Q:

What is the difference between IBAN and SWIFT code?

A:

IBAN and SWIFT are two standardized formats to relay transactions between financial institutions. IBANs (International Banking Account Numbers) are used mostly in Europe and identify specific accounts across national borders. SWIFT (Society for Worldwide Interbank Financial Telecommunication) codes identify institutions. As of September 2014, the United States, as most of the world outside the European Union, does not participate in IBAN.

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There are over 9,000 financial institutions in over 209 countries that participate in the SWIFT network, but only 66 countries participate in IBAN. SWIFT codes, formally called BICs (Business Identifier Codes) are eight to 11 characters long, while international banking account numbers can be up to 34 characters.

Another major difference between IBAN and SWIFT is that the former facilitates payments, but the latter does not. SWIFT only submits payment orders, and in order to be facilitated, financial institutions must have a relationship with each other in order to exchange banking transactions. IBAN transactions are electronic and automatic once requested. When making transactions within the Single Payment Euro Area, which comprises all of the European Union, Iceland, Norway, Switzerland and Lichtenstein, both SWIFT codes and IBANs are required, as the first identifies the bank, and the second specifies the person's account in an international format.

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