The move to global standardisation using ISO2022 XML has meant the adoption of the International Bank Account Number (IBAN) by many countries and organisations. This means the IBAN effectively supplants a country’s domestic bank account data, such as account number and sort code.
At first glance converting bank account data to IBAN does not seem too great a task but there are a few stumbling blocks to overcome to ensure that you do not end up with poor quality data which is likely to cause payments to fail.
1. Conversion, without validation means incorrect IBANs
Simply converting incorrect domestic account numbers to the relevant IBAN format results in incorrect IBANs. Many conversion solutions simply glue the component parts together. Validating data prior to formation of the IBAN can identify errors such as invalid or closed bank or branch codes, badly formatted or non-standard account numbers and missing data. In Europe, domestic clearing has been able to cope with some degree of error and allows the receiving bank to repair, but SEPA significantly reduces the ability to do this.
2. IBANs are not standard in every respect
Whilst the standard defines a structure, IBANs contain specific account information, which varies from country to country: IBANs vary both in length and in their use of numeric or alphabetic characters. Local variations such as the use of sub-account numbers in Germany or frequently missing check-digits in Italy can also lead to conversion of domestic account data into incorrect but seemingly valid IBANs.
3. Business systems need to be adapted to deal with IBAN.
IBANs are longer than the corresponding domestic data and so software systems such as ERP, or accounting and payroll solutions, may need to be adapted to accommodate this information and in some cases this may not be possible.
4. Consumers are not familiar with IBANs.
Many businesses need to collect bank account data from consumers and errors in re-keying or mis-hearing are often a cause of incorrect bank account data entering systems. Generally consumers are not yet familiar with their IBAN, tending to be more aware of their old, domestic bank account data such as sort code and account number. Since IBANs are longer and more complicated there is an even higher risk of error – could you quote your IBAN?
5. IBANs change over time.
Having obtained valid IBANs and managed them within your business systems, the problems are not necessarily over. Over time the underlying information, such as the bank code, will change and the IBAN may become invalid. When banks merge and branches close, account data changes and so without periodic checking this will cause the IBANs you hold to become invalid.
Learn more about bank account data validation and conversion clicking here and downloading your free copy of Does Valid Bank Account Data Matter?