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IBAN and SWIFT Differences Explained

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Last editedOct 20212 min read

If you’ve ever purchased anything online or transferred money internationally then you’ve definitely either used an IBAN or a SWIFT code. They are the lines of code that run behind the scenes, ensuring that your finances are secure and that your bank account can communicate safely with the seller. Are SWIFT and IBAN the same? Not exactly, but there are certainly a number of important similarities.

Whatever the size your business, you are going to be either buying or selling online so it’s in your best interests to understand both of these codes. Here, we’ll be taking you through not only why and how they work, but the fundamental and important differences between them.

IBAN vs SWIFT code

SWIFT (Society for Worldwide Interbank Financial Telecommunication) codes consist of between 8 and 11 characters and are made up of four sections: The bank code, which is in letters only, the country code, also in letters only, the location code, which is in letters and digits, and the branch code, also in letters and digits.

These numbers are given to every bank account and act essentially as the address for that account. The bank code denotes which bank you belong to, the country code denotes the country of origin, the location denotes the more specific location of your bank and the branch code is the specific branch that you signed up with. Note that even “neobanks” with no physical bricks and mortar presence will still have a branch code.

A SWIFT code is required whenever you make an international money transfer and is used not only to send or receive money, but to verify the legitimacy of your account and the account that is sending or receiving. It provides a network that allows banks from anywhere in the world to send and receive payments securely.

An IBAN (Internal Bank Account Number), meanwhile, is used to define the bank you’re using to make the transfer or payment. It is made up of between 7 and 9 characters and starts with a two-digit country code (much like a dialing code), followed by two numbers and then between three and five digits or letters.

The key difference between IBAN and SWIFT codes is that the latter identifies the specific account, whereas the former identifies only the bank. However, the IBAN also includes a great deal of more specific information that is important when sending money internationally. All foreign exchange platforms, for example, always require an IBAN. This is because the IBAN not only verifies the bank, but also acts as a method of checking all the details are correct within the transaction.

What did we use before SWIFT and IBAN?

Before these identification methods were introduced there were no standardized methods to speak of when it came to identifying and verifying bank accounts. This meant that the method used by one country was not necessarily recognized by another and that made sending payments complicated and laborious.

The lack of standard practice also meant many payments ended up being delayed while identification could be confirmed or were sent to the wrong account entirely. This resulted in costs to both the sending and receiving banks, and is what inspired the introduction of the SWIFT and IBAN standards in the 1970s.

We Can Help

If you’re interested in finding out more about IBAN, SWIFT Codes, or any other aspect of your business finances, then get in touch with our financial experts. Find out how GoCardless can help you with ad hoc payments or recurring payments.

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