are most likely to benefit from the mobile payment services.
Defining a payment services hub, Bareisis, Z. (1970). The Journal of Internet Banking and Commerce, 16(1), 1-16. The concept of a payment services hub has been gaining traction all around the world since its acceptance as a contemporary banks’ payment architechture. Despite this growth, there is still a lot of confusion over its definition and other related terminologies. This paper offers a visionary definition of a payment services hub while also clarifying the meaning of other key terms. You will also find the description of the four common types of payment service hubs that banks are currently practising.
Towards e-banking: the evolution of business models in financial services, Bask, A., Merisalo-Rantanen, H., Tinnila, M., & Lauraeus, T. (2011). International Journal of Electronic Finance, 5(4), 333-356. E-banking has brought about a lot of changes in the financial services industry. This paper highlights the evolution of business models in the retail, banking and even insurance sector. It asserts that banking services has been expanded to include insurance, expert services and asset managment. The advent of new technology and deregulation has also made it possible to free competition and make payments services a global affair. These findings not only add to previous literature on the matter but also help practitioners to improve their business models.
IBANs or IPANs? Creating a Level Playing Field between Bank and Non-Bank Payment Service Providers, Górka, J. (2016). In Transforming Payment Systems in Europe (pp. 182-213). Palgrave Macmillan, London. The legislative bodies in Europe through different acts such as the Payment Services Directive and the second Electronic Money Directive aim to enhance innovation and boost competition. Previously, banks were also part of payment service providers, which made them face marginal competition. With the new laws on payments in Europe and the willingness of clients to adopt these innovative services, it has become crucial to level the playing field between the old and the new participants.
The Single Euro Payments Area: A strategic business opportunity., Barbas, J. C. (2009). Journal of Corporate Treasury Management, 2(3). This article outlines some of the benefits to be accrued by the Single Euro Payments Area (SEPA). It asserts that the best way to gain benefits from SEPA is by adopting a strategic approach to it. Using SEPA, the paper describes 7 strategic steps to help save money and to get a strategic cash management advantage.