It's easy to feel lost in the fray when it comes to banking language, but regardless of your money management needs or financial goals, it's important to be in the know.
If you're a business owner or sole trader new to money management, IBAN, SWIFT, and BIC will probably sound familiar to you even if your paths have never crossed. But for many, getting to the core of what these codes *precisely* are - and when to use them - is a different matter.
Despite a common misunderstanding, the IBAN, SWIFT, and BIC aren't interchangeable codes for the same task; they will almost certainly play a vital role in most businesses' money management (hello, international payments) and keep your finances safer and more secure when trading overseas.
The good news is getting to know the difference is easier than you might think. If you're new to the terms, we're here to help break them down for you.
Stands for: International Bank Account Number
Used for: simply, this helps identify where the account you're trying to send money to is located. So, if one of your vendors is based in Denmark and you need to get their fee paid pronto, you'll likely need their IBAN (and BIC - more on that below) code to get moving.
An IBAN code can also be used to add a layer of security to your international payments. Though it won't protect you and your money from all security risks, it will help ensure your transaction details are correct before sending.
Used in: most countries still in the EU will use an IBAN code, but there are several exceptions and additions to this - including countries in South America, Africa, and the Middle East.
Finding an IBAN code: this is one for your international vendors or suppliers. The IBAN should be front and center along with the account number and sort code of the account they wish to use for transactions. You can also ask for the IBAN when you're raising a PO to remove half the effort during the invoicing week.
And if you don’t already have an IBAN code for your bank account, you can just as easily create one online to use for all your overseas invoicing. If you think you might already have one, it'll usually be on your banking statement.
Stands for: Society for Worldwide Interbank Financial Telecommunication
Used for: similarly, this identifies the bank to which an international payment is being sent, where that bank is located, and a number of other pieces of information.
But this is different: SWIFT is a universal financial messaging system and has the ability to transmit a large proportion of financial data. This can include the status of the account and details of the transfer. No, it doesn't mean anyone sending you money can discover anything about your account. But it does help financial institutions complete their due diligence.
Used in: global countries.
Finding a SWIFT code: luckily, finding a SWIFT code is fairly straightforward. You can speak with your banking representative who will be able to source this for you, or simply use a search tool online.
Stands for: Business Idententifier Code
Used for: a BIC number is sometimes referred to as a SWIFT and vice versa: an identifying code that tells you which bank you're sending your payment to and where.
There are two types of BICs: those connected to the SWIFT network and those that aren't. You might want to dive into this further another time, but the general difference is that those which aren't connected are used for reference, rather than for passing financial data.
Used in: global countries
Finding a BIC: much like finding a SWIFT code, you can find a BIC through online search tools or by speaking with your bank.
In increasingly global trading routes, there will likely be a time in your business' growth where you will need to accept or make international payments.
Whether that's because you've found a great digital partner in Pakistan, or secured a new client in Chile. And doing so safely and securely is vital to keeping your finances safe.
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