5 October 2023 3 minutes

International funds transfer options: IBAN vs SWIFT

Want to learn how to utilise IBAN and SWIFT in your international business operations? Look no further. We provide a comparative breakdown of IBAN and SWIFT in this blog.

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Sharyh Murray

International funds transfer options: IBAN vs SWIFT

What is an IBAN?

First up we have the IBAN. IBAN stands for ‘International Bank Account Number’ and is the reference number attached to a bank account. It consists of up to thirty-four alphanumeric characters, comprised of:

A country code
Check digits
Bank identifier
Basic bank account number

How does an IBAN work?

So, how does it work? Well, an IBAN is one of the primary tools used for sending and receiving global payments (including international business payments). Its special identification codes help ensure that payment instructions are accurately directed to the right recipient's bank account. When it comes to cross-border transactions, this means reduced errors and improved efficiency.

Not only are IBANs great for accurate global transactions, but they also help businesses scale. Learn more about how a local IBAN can help with scaling your business and how to get one with a 3S Money International Business Account.

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When to use an IBAN?

Now that we’ve covered what an IBAN is, let’s delve into when you’ll need to use one.

For businesses with international operations, there are likely to be circumstances where you’ll need to use an IBAN. This includes when you are:

Sending interbank transfers
Making international payments
Receiving international payments
Verifying whether transaction details are accurate (i.e. bank account)

To generate an IBAN, you typically need the recipient's bank account details and the country's IBAN structure. Verifying an IBAN involves checking its structure, including the correct number of characters and the validity of the check digits.

What is SWIFT?

Now that we’ve covered all things IBAN, let’s delve into SWIFT and how it compares.

First things first, SWIFT stands for ‘Society for Worldwide Interbank Financial Telecommunication’. The SWIFT network facilitates trillions of dollars worth of cross-border payments in over 200 countries.

A SWIFT code is what banks use to identify one another when communicating (unlike an IBAN which identifies the actual bank account). The code itself is made up of between 8-11 alphanumeric characters, broken down into part bank code, part country code, a location code and a branch code. Here’s what it looks like:

How does SWIFT work?

When a bank or financial institution sends a SWIFT message, it contains essential transaction details and is securely routed to the recipient institution. SWIFT ensures the quick and accurate exchange of information for international payment transactions.

When should you use SWIFT?

Just like IBAN, there are specific instances where businesses would use SWIFT. They are:

When making international business payments
When receiving international business payments
To verify the identity of the bank or financial institution
For international wire transfers
When using trade finance
For messaging related to financial services

How to obtain SWIFT codes for your business

To obtain the SWIFT code for a specific bank or branch, you can contact the bank directly or use online SWIFT code directories.

It’s also worth noting the fees for SWIFT payments, as these can impact your business’s bottom line if not taken into consideration. Most payment platforms charge up to $25 to send and receive SWIFT payments from around the globe. With 3S Money, it costs only $1 to make a SWIFT payment and $0 to receive one. Check your eligibility for an International Business Account. You could be pre-approved in less than fifteen minutes.

IBAN vs SWIFT: the similarities and differences

We’ve explored IBAN and SWIFT – and you might already be recognising key similarities and differences between the two. If not, don’t worry as we’ll compare them in depth. Let’s start with the similarities:

Both IBAN and SWIFT are essential components of international transactions.
IBAN and SWIFT are used and recognised worldwide.
They help to streamline and standardise the international payments process. IBAN provides a standardised format for identifying bank accounts, and SWIFT standardises the messaging and communication protocols used by financial institutions.
IBAN's structured format helps eliminate manual errors in account numbers, likewise, SWIFT's secure messaging system minimises the risk of data entry.

Now for the differences:

The IBAN’s main purpose is primarily to identify individual bank accounts within a specific country or region whereas the SWIFT code’s main purpose is to identify the bank itself.
In terms of global use, IBANs are largely popular in Europe. SWIFT, on the other hand, is used internationally.
The two also have different functions. An IBAN is used to validate and route payments accurately, whereas SWIFT in and of itself is a messaging system that facilitates communication between banks and financial institutions.

Overview:

We’ve covered a lot in this blog, so here’s a brief summary of what you need to know about SWIFT and IBAN:

IBANs are used to identify bank accounts.
SWIFT codes are used to identify banks and financial institutions.
IBANs can help you scale to new markets.
3S Money offers IBANs in the United Kingdom, Netherlands, Denmark, Germany and Luxembourg.
3S Money charges only $1 to send business payments using SWIFT and $0 to receive.

Making international money transfers with 3S Money

Making international transactions with 3S Money is quick, easy and secure. We facilitate both IBAN and SWIFT payments to help our clients in over 190 countries reach markets around the globe with ease. We’re also FCA, DFSA and CSSF regulated to ensure your funds are safe. Ready to expand into new markets? Get started with a 3S Money International Business Account today.

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FAQs

A SWIFT code is used to identify a specific bank or financial institution, whereas an IBAN is used to identify a specific account number.
Although there is no risk of withdrawals associated with sharing your IBAN or SWIFT code, it is not advised to share this information. Always keep your banking details safe and secure.
Yes, your IBAN code is different from the sort code and account number associated with your bank account. Your IBAN code is used to help international banks identify your bank account.

Meet the authors

Sharyh Murray

Author

Sharyh is the lead Content Writer at 3S Money with a strong background in crafting high-quality, compelling fintech and FX-related articles. With extensive expertise in the field, Sharyh's writing resonates with a variety of audiences and drives action among readers, whatever the financial topic.

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