What are BACS, CHAPS and Faster Payments (2024)

FAQs

What are BACS CHAPS and Faster Payments? ›

The main difference is that CHAPS payments are faster but more expensive, typically preferred for high-value, critical transactions. On the other hand, BACS payments are slower and cheaper, commonly used for regular, smaller value transfers.

What does BACS stand for? BACS stands for Bankers' Automated Clearing System. It's a regulated payment system run by Bacs Payment Schemes Limited (now Pay.UK) and is one of the most common ways that money is sent and received from bank to bank.

Bacs is the UK's electronic clearing system, while ACH is the electronic clearing system used in the United States. Both systems are used to process electronic payments between bank accounts.

To make Bacs Direct Credit payments you submit your payment data - including amount of each payment, PSP account numbers, sort codes and dates - via a bureau or direct access depending on which method you choose. The data is sorted into payments to each of the PSP and then transmitted to each institution.

Bacs payments are considered very cost-efficient. The cost of sending a Bacs payment depends on the amount and the bank, but it usually only amounts to pennies. You won't be charged for receiving a Bacs payment.

For example, all CHAPS and TARGET2 payments are sent through the SWIFT messaging network. It is also the go-to network for transmitting cross-border payments in multiple currencies for both business and private needs.

Bacs is one of the safest ways for businesses to make and collect payments. It has been ever since it was introduced in the UK back in 1968. Nowadays, Bacs payments have become a by-word for secure electronic payments. No fewer than 130 billion Bacs payments have been made worldwide.

CHAPS stands for Clearing House Automated Payment System. The Bank of England (BoE) has been responsible for the CHAPS system since 2017, so transfers must be made in pounds sterling. Before that, CHAPS was operated by a private entity (CHAPS Co).

The equivalent system to the UK's Bacs is the Automated Clearing House, or ACH. This network only works within the United States, so you won't be able to send payments to UK clients using ACH. It also only applies to banking rather than debit or credit card payments.

Is Zelle an ACH transfer? ›

Basically, all Zelle payments are (instant) ACH payments but not all ACH payments are Zelle payments. The primary difference between Zelle and regular ACH payments is related to speed—whereas a standard ACH payment can take 2-5 days to clear, Zelle payments tend to clear in minutes.

Like a home address, an ACH routing number directs electronically transferred funds to the correct bank and branch. The number is necessary for setting up direct deposits, automatic payments, and wire transfers.

BACS handles higher-value transactions. Faster Payments handle low- to medium-value transactions. BACS's ability to process transactions in bulk makes it ideal for bulk corporate payments and salary transfers. You can use Faster Payments for smaller and more frequent transactions.

The upper payment limit for BACS payments is £250,000 per transfer. Businesses use the BACS payment network for routine transactions, such as paying employee wages, suppliers and pension payments.

The Faster Payments Service (FPS) is used to send electronic sterling payments in the UK. When you send a Faster Payment, it'll arrive almost immediately, but sometimes in up to two hours, as long as the receiving bank or building society also uses the service and the amount is within the limit.

A Faster Payment usually arrives on the same day within 2 hours, so long as the account you're sending to accepts them. There is no fee for sending a Faster Payment. You could also pay by cheque if the recipient will accept one. This will take several days to process.

Whilst best known for payments within the UK, it is possible to use your corporate moneycorp international payments account to set up BACS payments in currency for international payroll and other costs such as paying suppliers or overseas office costs.