Going international is a great way to grow your business. Expanding into new markets overseas can boost revenue, grow your company's talent pool, and avoid the risks of doing business in just one country. However, establishing your firm in a new region isn't always easy.
One issue you may encounter early on is how difficult it can be to make international payments. Blockages, delays, high fees for currency exchange - banks don't make it simple!
Fortunately, IBANs make this part of international trade a lot simpler.
What is an IBAN?
IBAN stands for International Bank Account Number. An IBAN is a calling card for a specific bank account in a particular country.
If you have someone's IBAN, you can send money to their account from anywhere in the world. If someone has your IBAN, they can send money to yours. Since IBANs can only be used to send funds - not withdraw them - there's no security risk in sharing your IBAN with business contacts.
IBANs are different from bank account numbers. While they contain a bank account number, they also contain information like country, bank, and specific bank branches.
For example, if you want to send a payment from a UK bank to a German bank account, it's not enough to just have a German bank account number. A UK bank won't recognise the German account number as the format is different to local accounts.
IBANs offer the solution. Combining all the necessary information in a simple, internationally recognised format provides a bridge between bank accounts in different countries. So, by using an IBAN, your bank can say, "This is not a British bank account. This is a German bank account located at this specific address," and then make the payment.
IBANs also smooth out international transfers by avoiding transcription errors, delays, or rejected payments (and the payment reversal fees that come with them). When running a global business, you must pay and get paid on time.
What do IBANs look like?
IBANs are a string of up to 34 letters and numbers. The length can differ slightly because bank information (like account or branch number) is written differently in different countries. Regardless of length, all IBANs follow the same format.
The first two letters of the code will always represent the country - NL for the Netherlands, for instance. Two check digits follow this. These digits ensure the rest of the IBAN is written correctly (if the format isn't valid, the payment won't go through). The remaining characters cover the bank name, branch, and account number.
Who uses IBAN?
IBAN was first developed in 1997. In 2014, it was adopted across the European Union to make payments between Eurozone countries easier. Today, IBANs are a critical component of SEPA. Most European countries, along with some in the Middle East and the Caribbean, use IBAN.
The US, Canada, and Australia are three major countries that don't use IBAN. However, they do recognise the system. If you live in Canada and want to send money to an IBAN in Sweden, you can. However, you can't receive an IBAN payment in Canada from Sweden.
If you live in a country that uses the IBAN system, your bank will issue your IBAN.
IBAN vs SWIFT
Like IBAN, SWIFT is a major international payment system. SWIFT stands for Society for Worldwide Interbank Financial Telecommunication.
Despite the longer name, SWIFT codes are much shorter than IBANs - between 8 and 11 characters. This is because they include less information.
Both IBANs and SWIFT codes point to specific bank locations in specific countries. The difference is that IBANs identify a specific bank account at that bank - a SWIFT code doesn’t.
A related term you may have seen is BIC (Business Identifier Code). BIC and SWIFT are used interchangeably. BIC is the official name for an individual SWIFT code, whereas SWIFT refers to the overall system.
When making international payments, IBANs and SWIFT codes are often used together. For example, when sending money across borders with a 3S Money account, you'll need both the recipient's SWIFT and their IBAN. This helps confirm the destination of the payment and ensure it arrives on time.
How to find an IBAN number?
If you live in one of the 70+ countries that use IBAN, finding your number may be as simple as looking in your wallet, as some banks print it directly on their cards.
If not, you'll probably find it on your bank statement or online banking app. If you’re still unable to find your IBAN, your bank can provide it for you.
Finally, because the system is standardised, online generators can create an accurate IBAN for you. All you'll need is the appropriate country code, sort code, and account number. You can find an IBAN calculator on the official IBAN website.
If you’re looking for local IBAN solutions for your business, look no further than a 3S Money International Business Account.
How local IBANs can help you scale your business globally
Let’s say you’re a UK-based business and you’ve found a fantastic market opportunity in the Netherlands. After researching the local laws and registering your business, you’re ready to launch.
Receiving and sending payments in Euros may be difficult without a recognised European or Dutch business account. Trading in local currency is a good business practice when operating in different countries.
Opening a business account as a foreign national is difficult. Banks are naturally risk-averse to non-residents, and many applications are rejected or delayed. You'll have to pay significant fees when converting Euros to pounds even with a local bank account. Banks usually have an important foreign exchange markup, which helps them make a healthy profit on every transaction.
Having a local IBAN is almost the same as having a bank account in the country you're doing business in. It helps establish a direct connection to local financial networks, makes paying local distributors and employees easier, and inspires consumer confidence.
Local IBANs are a lot easier to set up than local bank accounts. All you need to do is open a 3S Money International Business Account.
Open a 3S Money International Business Account
With an International Business Account from 3S Money, you'll be able to easily create multiple Local EU IBANs, a UK sort code, and a US routing number in your company's name.
With the broadest global coverage of any provider, you'll be able to send and receive payments in 65+ currencies and 190+ countries. With a single platform to manage all your business accounts, you can start trading globally and paying locally across borders in seconds.