SWIFT Code vs IBAN: Which is Better for International Transfers?

Introduction

When it comes to international money transfers, you have probably come across terms such as SWIFT Code and IBAN. These are two commonly used codes that facilitate the process of transferring money between banks globally. However, many people are still unsure about the differences between SWIFT Code and IBAN and which one is better to use for international transactions. In this article, we will explain the differences and help you decide which one to use.
 
 

What is a SWIFT Code?

A SWIFT Code is a unique code used to identify a specific bank or financial institution in international transactions. This code is used to transfer money between banks across borders and is made up of 8-11 characters.
 
 

What is an IBAN?

An IBAN (International Bank Account Number) is another unique code used for international transactions, but it is more specific than the SWIFT Code. The IBAN is made up of up to 34 characters, including the country code, bank code, branch code, and account number. This code helps ensure that the funds are transferred to the correct bank account and prevents any errors that may occur during the transfer process.
 
 

What are the key differences between SWIFT Codes and IBANs?

While SWIFT codes and IBANs serve similar purposes in facilitating international banking transactions, they are designed to fulfill different needs within the global financial system. Here’s why both are used instead of just one:

• Historical Context: SWIFT codes have been in use since the 1970s and were developed primarily for routing international transactions between banks. They have become a standard in global banking systems. IBANs, on the other hand, were introduced later, primarily in Europe, to streamline and standardize cross-border payments within the Single Euro Payments Area (SEPA) and eventually adopted by some non-European countries for international transactions.
• Geographical Differences: While SWIFT codes are used globally and recognized by banks worldwide, IBANs are more prevalent in Europe and certain other regions. European countries have adopted IBANs as part of SEPA regulations to simplify and enhance the efficiency of cross-border payments within the region. However, not all countries outside Europe have adopted IBANs universally, so SWIFT codes remain essential for international transactions involving those countries.
• Different Functions: SWIFT codes and IBANs serve different functions in international banking transactions. SWIFT codes identify banks and branches, ensuring that transactions are routed correctly between financial institutions globally. IBANs, on the other hand, identify specific bank accounts within a country, ensuring that funds are credited to the correct recipient account. Both are necessary for the smooth processing of international transactions, with SWIFT codes used for routing and IBANs used for account identification.
• Legacy Systems: Despite efforts to standardize and streamline international banking systems, legacy systems and differing regulatory frameworks in different countries contribute to the continued use of both SWIFT codes and IBANs. Changing these systems entirely would require significant coordination and investment from financial institutions worldwide.

While the use of SWIFT codes and IBANs may seem redundant in some cases, they serve different purposes and have evolved within different geographical and regulatory contexts. Both are essential components of international banking transactions, ensuring the smooth and efficient flow of funds across borders.
 
 

SWIFT Code vs IBAN: Which is better for international transfers?

In terms of which is “better,” it’s not really a matter of one being superior to the other. Both SWIFT codes and IBANs serve different functions in the international banking system. For an international B2B transfer to be successful, both the SWIFT code of the recipient’s bank and the IBAN of the recipient’s account are typically required.
 
 

How to find a SWIFT code or IBAN for your international transfers?

Banks use SWIFT codes and IBANs to verify the legitimacy of transactions and ensure compliance with regulatory requirements. Mistakes in international transfers, such as using incorrect codes, can incur additional fees and charges.

Getting the right codes helps avoid unnecessary expenses associated with failed or delayed transactions. To minimize disruptions to your next international payment, you should always verify each of your SWIFT codes before initiating your international transaction. Ensure your international payments are error-free with Veem’s free online IBAN Lookup Tool.
 
 

How can Veem help?

We use Multi-Rail Technology, a sophisticated payment routing model that optimizes delivery, gives control back to businesses and provides them with an unprecedented payment experience. Payment Rails are chosen based on a combination of things, such as sending and receiving country, currency, amount and speed. Our goal is to find the most effective and efficient way for businesses to send money.

Because of this the information needed from you could differ depending on your location. Whether we need a SWIFT Code or an IBAN, Veem takes the guesswork out of it for you. When creating your account, we will always make sure that the correct bank information is collected, depending on your banking country!
 
 

Conclusion

In conclusion, both SWIFT Codes and IBANs are essential for facilitating international transactions. While SWIFT Codes are widely accepted globally, IBANs are mandatory in some regions, including the EU. The choice between SWIFT Code and IBAN ultimately depends on the nature of the transfer and the countries involved. To ensure a smooth and secure transfer, it is important to double-check the codes before initiating the transaction and ensure that all the necessary information is provided. Ready to let Veem help you with all of your international payments? Sign up today!