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The Banking Basics: Your guide to terms relating to EU banking
Sometimes banking gets in its own way. It's supposed to make your life easier, but all too often it's a little too ... complex. Inscrutable. Incomprehensible.
And all the abbreviations don't really make it any better: SEPA, IBAN, SWIFT, BIC. If you don't know what these terms mean, you may feel overwhelmed at times.
But don't worry - once you deal with it, it's not that difficult to understand. Our guide explains all the important abbreviations for banking in Europe.
The IBAN is an international bank account number. It makes it easier for you to transfer money across borders. It is a standardized international system. Originally the system was only intended for countries of the European Union, but today it is also used by non-EU countries such as Brazil and Qatar.
If you have a bank account in an EU country, you will automatically receive an IBAN - regardless of whether you use it or not. It consists of up to 34 characters, although the length varies slightly depending on the country. The first two characters are letters and represent the bank's home country. The next two characters are verification numbers, which are used as a control, and finally a series of numbers that define your bank and the specific account. These numbers are very likely the same as those you use for domestic banking: namely, the sort code and account number.
An example: With N26 accounts, all IBANs start with DE, as we are based in Germany. After the two check numbers, the N26 bank code follows for all IBANs: 10011001. And at the end is your ten-digit account number.
How do you find your IBAN?
In some countries, such as Germany, the IBAN numbers are usually noted on the bank card. If this is not the case - in the UK, for example - you will find your IBAN on your bank statements. You can also find out your IBAN in online banking. As an N26 customer, you can find it under My Account in the mobile app.
BIC stands for Bank Identifier Code (or officially: Business Identifier Code). In contrast to the IBAN, this code is assigned to your bank and not to you personally.
BICs are either eight or eleven characters long. The symbols stand for the bank, the country and the place within the country. In the case of a BIC with eleven characters, the last three characters stand for the corresponding bank branch.
The abbreviation SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It facilitates international transfers between banking institutions. Most international transfers (outside Europe) are made via the "SWIFT network".
SWIFT is responsible for registering BICs (Bank Identifier Codes). This is why SWIFT and BIC are often listed together.
Are SWIFT and BIC the same?
Yes they are. They are often given as SWIFT / BIC, SWIFT-BIC, BIC / SWIFT or something similar. “SWIFT” refers to the organization that regulates these codes, while “BIC” refers to the code itself. In practice, however, they mostly mean the same thing.
How do I find my SWIFT / BIC code?
You can usually find your BIC where your IBAN is written: on your bank card or on your bank statement. The N26 BIC / SWIFT code is noted on your account statements and under My Account in the mobile app or web app.
SEPA stands for Single Euro Payments Area and means the European payment area. Countries within the SEPA area can transfer money to each other using a single system that is more efficient than the global SWIFT network. The aim is to make payments within the SEPA area as easy as domestic payments.
Which countries are part of the SEPA area?
All countries of the European Union belong to the SEPA area, regardless of their currency. In addition, Iceland, Liechtenstein, Norway, Switzerland, Andorra, Monaco and San Marino are also part of the SEPA area.
Since the United Kingdom is currently still an EU member state, it is part of the SEPA area.
What is a SEPA transfer?
A SEPA transfer is a transfer that is made within the SEPA area. It is initially subject to the SEPA and not the SWIFT system, which is intended to guarantee transparent fees and prompt receipt of payments.
To make a SEPA transfer, you need the name of the recipient and their IBAN. You may also have to provide the BIC.
How long does a SEPA transfer take?
SEPA transfers are relatively quick, but can take a little longer if currency conversions have to be made. As a rule, N26 carries out SEPA transfers in euros within one bank business day.
Are SEPA payments free?
It depends on. Banks can charge euro transfers as long as they charge the same transfer fee to all euro area countries (and that includes domestic transfers). N26 does not charge any fees for SEPA payments in euros. But since this could be the case with other banks, you should always inform yourself beforehand.
Currency conversions may also incur fees. For example, if you're sending money from the UK to a euro zone country, you may have to pay a fee to convert pounds to euros.
To ensure that the recipient receives the correct amount after deducting the fees, you should always find out about possible fees from your bank in advance.
Abbreviations like IBAN, SWIFT, BIC and SEPA may sound like a jumble of letters at first, but they should make your life easier and make international banking much more uniform, from which we all benefit.
We're trying to simplify banking. Look forward to more articles that explain the basics of banking in an easy-to-understand way - because it's often a lot easier than you think at first glance.
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