> And besides, big banks still have to deal with checksum-passing iban typos on a daily basis. IBANs only have two check digits.
Actually the checksum was designed especially to deal with typos. As such, dealing with typo errors is usually not an issue at all.
What they do have to deal with is maliciously created IBANs though. However, if the account an IBAN should point at doesn't exist then the transaction usually just bounces.
They’ll ask the other bank if they’d like to return the money, and that bank will maybe ask the recipient if they’d like to return the money.
The recipient doesn’t want to return the money? You’re SOL. You can go to court, but they can trivially evade civil action by transferring the money overseas.
I think there's a misunderstanding here. If the customer mistypes the IBAN account number, the bank (website, app etc) will automatically reject it as invalid immediately, he won't have to deal with the customer service.
This is overly simplified so not entirely accurate, but if 100 customers typo their destination IBAN the modulo 97 checksum will probably let 3 of them through.
Wikipedia says that "where used, IBANs have reduced trans-national money transfer errors to under 0.1% of total payments", although there's no source for the claim.
And besides, big banks still have to deal with checksum-passing iban typos on a daily basis. IBANs only have two check digits.