e-⁠residency joins campaign against iban discrimination

Community surveys show this problem affects many e-⁠residents, so we’re joining the movement to end it

This year, Wise and other EU fintechs, including Revolut and Monese, has launched a campaign to tackle IBAN discrimination in Europe. Anyone who has experienced IBAN discrimination in the EU can report it at the Accept My IBAN website.

E-⁠Residency welcomes this initiative, particularly after receiving the results of one of the biggest surveys we’ve conducted regarding business banking for e-⁠residents. Of 952 e-⁠resident company owners with non-Estonian IBANS who responded to the survey in February, almost one third said they have experienced some form of IBAN discrimination.

As it is evidently a barrier for e-residents running cross-border businesses, e-Residency has joined the Accept my IBAN movement to push for the European Commission to enforce existing laws and end IBAN discrimination once and for all.

What is IBAN discrimination?

IBAN discrimination occurs when a bank, client, service provider or other company requires the IBAN of a person or business they are transacting with to have a particular country code.

An IBAN or ‘international bank account number’ is used to make and receive domestic and international euro payments across SEPA countries. It is denoted by a country code at the beginning followed by a series of unique numbers. For example, French IBANs look like this: FR12 3456 7890 and German IBANs look like this: DE09 8765 4321, etc.

IBAN discrimination is against the law in the EU — see Article 9 of Regulation (EU) No 260/2012. The law has been in force since 2014 but due to low enforcement in practice, IBAN discrimination is still commonplace.

IBAN discrimination amongst e-⁠residents

In recent years, we’ve heard anecdotally that IBAN discrimination has been a very real problem for e-⁠resident owners of Estonian companies.

The most common scenarios we have heard relate to eCommerce. Let’s say an e-⁠resident wants to sell products from their Estonian company via an online eCommerce platform based in Spain. The Estonian company has a Belgian IBAN for its business banking account. The Spanish eCommerce platform would be guilty of IBAN discrimination if they didn’t accept the Belgian IBAN for your Estonian company (or in other words, they required your Estonian company to use a Spanish or Estonian IBAN).

e-⁠Residency banking survey

Survey results confirm what we have been hearing firsthand. In February, e-⁠Residency surveyed e-⁠residents regarding their experiences with business banking for their Estonian companies. 1313 people responded to the survey, which covered a broad range of issues related to business banking relevant for e-⁠residents who have registered Estonian companies.

We asked a series of questions to e-⁠resident company owners who use a business banking account with a non-Estonian IBAN to understand their experiences with IBAN discrimination. 29% of these bank account holders responded that they have experienced IBAN discrimination (see graph below).

The proportion though rose to 38% for the 240 e-⁠residents who live outside of Europe and responded to the survey.

Of the 273 e-⁠residents who reported IBAN discrimination, we asked how it affected their business (see above graph). 15% said most business activities stopped as a result and 63% said it’s a problem but business is still running — for example, they couldn’t accept or make payments in specific instances but otherwise business continued. As one respondent commented, “I could not get certain eCommerce services related to Finance such as payment options. It meant that I could not accept various payment methods.” 23% said it didn’t influence their business.

An analysis of the specific circumstances of IBAN discrimination experienced by e-⁠residents reveal some possible motivations behind them. A third noted that the discrimination was due to systems or partners requiring that a company and its IBAN be from the same country. As one respondent specified: “companies like Apple, Google, and PayPal require businesses to have a bank account in the country where they are registered. My business is registered in Estonia and they asked me to add a bank account with an Estonian IBAN number which we don’t have.”

About one fifth said it was due to mistrust for companies operating with an IBAN from another country, for example via clients or partners: “my first business bank account was opened [in Belgium]… but a large scale…French client …gave me an “orange” signal for being an Estonian company with a Belgian bank account”.

Small numbers also said that being a third country citizen (i.e. from outside the EU or Estonia) was the cause of the discrimination.

Report your experience of IBAN discrimination

Your IBAN, regardless of which EU country it’s from, should be accepted anywhere in the European Union. Your provider is breaking the law if they don’t accept your IBAN.

Report your case, to help stop it from happening again. All submissions will be anonymised and passed on to the relevant authorities and the European Commission, and shared with the supporting companies of this coalition.