BIC and IBAN: these two acronyms are probably not unfamiliar to you but what do they mean exactly?
What is IBAN?
IBAN (International Bank Account Number) is an international standard that identifies an account in a financial institution anywhere in the European Union. This unique number may contain fourteen to 34 alphanumeric characters and has a fixed length for each country. If you have a bank account in Luxembourg, the IBAN will have 20 alphanumeric characters: the code of the country of origin with two letters (LU for Luxembourg), the check-digit with two digits and your national bank account number with sixteen digits.
When you make cross-border payments, don't forget that the IBAN can have a different length from one country to another. The IBAN has sixteen alphanumeric characters in Belgium, 27 in France and 22 in Germany.
What is BIC?
BIC (Bank Identifier Code) is an international standardised code. It has eight to eleven alphanumeric characters and is used to identify the financial institution where you have a bank account. You have to provide it when you make your cross-border transfers.
The BIC is also known as the SWIFT (Society for Worldwide Interbank Financial Telecommunication) code. For example, the BIC for ING Luxembourg is CELLLULL (it's weird, right? That's because this was the original code allocated to our predecessor, Crédit Européen Luxembourg, CEL J).
Why do we need these codes?
For two main reasons. Firstly, they allow your bank to make cross-border payments more easily. These codes enhance the accuracy of identifying bank accounts facilitate the automatic treatment of foreign transfers, they make the system more secure and finally less expensive for you.
The second reason is more practical. Without using the BIC and IBAN, you cannot make money transfers in European countries. If you do not have the BIC and IBAN of your creditors, you must contact them to get the information. The same problem will arise if you do not transmit your IBAN and BIC to your debtors.
And if you state the recipient's IBAN but not the BIC when making a cross-border transfer, you might pay more. The BIC is one of the requirements that you have to meet in your payment orders to other European countries if you want to benefit from the same rates as for national payment orders. However, you do not have to state the recipient's BIC when making a national transfer.
If you have any doubts or questions, please contact your banker. He/she will help you to avoid wasting money!