Every year Ukraine is getting step-by-step closer to European standards and 2019 are not an exception. We propose to consider one of the most important innovations in the banking sphere that is an introduction of the IBAN code.
Anyone who has ever made money transfers abroad or from abroad is undoubtedly familiar with the concept of “IBAN” and surely understands its purpose. The IBAN (International Bank Account Number) is the international format for the number of the current bank account of each individual customer that meets the requirements of ISO 13616 and used for international banking transfers. To say simpler, IBAN is an individual account number, formed according to the established requirements. Initially, such a standard was used only by the countries of the European Union, although, now the geography of its usage has considerably expanded. For today, such code is used more than in sixty countries all over the world.
The history of IBAN
A company which has launched and implemented the IBAN standard is SWIFT (Society for Worldwide Interbank Financial Telecommunications), which is considered as a global network that brings together banks around the world. The aim is to simplify the transfer of financial information. SWIFT is the most popular money transfer system which allows you to make such transfers between legal entities, individuals, legal entities and individuals, with a simplified procedure and a minimum of requisites. However, the transfer of funds under this system needs the presence of the IBAN. That is why this innovation is so indispensable.
It should be noted, that the usage of the IBAN code in Ukraine has begun since 2013, because of difficulties, which often arose when transferring money from EU countries. The situation was caused by the need of IBAN number of the Ukrainian recipient for making a payment.
At that time, IBAN was one of the possible ways to form the bank account number for realization of international transfers. The standard of IBAN number for Ukrainian banks was officially registered and published by SWIFT on January 28, 2016. After that, the client should just contact the bank, and easily get the IBAN code, then use it for conducting international banking transactions without any problems.
The official document establishing the mandatory usage of IBAN in Ukraine is the Board Resolution of the National Bank of Ukraine, named “About the Introduction of an International Bank Account Number (IBAN) in Ukraine”, released on December 28, 2018. The Board Resolution enters into force on April 1, 2019. The document obliges banking institutions to open accounts in IBAN format from April 1, 2019, and independently reformulate existing accounts of current clients in accordance with the IBAN standard from August 5 to October 31. When creating a new account number, the number of the payment card is not used. The IBAN code will be necessary for clients of Ukrainian banks when making all kinds of transfers: in foreign and in national currency, as well as for international payments.
The structure of IBAN
The IBAN code has a well-defined structure. The number of symbols in the code can not override more than 34 characters. Each symbol has its own definition. There is the structure of IBAN number:
- The first two characters indicate the country of bank location;
- Figures 3 and 4 – are the information about the unique IBAN code, which is calculated according to the standard ISO 7064;
- The next two characters contain the information about the BIC code of the bank;
- The remaining characters is the bank account number of the individual client.
Each country sets its standard for an IBAN. For Ukraine the number will consist of 29 alphanumeric characters. The first two letters (UA) mean Ukraine and allow immediately recognize the participating country that has joined the standard. What about the following symbols, they are the next:
- check bit, which helps to check whether the client’s account is correct or not;
- unique code of the bank;
- bank account number of an individual client.
The benefits of IBAN
The benefits of implementing a standardized IBAN account number are:
- Quick identification of the recipient and the payor, as well as the bank serving them;
- Significant reduction of bank details, which will simplify the formulation of settlement documents;
- Absence of mistakes that are often admitted in the account details;
- Speeding up the time required for money transfer and receipt of funds.
In the future, reliance of IBAN will allow the usage of QR codes containing information about the bank. It will greatly simplify the procedure for paying bills and exchanging payment information.
Also, the usage of the IBAN is intended to reduce the cost of money transfers abroad. In EU countries, the commission for conducting an international money transfer is equal to the cost of an internal transfer. With regard to necessary requisites, only the code of the corresponding bank, called BIC or SWIFT code, and IBAN number will be needed for money transfer.
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