How to avoid IBAN discrimination?

The purpose of IBANs is to simplify bank transfers across Europe. With SEPA (Single Euro Payments Area) Regulation's creation, Member States are now legally bound to accept all transaction made from IBANs from other SEPA countries as a local payment. Hence, it is surprising that some European banks do not acknowledge IBANs from other SEPA states. It is called IBAN discrimination, and it is illegal.

Navigating your payments around IBAN can be confusing at times since not all banks adhere to the rules. Therefore, we gathered some crucial information for you to understand what IBAN is and how it affects your payments, in the following:

What is an IBAN?

An IBAN number is an International Bank Account Number introduced by the European Committee for banking standards to reduce bank details errors. Unlike SWIFT/BIC, which identifies the bank, an IBAN identifies the bank account. IBAN supported countries include both the EU and EEA and several Non-EU/EEA countries.

Note: To check the validity and accuracy of IBANs, check out the IBAN calculator.

What’s an IBAN used for?

The IBAN is a standard for identifying bank accounts, whether they are in the same country or not. It is possible to transfer local and European payments across SEPA countries using your IBAN. It includes EU countries and EEA countries as well as those in the European zone but not in the EU or EEA. In essence, there should be no distinction between domestic and SEPA payments with your IBAN.

The advantage of a European IBAN is that you don't have to open multiple accounts across the EU to make and receive payments in euros. You can use your home country's IBAN to receive and make payments.

How do I know if I have an IBAN?

Under Regulation 924/2009, all SEPA countries must communicate account numbers in IBAN format automatically when making payments. However, some countries do not, and instead, they offer their customers the ability to generate IBANs on their website and publish them themselves to the receiver. For example, the United Kingdom does not publish IBANs when making a payment. Customers have to generate them separately to make SEPA transfer, even though the UK is part of SEPA. Or the customer has to contact the bank for IBAN support.

What is IBAN discrimination?

IBAN discrimination occurs when an institution from one SEPA country refuses to accept transactions to and from IBANs from another SEPA state. Under article 9 of Regulation (EU) No 260/2012, institutions must accept IBANs from states within the EEA. To do otherwise is illegal.

Many local authorities have implemented and fined institutions that prevented customers from paying their bills from another SEPA state. For instance, the Italian authorities have fined three major telecom companies because they were preventing their customers from paying their mobile bills from another SEPA state.

How can I identify IBAN discrimination?

IBAN discrimination can take various forms. For instance, requiring you to follow strict local format when making a transfer, such as using the domestic country code of that particular state or asking them to fill in an IBAN on a domestic form. For example, a Spanish resident in France needs to make a bank transfer to a Spanish institution from a French bank. However, the Spanish bank fails to initiate a standard SEPA payment because the recipient's IBAN account is based in France and does not begin with an ES but an FR. Another example could be a Belgian resident working for a German company, not receiving the salary in the Belgian bank account because the German bank is refusing to do so.

What can I do if my IBAN isn’t accepted?

The following outlines some general steps to follow in case your IBAN is not accepted:

  • Send them a formal written complaint, explaining that it is against the law;
  • Inform the local authorities of a breach of Article 9. It is encouraged, in fact;
  • Contact the bank or the IBAN provider, informing them of the breach. IBAN providers, including local banks, offer to help their customers if their IBANs are refused and take control of the situation to solve it more diligently internally. Many of them offer forms to give them the information they need to deal with the situation.

Despite the existing law, the intolerance against non-local IBANs is still ongoing. Many individual account holders, being aware of their rights regardless, can do nothing when an institution simply refuses to adhere to the law. For example, European companies are refusing SEPA payments and direct debits from GB IBAN after Brexit, even though the UK is still part of the SEPA.

Taking it to the local authorities is often so time-consuming that many account holders simply do not have the time to waste. Hence, a few companies offered their help to the customers, hoping to reduce some of the impacts of bias against non-local IBAN.

For instance, Wise started providing European IBANs to their customers with the code BE for direct debits. They encourage customers to share the details of any banks or traders who are refusing to accept Wise IBAN for a transaction so that they can take over the situation on the customer's behalf to get their IBAN accepted into their system.

How to avoid IBAN discrimination?

You, as a customer, are generally encouraged to report these institutions and submit a formal written complaint to your local authorities for breach of SEPA regulation. Fortunately, there are relevant institutional bodies that receive complaints regarding IBAN discrimination. However, such a procedure may take time when you may miss your payments, salaries, and other transactions you needed to make. Many find it more convenient to either give in and open a local account or take an alternate route in those situations. An example of one of those alternative routes is neobanks or challenger banks.

Many neobanks have taken up the burden of providing solutions for customers who suffer from IBAN discrimination. For example, Revolut has offered help against IBAN intolerance for their Romanian customers. They partnered with Libra Internet Bank to provide around 1.25 million local IBANs to all Revolut customers in Romania. N26 and Qonto (a French online bank), similarly, are offering local IBANs for customers in Spain and Italy, with Qonto also offering German customers a local IBAN.

Consequences of IBAN discrimination

IBAN discrimination is a barrier to the free movement of capital. IBAN discrimination can affect you in numerous ways in your daily financial transactions. Employer banks may refuse to pay your salary through direct debits simply because your bank is in another SEPA state. SEPA institutions can prevent you from paying your bills to a utility company from other SEPA banks or investing in another EU country. Institutions in a SEPA state may still charge you for an international transfer, even though both the sender and receiver states operate under the same Euro currency.

As for non-Euro SEPA states, there will be a conversion charge added. The consequences are endless, but the barrier prevents EU residents from making any transactions outside their country, which would otherwise make their lives easier. This is exactly what new century fintech companies are trying to help with.


This article gives an overview of IBAN rules and discusses how IBAN works. IBANs were introduced to identify the specific bank account instead of the branch, simplify cross-border payments and lower transfer costs. European law requires all banks to communicate IBANs to clients when they are making a transaction, and the law dictates that EU member states accept IBANs from other EU countries as local. However, not all institutions follow the law and have been discriminating against IBANs from other EU states. The article gives a few suggestions to clients in case an institution refuses your IBAN. The suggestions include generally writing a complaint to the institution or informing the local authorities. Since most people do not want to go through the legal battle, many just opt for neobanks.

Even though the IBAN discrimination exists, it is still possible to find a way to benefit from the cross-border services run by the other European Union companies paid by a wire transfer. If a usual transaction to a foreign IBAN does not work, try a European payment or a Foreign Transaction and ask your bank to stop charging you for EU interstate transactions.

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