The Business Identifier Code Explained
What a BIC is used for in international payments
An individual BIC code identifies a specific bank and its branch location within the SWIFT network. It is used for sending and receiving money via bank transfer systems, primarily for international transactions with traditional banking payment systems.
For a transaction to happen, PSPs and banks need the recipient’s IBAN or account number and their BIC. This information helps confirm that funds are correctly transferred from one bank to another and deposited in the recipient's account in their country.
Modern payment platforms handle this data automatically through backend processing. This method reduces friction during transfers and maintains compatibility with legacy banking systems.
Why banks and financial institutions use BIC codes
Banks and various financial institutions use BIC codes in their SWIFT network. SWIFT is a worldwide messaging network run by the Society for Worldwide Interbank Financial Telecommunication (SWIFT). It streamlines secure communication for financial and non-financial institutions, such as payment providers.
How a Business Identifier Code Works
BIC is used within the worldwide interbank financial environment. When a transaction is initiated via bank transfer mechanisms, the BIC identifies the international bank of the receiving party.
During the routing of an interbank financial payment, intermediary institutions may be involved, particularly with cross-border transactions. Identification is performed at every stage of the process to ensure the correct routing of the transaction.
Note that in contemporary payment systems, the process of routing an interbank financial transaction is abstracted. Payment orchestration platforms calculate routing paths by combining traditional identifiers, such as BICs, with payment information to improve transaction success rates. In this situation, the BIC is not replaced; it is still used in the banking layer.
As BIC is an international standard identifier, it is compatible with both legacy and contemporary banking systems.
BIC and IBAN: How They Work Together
IBAN and BIC, along with other payment data, are used by modern platforms to accurately route payments worldwide.
While the IBAN, or international bank account number, identifies the specific bank account number of the recipient, the BIC is about the identity of the institution itself. Combined, these two elements provide a complete set of data for international payments and bank transfer transactions.
In some advanced international payment systems, IBAN and BIC may be only one of many possibilities used for this purpose. For instance, in regions such as Europe, IBAN is used for SEPA transactions, while BIC is still required for some international or non-SEPA transactions.
Structure of a BIC Code
Bank code and country code
The two parts of the BIC and country code break down as follows. The BIC contains 8 or 11 characters. That represents the bank code in the first section, which identifies the institution and is linked to the bank’s name. It is then followed by the country code, which indicates the institution's location.
The easy-to-identify format helps systems confirm the fund’s destination for overseas payments.
Location code and branch code
Next is the location code, which specifies a geographic area. The last optional field is the branch code, which identifies a specific branch.
If no branch is provided, a default value like "xxx" is used.
This structure is standardised across the banking industry and worldwide financial systems.
Where BIC Codes Are Used
International wire transfers
International bank transfers using BIC are usually processed through traditional banking channels and settled through international interbank systems. However, modern payment systems can optimise their operations by selecting faster or more cost-efficient alternatives.
SEPA payments
Within SEPA, an IBAN is usually sufficient, but a BIC may be required in exchange scenarios with older legacy systems.
SWIFT payment messages
BIC codes are included in SWIFT messages, sent between the banks across the interbank infrastructure. The messages are used to exchange payment instructions between banks.
BIC vs SWIFT Code
Are BIC and SWIFT the same?
Yes, they are, as both the BIC and SWIFT codes are linked to ISO 9362 and are used globally in banking.
Differences and common usage
“BIC” is the technical term, while “SWIFT code” is the term used in practice. Both of these terms refer to the bank identifier code and are used for routing bank-based payments. In modern payment environments, these identifiers are used alongside other technologies that extend beyond transfers and exploit broader banking capabilities.
Why BIC Codes Are Important in Payments
Accurate identification of financial institutions
A business identifier helps confirm that a transaction is sent to the right institution, one of many thousands worldwide. This kind of precision is necessary when working with many different countries and payment infrastructures.
The use of a standardised identifier code allows platforms to accurately identify their counterparty even in complicated routing scenarios.
Reducing errors in cross-border payments
Mistakes in international payments can occur due to incorrect country names, invalid identifiers, or incorrect account details. That can lead to settlement delays and additional costs arising from exchange rate fluctuations.
Standardised codes like BIC minimise the possibilities of errors in international payments. This accuracy improves when used in conjunction with intelligent routing and validation systems.
A business identifier code plays a key role in global banking as well, especially in bank-based international transactions. However, today’s payment systems are evolving beyond traditional identifiers, such as BICs, and are integrating intelligent routing systems, enabling faster, frictionless payments.
