What Are Faster Payments in the UK: Everything Merchants Need to Know

Real-time payments of up to £ 1 million anywhere within the UK are now possible with the Faster Payments service. As a business owner in the region, this means you can settle payments in a matter of seconds and also pay your suppliers on time. As long as they are based within the UK, of course. Read on to know more about faster payments and how they stack up against other fund transfer systems like BACS and CHAPS in the UK.

What are Faster Payments Service?

Faster Payments is a real-time electronic money transfer service by Pay.UK, the same company that also runs BACS payments, cheques, and Paym, the UK’s mobile payments service, amongst others. It speeds up the process of sending money anywhere within the region. You can make payments over mobile, internet, telephone, or standing order. The service is available 24 hours a day, 365 days a year. As of February 2022, you can make payments of up to £1 million via the service. However, participating banks sometimes set their own limits. You can look up this list to see if your bank is a part of this scheme.

If you are looking to make payments larger than £1 million, you can use another service known as CHAPS. BACS payments, on the other hand, are the most common bank-to-bank transfer method in use in the UK. In 2020, the Fast Payment System enjoyed a record-breaking year, processing 2.9 billion transactions with a value of £2.1 trillion. This represented a year-on-year volume increase of 410 million payments, or 17%, and an 8% jump in values (up from £1.9 trillion in 2019).

How do they work?

You can make Faster Payments via your bank website, mobile banking app, phone banking, or directly at your bank branch. Say, you wish to pay £1,000 to your supplier.
First, you instruct your bank to make a Fast Payment, using any one of the methods (see above). Before initiating the process, your bank will verify your identity, usually by asking for your password. You also need to provide your supplier’s sort code and bank account number, which serve as the identifying address for the Faster Payment. A reference is included to identify the payment on your supplier’s bank statement, which also states the purpose of the payment. Banks require the payer’s ID (you, in this case) and the recipient’s (your supplier) sort code and account number to keep the transaction secure. Before making the payment, your bank will check if you have enough funds in your account. It also verifies your identity, and if unsure, will hold the payment and perform additional checks. After doing so, it will send the funds to your supplier via Faster Payments. This service checks and forwards the payment instructions your supplier’s bank, also known as the receiving bank. The receiving bank then checks if the supplier sort code and account number are valid. Once done, it accepts (or rejects) the payment and informs the Faster Payments Service.

The service then credits the funds with the receiving bank and informs your bank that the transaction is complete. Your bank then informs you about the payment status. As long as both banks are participants in faster payments, the funds are available almost instantly, but sometimes can take up to two hours. Check with your bank to get an exact idea of how long it will take. A word of caution here though. This Payment cannot be reversed once it is sent. Hence, ensure you double-check the sort code and account number before sending a payment. Sharing the wrong account number or sort code can cause the payment to go to a wrong account. Here is a handy sort code checker to help you get it right.

What type of payments can be made using Faster Payment Services?

You can make four different types of payment with this Payments Service. Let’s take a look at these:

• Single immediate payments: One-off payments that are made via mobile banking, online banking, phone banking, or at a bank branch. Faster payments can be sent 24 hours a day, throughout the year. The maximum limit per transaction is £ 1 million. However, this amount could vary based on limits set by individual banks.
• Forward-dated payments: One-off payments that are settled on a prior date set by the customer, for example, paying for a monthly gas bill.
• Standing orders: Regular payments for a set amount to the same recipient on regular dates, for example credit card bills.
• Direct corporate access payments: A service for business customers in which payment messages are sent in the form of bulk files to the Faster Payments Service. Processing time and transaction limits are the same for these types.

Faster Payments vs BACS vs CHAPS?

Apart from this, UK also has Bacs and CHAPS. They differ mostly in terms of speed. Bacs payments are directly between bank accounts (account-to-account) and are mainly used to make Direct Debit and Direct Credit payments. Bacs payments take three working days to clear. CHAPS is a same-day payment system for high-value transactions. In this type, the payment arrives on the same day it is made. There is, however, a £ 25 fee per CHAPS payment, though some banks may offer it free of charge. Large-cap companies and finance institutions use CHAPS to pay suppliers and taxes, and settle FX transactions and money markets. Consumers can use it buy high-value items such as cars or homes.

How can Novalnet help?

We are a global PSP with deep experience in processing payments for the European industry. Many of Europe’s leading brands trust us to handle their payments. We can help you accept payments seamlessly in 125+ currencies in 150+ country-specific payment methods. Our instant plug-ins get you up and running within minutes and with minimal coding. With our AI-based risk management solutions and advanced analytics, you can securely process payments in a PCI DSS-compliant environment.
Give us a call today to know more about how we can help with your payments and enable you to become the best in your game.

Jose Augustine

Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.