When a company refuses to accept a bank account from another country for a direct debit or payment, insisting on a local account, even though EU rules forbid it for euro accounts across the single payments area.
IBAN discrimination is when a company refuses your bank account because it is from another country, insisting on a local one, even though EU rules forbid this for euro accounts across the single payments area. It is about being rejected for a valid account, not to be confused with a SEPA transfer, which is the euro payment itself. Inside the euro area it is against the rules but happens constantly, and outside it you have no protection at all.
You open a valid euro account with a fintech and try to set up a direct debit for your gym and phone bill in Spain. Their online form rejects your IBAN because it does not start with the local country code, and even though that refusal breaks EU rules, you are stuck arguing with a form that will not budge.
You open a perfectly valid multi-currency or foreign euro account and then cannot pay your gym, utilities or phone bill because their form rejects a non-local IBAN. It is against the rules inside the euro area but happens constantly, and outside it there is no protection at all.
The difference is the whole point, so here is each one in a line.
These are the identifiers that route money to the right account, and the checks around them.
An IBAN is the standardised international account format used mainly in Europe, a routing number is the domestic code for your specific bank or branch, called a sort code, BSB or IFSC elsewhere, and a virtual IBAN is a local-looking account number a fintech issues you while the money sits centrally.
IBAN discrimination is a company illegally refusing a foreign euro account, and beneficiary verification checks that the account name matches before the money sends.
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