In Pakistan, the IBAN consists of 24 alphanumeric characters: first the two-letter denotes the country code (PK), and then two check digits, and finally a country-specific Basic Bank Account Number (BBAN), which in segregated in Pakistan as a bank’s identifier (4 digits) and the account number (16 digits).
The aim of IBAN is to reduce errors in money transfers made through banks and other financial institutions, across the world and standardize the result from such errors. With the help of IBAN the transferred money passes from the sender’s account to the receiver’s quickly and without error. This reduces the holding period of the transaction and its cost.
How does IBAN provide convenience for account holders?
Currently the form and length of account numbers is different for every country and every bank. As a result of this lack of standardization, customers who transfer money to another country or bank can’t be sure the accuracy of the account numbers they receive from people with whom they will be making a money transfer.Particularly when buying and selling properties or services is at issue, there are different account numbers on the bills coming from many different sellers and this leads to the possibility of mistakes being made in the transfer process. Consequently, money transfers that made with wrong account numbers fail to go through. When the money reaches the receiving bank it is understood that the account number is faulty. To correct the faulty transactions, many different operations are required, extending processing times and increasing costs.
In countries that have adopted the IBAN system, an IBAN is assigned to every bank account and given to the account holder. The IBAN has a specific format and standard for every country. When a customer wanting to transfer money to another country or bank gives his or her IBAN to the sender bank, the receiver accounts’ IBAN is checked in the receiver bank before the money goes to the receiving bank. If the IBAN is faulty, money will not be sent to the receiving bank and the faulty transaction will be canceled.
Usage of IBAN
Assume that Mr. Salman who lives in Dubai wants to send a money order to his brother Fahim, who lives in Pakistan.
As Fahim doesn’t know his IBAN number, he will go to his bank to learn it.
Fahim tells his brother (Salman) his IBAN number.
After Mr. Salman learns the IBAN of the account to which he is sending the money order, he goes to his own bank in Dubai. Mr. Salman gives his brother’s IBAN and tells them that he wants to send a money order to this account.
The authorized person from Mr. Salman’s bank will check this IBAN number to make sure that it is correct. If the given IBAN number is correct, the money transfer will be processed.
The money transfer has been conducted with correct IBAN number. When the transfer message coming from Mr. Salman’s bank in Duabi reaches Mr. Fahim’s bank in Pakistan, the funds that Mr. Salman has sent will be passed on to Mr. Fahim’s Account automatically.
The same IBAN of Mr Fahim can also be used by his cousin Mr. Saleem Mufti living in Germany.