IBAN Verification: What Is It and How Does It Work?

Financial institutions used to struggle in the past when verifying IBAN numbers and confirming account holder details because businesses used to do it manually which is time consuming and prone to human errors.

As time passes and more people start using international transactions, it becomes very risky to verify IBANs manually since the International Bank Account Number (IBAN) is crucial to making these transactions smooth and error-free. The IBAN checker and verification process determines the level of smoothness, correctness, and quickness when cross-border payments are processed.

However, it is important to mention that IBANs are not used everywhere; they are mainly used in Europe, the Caribbean, Africa, and parts of the Middle East. Other non-IBAN countries might use SWIFT codes or other systems for processing international transactions.

What is an IBAN?

An International Bank Account Number (IBAN) is made up of several components that are designed to identify bank accounts across international borders. The specific length and format of an IBAN differ from country to country. For instance, both a German IBAN and a UK IBAN have 22 characters, but they contain different information within their structures. The structure of an IBAN includes:

• Country Code: A two-letter code representing the country.

• Check Digits: Two digits used for IBAN validation purposes.

• Bank Identifier: A code that identifies the bank.

• Account Number: The unique number of the individual account.

IBANs are important for SWIFT (Society for Worldwide Interbank Financial Telecommunication) and SEPA (Single Euro Payments Area) transfers. SWIFT is a network that banks use to send secure messages about money transactions around the world, and SEPA is a project by the European Union to make sending euros across countries as easy as sending money within one country.

When you send money internationally, the IBAN makes sure the money goes to the right bank and account. It standardizes the process, making it smoother.

The IBAN accurately identifies the bank and account details, reducing mistakes. For example, a wrong digit in a regular bank account number can cause delays and problems, but the IBAN's structure and verification help avoid these issues.

If the IBAN is wrong, transactions can fail, be delayed, or cause financial losses. Checking and verifying IBANs is crucial to ensure international payments go through smoothly and correctly, protecting both the sender and the recipient from potential problems.

IBAN Format in Saudi Arabia:

• Country Code: SA

• Check Digits: 2 digits

• Bank Identifier: 2 letters representing the bank

• Account Number: 18 digits

This example demonstrates how the IBAN system encodes critical information about the account and the bank in a standardized format, which facilitates international transactions.

• Country Code (SA): Indicates the IBAN belongs to a Saudi Arabian bank.

• Check Digits (03): Used for IBAN validation.

• Bank Identifier (80): Specific to the bank (National Commercial Bank in this example).

• Account Number (000000608010167519): The individual’s bank account number.

Read more: Anti-Money Laundering Compliance in Saudi Arabia: An Overview

How IBANs Are Assigned

National banking authorities are responsible for assigning IBANs based on standardized formats. Let’s take a look at the following examples:

• In Germany, the IBAN is generated by banks according to guidelines set by the Bundesbank.

• The UK’s IBANs are assigned following protocols by the British Standards Institution.

In Saudi Arabia,

• Standardized Format:

• The Saudi Central Bank (previously known as SAMA) has adopted the IBAN format as per ISO 13616-1:2007 standards, ensuring compatibility with international banking systems.
  

• Bank-Specific Implementation:

• Individual banks in Saudi Arabia are responsible for generating IBANs for their customers. Each bank follows the guidelines provided by the Saudi Central Bank to ensure that the IBANs are correctly formatted and unique.

What is IBAN Verification?

IBAN verification checks if an International Bank Account Number (IBAN) is correct and follows the rules. This means looking at its format, length, and structure to make sure it meets international banking standards.

How Does IBAN Verification Work?

IBAN verification makes sure the IBAN linked to a bank account is structured correctly and valid. Here's how it works:

1. Entering the IBAN: Users type in the IBAN they want to check and verify. This can be done manually by entering it into a form or automatically through a connected system/verification tool.

2. Format Check: The verification system looks at the IBAN format to ensure it fits the right structure for that country. It checks the correct length, country code, and specific characters.

3. Validating Check Digits: IBANs have check digits, which are numbers calculated from the other digits in the IBAN. The system recalculates these check digits and compares them to the ones entered. If they match, the IBAN is likely valid.

4. Verification of Country Code and Bank Identifier: The system checks the country code and bank identifier in the IBAN to make sure they are real and belong to a known bank in that country.

5. Confirmation of Account Number: Not all systems verify the actual account number, but some might check it with the bank's records to see if it exists.

6. Result Presentation: After the verification, the system shows a result saying if the IBAN is valid or invalid. If valid, it may also provide supplementary details such as the country, bank, and associated account information.

Learn more about Customer Verification with FOCAL

Methods of IBAN Verification

IBAN validation can be done manually, but automated tools offer more efficiency and accuracy. These tools validate IBAN numbers using algorithms that confirm their structure and correctness.

1. IBAN Checker

An IBAN checker is a tool that validates IBANs and verifies their validity. Users input the IBAN, and the IBAN number checker tool verifies its structure and correctness against the country-specific format. These tools are widely available online and are easy to use.

2. IBAN Validator

An IBAN validator goes a step further by not only checking the format but also validating the IBAN through algorithms that ensure the checked digits are correct. This ensures a higher level of accuracy in verification.

It can verify if the IBAN is associated with the correct person by matching it with the provided ID number, similar to how we can check if someone's IBAN matches their associated ID.

3. IBAN Lookup and IBAN Decoder

IBAN lookup and IBAN decoder tools provide detailed information about the bank and account associated with the IBAN. By inputting the IBAN, users can decode it to get insights into the bank branch and account details, aiding in thorough verification.

IBAN Verification with FOCAL

FOCAL IBAN verification process ensures the authenticity of bank accounts by cross-referencing the Bank Code, IBAN, and Customer ID. The verification process works as follows:

1. Data Input: The system receives the IBAN and corresponding Customer ID (such as ID/Iqama or CR number).

2. Cross-Referencing: The provided information is cross-referenced against authoritative databases to confirm the account's validity.

3. Matching Process: The system matches the provided ID/Iqama against the IBAN.

4. Confirmation: A successful match returns a confirmation status of TRUE along with the account holder's name, guaranteeing the integrity and ownership of the account.

This automated process reduces the risk of errors and fraud, ensuring that the bank account details provided are accurate and belong to the correct individuals or businesses.

It is worth noting that the advanced IBAN verification services from FOCAL offer bulk verification, allowing you to check IBAN numbers simultaneously, which is useful for businesses handling numerous transactions.

Key Benefits of IBAN Verification with FOCAL

1. Improved Precision: By automating the verification process, FOCAL minimizes errors in transaction processing, enhancing the accuracy of financial operations.

2. Enhanced Fraud Protection: FOCAL Fraud Prevention dramatically reduces the likelihood of fraudulent activities by confirming the authenticity of bank accounts, thereby safeguarding assets.

3. Increased Efficiency: Streamlining verification processes saves valuable time and resources previously allocated to manual checks, allowing financial institutions to focus on core activities.

4. Strengthened Trust: By ensuring the security and accuracy of financial processes, FOCAL elevates customer confidence, enhancing the overall trust in the institution.

5. Effortless Compatibility: The IBAN verification product seamlessly integrates with existing financial systems and workflows, ensuring smooth operations without significant disruptions.

Conclusion

As global banking continues to evolve, the importance of IBAN checker best practices will only grow. Adopting advanced verification technologies and staying updated with regulatory changes will be crucial for financial institutions and businesses.

FOCAL's IBAN Verification efficiently addresses the challenges posed by manual verification processes. By automating the verification of IBANs and matching them with customer IDs, FOCAL enhances the precision and efficiency of financial operations and significantly reduces the risk of fraud.  

FAQs

Q1. How do I verify an IBAN?

To check if an IBAN is valid, you can use online services from banks or other financial websites. These IBAN verifier services use math algorithms to check IBAN’s number format, length, and correctness.

Banks and other financial institutions use special software or systems like FOCAL IBAN Verification. These tools are connected to their databases and do various checks to make sure the IBAN is legitimate.

Q2. What details are needed for IBAN checkers?

To verify an IBAN, you usually need the whole IBAN. This includes the country code, check digits, bank code, branch code, and the unique account number.

Q3. Can I manually verify an IBAN?

You can manually check an IBAN by looking at its structure and length for each country, but it's not recommended. It's complicated and easy to make mistakes. Automated IBAN verifier tools like FOCAL IBAN Verification are more reliable.

Q4. Are IBAN checker tools secure?

Yes, good IBAN checker tools like FOCAL IBAN Verification are secure. They use encryption to protect your data.