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An international bank account number, also known as IBAN, is a numbering system that makes it possible to recognize a bank account, regardless of the location of the bank where the account resides. The idea behind the development of this type of system was to make the process of managing transactions that involved bank accounts that were connected with banks not located in the same nation. While the international bank account number is primarily utilized among European countries, more nations around the world are implementing the system as the need to simplify international transactions becomes more urgent.
The early development of the international bank account number was conducted under the auspices of the European Committee for Banking Standards, and was originally envisioned as a means of expediting transactions that took place between nations within the European Union. Over time, a basic formula for the number was agreed upon, with the first two letters in the sequence identifying the country where the bank account resides. The next portion of the sequence involves the designation of two check digits. The last portion of the international bank account number contains what is known as the basic bank account number. This portion is developed by the local bank and must conform to the standards set by banking regulatory agencies within the country of origin. This basic bank account number may include up to thirty characters, and normally includes both letters and numbers.
One of the benefits of the international bank account number is that it eliminates some of the confusion created by the differing standards and practices that apply to account identification in different countries. By establishing a uniform platform that helps to identify countries and specific banks within those countries, it is possible to minimize the effort required to quickly and efficiently process transactions. For bank customers, this means payments are processed and posted to vendor accounts with greater speed, while also making it possible to receive deposits without long delays.
Over time, nations outside the European Union have voluntarily chosen to participate in the international bank account number strategy. Nations like Turkey, Saudi Arabia, Israel, and Lebanon have created standards for the creation of IBANs that comply with the standards used by the European Union. A number of countries do not participate in the IBAN initiative, and make use of other methods to manage international transactions. This includes nations like Canada, Australia, and the United States.