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What are IBANs and BICs?

What are IBANs and BICs?
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IBAN isn’t a German motorway (that would be autobahn), and BIC isn’t just a type of ballpoint pen. The acronyms actually stand for International Bank Account Number (IBAN) and Bank Identifier Code (BIC).

What’s the point of an IBAN?

An IBAN simplifies international payments by letting your bank process transactions automatically, ensuring cross-border payments are both quick and secure. So, for example, if you were a self-employed web designer with clients in Austria, it would be just as easy for them to pay you as for someone in Andover.

All European Union (EU) countries use IBAN, but the system has also been adopted by several other nations like Cyprus, the Dominican Republic, Costa Rica and Turkey. Neither the USA nor Canada utilise IBANs in their own banking structures, but they do use the system to process international transactions.

What do the characters in an IBAN mean?

Your IBAN takes your sort code and account number and adds a few more characters into the mix. At first glance, an IBAN looks just like gobbledegook, but, like a good dance routine, it can be broken down in a few easy steps. 

So, here’s what it might look like: GB15BUKB20152912345678.

And here’s what it actually means:

  • Country code: GB
  • Validation number: 15. Every account has a different number, which is created using a smarty-pants algorithm called MOD97. This is used to check your IBAN is genuine; if it isn’t, the transaction won’t be processed.
  • Bank identifier: This shows which bank the account belongs to. In this example, BUKB is Barclays.
  • Sort code: The next six numbers are your sort code, in this case 20 15 29.
  • Account number: This is the last set of digits; here it’s 12345678.

So, if we have IBANs, why do we need BICs?

OK, so an IBAN provides information about your individual account, whereas a Bank Identifier Code (BIC) identifies the… bank that your account is held at. Countries that recognise the IBAN system will ask for both the IBAN and the BIC.

The BIC system pre-dates IBAN and is used as part of something called SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunications. SWIFT is essentially a way for banks across the world to talk to each other about upcoming transactions (like an exclusive chatroom, but without any interesting topics). BIC is used in conjunction with SWIFT, so the terms BIC, SWIFTBIC, SWIFT Code and SWIFT ID are actually all the same thing.

A BIC in the UK is made up of three parts and looks like this: HBUKGB6H.

In this example, the components are:

  • Bank code: HBUK (the code for HSBC)
  • Country code: GB
  • Branch code: 6H

For countries that don’t use IBANs (like the US and Canada), the SWIFTBIC system can be used instead. But don’t forget – you’ll also need the account number of the person you want to send money to, because the BIC only identifies the bank not the individual account.

Where do I find my IBAN and BIC?

These codes are probably hiding in plain sight – some banks such as Barclays and NatWest already show the IBAN and BIC on your statements. Alternatively, if you manage your account online, you might find them in the account information section.

You can also generate your own IBAN and BIC; your bank might have its own generator on its website, or you could use one of the many IBAN/BIC generator websites.

If that sounds too much like financial jiggery-pokery, then you can request your IBAN and BIC directly from your bank.

Is giving out my IBAN and BIC risky?

On the whole, no it’s not. The BIC contains fairly generic information about who you bank with and at which branch, but no more than that. And while your IBAN does reveal your sort code and bank account number, these are really only useful to anyone putting money into your account rather than for taking it out. Plus, let’s not forget that your sort code, account number and the name of the branch you bank at are printed on your cheques.

Someone who really, really wanted to use your account for less than honest reasons is likely to need your PIN or the card verification value (CVV) number on the back of your debit card, as well as the card’s expiry date. 

Stay money wise

If you don’t have friends or family abroad or work with overseas clients, you might never need an IBAN or BIC. However, a little bit of knowledge goes a long way, and with this information about IBAN and BIC you can dazzle everyone with your understanding of the international banking system.

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The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.