In an industry driven by innovation and speed, processing payments quickly is a necessity. Despite the complexity of payment processing, individuals and companies can now make payments within minutes. In the UK, that is thanks to the Faster Payments system.
Faster Payments is a payments system where electronic payments are, as they name says, processed quickly and arrive almost immediately to the receiver’s account. It is owned and operated by Pay.UK, the same retail payments authority that manages Bacs payments and cheques.
The Faster Payments Service (FPS) launched in 2008, aimed at reducing waiting times for bank-to-bank transfers. Faster Payments can be done via the internet on the bank’s website, mobile banking, telephone banking or physically at a branch. There are various types of Faster Payments, the most popular being single immediate payments (individual, one-off payments) that can be processed instantly, 24 hours a day, 7 days a week.
Other types of Faster Payments include forward-dated payments (one-off payments that can be scheduled for a later date), standing orders (automated recurring payments that a customer authorises and controls) and, lastly, Direct Corporate Access (DCA) payments, that allows banks’ corporate customers to send payment messages and make payments directly through the Faster Payments Service.
For all Faster Payments, there is a limit on the amount of money that you can transfer via the Faster Payments system, which depends on each bank’s own rules. The general maximum amount per transfer is £250.000.
There are currently 35 banks and building societies directly connected to the Faster Payments system. Even if your bank isn’t a direct participant, all the other banks and building societies in the UK accept Faster Payments through a sponsor bank. To ensure that your bank and the receiver’s bank are able to take Faster Payments, you can check the list of direct participants here or verify a sort code here.
To make a Faster Payment, you need to provide the bank details (account number and sort code) of the receiver, so his/her identity can be identified. A reference to explain the nature of the payment is often optional, so it is up to the payer to include this.
Both the Issuing Bank (payer’s bank, where the money is coming from) and Acquiring Bank (receiver’s bank, where the money is being deposited) need to perform identity checks to ensure the legitimacy of the payment. If all information is valid, the Faster Payments system will credit the Acquiring Bank and inform your bank that the transaction is completed. You will also be notified that the payment was successful.
Both payment systems are very popular in the UK, but they do have their own differences. A Bacs payment takes three working days to clear, so the receiver will only see the funds in his/her account three days after the payment was initiated. Faster Payments, on the other hand, are often processed within seconds.
The Bacs payment system is most often used for Direct Debit and Direct Credit (for example, to pay salaries or bills), whilst Faster Payments is used for any individual bank-to-bank transfer between people or organisations, and not for Recurring Payments.
Imburse can connect your company to Faster Payments, BACS and all the other payment systems in the UK and globally. By connecting to us, enterprises don’t have to worry about individually integrating payment systems into their own IT systems, effectively saving valuable time, money and resources. Reach out to us here if you are interested in our solution, have any queries or would like to know more.