When you’re in business, promptly processing payment can be a lifeline for your business. Luckily in the UK, the Faster Payment Service (FPS) is offered by most banks, which provides a fast and reliable way of making payments in the UK.
With Faster Payments, you can conduct business and receive money in your business account within seconds. It helps you maintain liquidity and operational cash flow to keep your business going. But do you know how Faster Payments works? Or the banks that offer it?
Here is a closer look at one of the most innovative and popular ways of sending money within the UK, how it works and its unique features.
What is Faster Payments?
Faster Payment is an electronic money transfer method that speeds up the processing of sending money within the UK. It was introduced in May of 2008 to reduce the payment times of bank-to-bank payments.
As of 2022, the Fast Payment Service had over 40 participating institutions processing up to £1m per transaction. However, every institution has its own regulations and limitations on how you can use the service.
Other alternatives like CHAPS offer a similar service for larger services, but there are differences which we will look at later in the article.
The Faster Payments Service is more attractive than other payment options because it is free of charge for personal customers. But business customers pay a fee depending on their usage of the service and their bank’s fee structure.
Although transactions are instant in practice, they’re not guaranteed. For example, some banks allow up to two hours to complete the transactions.
How Long Does Faster Payments Take?
It’s all in the name – Faster Payments. The payments are fast. They usually arrive in the recipient’s account instantly, sometimes within a couple of minutes and up to two hours on extremely rare occasions.
The time taken for the payments to hit your account varies depending on your selected banking institution. You shouldn’t have any problems processing transactions with most banks, but it might take a couple of hours in uncommon situations.
What Types of Payments Can Be Made With Faster Payments?
The Faster Payments Service handles four types of payments. Each of these payment types works slightly differently. Here’s a quick explanation to help you understand the different types of payments you can send with FPS and how each works.
Single immediate payments
Single immediate payments are the most common types of payments that customers initiate on Faster Payments. They are one-off payments initiated through mobile banking, phone banking, online banking or at the bank’s physical branch.
Single immediate payments can be sent 24 hours a day, seven days a week. The limit for single payments allowed by the system is up to £1m per transaction. However, the maximum amount is subject to individual bank limits.
Forward-dated payments
Forwarded-dated payments are one-off payments sent and received on a pre-arranged date decided by the customer. Bill payments are a good example of forward-dated payments.
Standing orders
Standing orders are regular payments that have a fixed date and amount. Most standing orders are used for recurring expenses like bills and rent. Most standing order payments are fulfilled on weekdays, and if the pre-arranged date falls on a weekend, the payment is made the following working day.
Some banks have a second version of standing orders called scheduled payments, which are processed 24/7. You must check with your bank for scheduled payments to confirm if FPS covers them.
Direct corporate access payments
As the name suggests, these payments are designed for business. They allow businesses to send payment messages in bulk to Faster Payments. Some banks that offer Faster Payments don’t support this type of service. But authorised Payment Service Providers like Pay iO can apply for indirect access to Faster Payments through the bank’s services.
How Do Faster Payments Work?
Customers can enjoy the convenience of the near-instant payments that Faster Payments brings, even without knowing how the system works. However, some users of the service might take an interest in understanding it and knowing how it works.
Faster Payments users have several options at their disposal when using the service. They can use the following:
- The bank’s website
- A mobile app
- Telephone banking
- The bank branch
Depending on your option, the Faster Payments process can take different forms. However, the procedure is the same for each of them.
Step 1: Filling out the payment details
You will need to fill out the details of the individual or the business you’re sending the payment. This can be done using an app, the internet or a phone call. As the sender, you will need to have the following details of the recipient:
- The name
- Sort code
- Account number
- Reference details
- Transaction account
Once you have provided this information, the rest of the process can continue.
2. Sending the payment
The sender’s bank will send all of the information to the recipient’s bank. The bank will verify the information is correct. If the information is accurate and you have adequate funds, the bank will receive the information on behalf of the recipient. If the information provided is incorrect, they’ll reject it. Regardless of the outcome, the sender is notified.
Step 3: Completing the transaction
The sender can verify the information and try again if the payment is rejected. If it is accepted, the sender is notified, and the amount is transferred to the recipient’s account. The process is super quick and completed within minutes. It’s easy and makes receiving money simple.
Faster Payments Vs CHAPS Vs BACS Vs SWIFT?
The UK is not short of fast ways to send money. You can transfer money to people and businesses with just a few clicks of a button on your phone, laptop or tablet. Besides Faster Payments, other transfer methods you can also use these other transfer methods to send money.
CHAPS
CHAPS is mainly used for single, large payments from one bank to another. If instance, if you decide to buy a new car, there’s a high chance you will use CHAPS at some point.
CHAPS uses the SWIFT network. One of the distinguishing factors of CHAPS is that the transfer processes here are time-sensitive. As a result, the payments are fast, which makes it perfect for large businesses that require the receipt of funds for work to start.
CHAPS payments are guaranteed to arrive to the recipient on the same day as long as the payment is set up before 3:30 pm in the bank and before 5:00 pm electronically. Payments submitted after these times are made the next business day if the payment is made on a Friday.
How is CHAPS different from Faster Payments?
Overall, CHAPS costs more to transfer money than Faster Payments. There’s a flat rate of £25 to send money using CHAPS, which is why it is primarily used to send large sums of money. Also, unlike Faster Payments, CHAPS has no limit on the amount of money you can transfer, which is another benefit for large businesses.
Besides businesses using CHAPS to receive large payments, you can also use the service to pay suppliers, taxes and even individuals quickly and efficiently. Most startups may not fully benefit from CHAPS, but Faster Payments and BACs might be a great alternative.
BACS
BACS is the system that processes debit and credit card payments. It is the most commonly used system in the UK and is designed to compute in high volumes.
The UK handles tens of millions of BACS payments daily, and this system handles them all! However, the BACS system, though efficient, is not as fast as the CHAPS or the Faster Payments systems. You might have noticed pending transactions after checking your bank account after purchasing something. The pending transactions indicate the transaction isn’t completed yet.
Sometimes, BACS payments can take up to three days to process. Although most of the payments handled through the BACS system are small, you can use it for payments of up to £250,000.
Most BACS payments are generally free or can cost a few pennies depending on the selected method and how you choose to set up BACS for your business. If you go the bank or bureau way, you will likely pay hundreds of thousands of pounds in admin fees. But when you put it against debit and credit card fees, BACS is cheaper per transaction.
How is BACS different from Faster Payments?
BACS is much slower than Faster Payments. If time is of the essence, Faster Payments is the preferred method. BACS payments can take up to three days to arrive. However, the advantage of BACS is that you will pay less in fees. Most of the BACS payments are free, making it better for long-term and regular payment instalments.
The BACS system can benefit both small and large businesses. Large businesses can use it for large transfers like paying salaries and pensions. Startups may benefit from using its Direct Debit service to reduce costs of financial administration by reducing billing paperwork.
SWIFT
When looking into different ways of sending money in the UK, SWIFT is a term you will come across multiple times. It is a network of cross-country financial institutions that allows international bank transfers from your UK bank account to accounts held in other countries. SWIFT only transmits payment orders processed by institutions that have an agreement with each other.
SWIFT payments can take 3-5 days to complete depending on the countries and institutions involved. Each bank involved in the transaction will take a cut to process the payment. You will also pay some markup on the exchange rate per intermediary if multiple currencies are involved, making SWIFT payments very costly.
How is SWIFT different from Faster Payments?
SWIFT is most applicable when sending payments across borders. Unlike Faster Payments, SWIFT is a lot slower and more expensive. It’s best applied when the payments in question are not urgent and the recipient is out of the UK.
There are different types of bank transfers, each with its merits and demerits. Faster Payments offers a keen balance that maintains timeliness and efficiency and keeps processing costs low. Also, with Faster Payments, you can send significant amounts of payments.
Which Banks Offer Faster Payment Services?
All banks and building societies in the UK can now send and receive payments through Faster Payments, either directly or through a sponsor bank. Some of the direct participants of Faster Payments in the UK include:
|
Barclays |
Atom Bank |
TSB |
|
Citi |
J.P. Morgan |
Yorkshire Bank |
|
The Co-Operative Bank |
Metro Bank |
Ulster Bank |
|
HSBC |
Royal Bank of Scotland |
Tesco Bank |
|
Lloyds Bank |
Goldman Sachs |
Cashplus Bank |
|
BFC Bank |
NatWest |
Clydesdale Bank |
|
Clear Bank |
LHV |
Santander |
|
The Access Bank UK |
Starling Bank |
Turkish Bank UK |
You can also use some third-party payment solutions to set up your Faster Payments transactions. These services are backed by sponsor banks that support Faster Payments, making it easier to set up, send and receive money using the Faster Payment service.
Using the innovation and efficiency that services like Pay iO offer, you can maximise the convenience and speed that Faster Payments offers.
Are Faster Payments Secure?
When it comes to money, security and speed aren’t always aligned. Sometimes, you have to give up some security features because they take too much time and slow down money movement.
That’s not the case for Faster Payments. Although no electronic money transfer method is foolproof, Faster Payments offers adequate security for payments sent on the platform.
One shortfall with Faster Payments is that once payments are sent and approved by the system, the transaction cannot be recalled or cancelled. Therefore, you should do your due diligence and ensure you send payments or money to the right person.
Before sending money using the Faster Payments service, the information provided is compared to the recipient’s bank records. Therefore, the information has to be correct to the tee. Otherwise, the system will decline the transaction request.
This security measure ensures you send money to the right person every time. Also, the payments are handled by reputable financial institutions that must have all the certifications and security features like encryption to ensure the safe transfer of money
