Digital banking has eased banking and the movement of money within the UK and across Europe. Transactions that normally took days are now done in minutes. You can send money or make a payment within Europe, and the money arrives in the recipient’s account before you can put your phone down.
It’s a huge advantage to businesses and people. One such method of sending money is Faster Payments. It’s one of the most popular methods of transferring money from one UK bank account to another. If you’ve ever transferred money from one UK bank account to another, it was most likely facilitated by Faster Payments, also called the Faster Payments Service. It’s a common way of making fast and reliable payments in the UK. Here’s everything you need to know about it.
What are Faster Payments?
Faster Payments is an electronic method of sending money in the UK. The system uses a real-time payment system meaning the money is sent and received in real-time.
The system was launched in 2008 as an initiative to enable mobile, telephone and internet standing order payments to move quickly and securely within the UK bank accounts round the clock.
Before the initiative, it would take about three days to move money between accounts. Now, transfers are made and completed in minutes.
The Faster Payments System is operated by Pay.UK, the same company that facilitates BACS payments and the Current Account Switch Service.
Currently, the Faster Payments system allows transactions of up to £1m to be sent via the platform. However, each participating bank imposes its own limits. There are other services like CHAPS designed to handle larger transactions.
The FPS platform has over 40 participating institutions creating a robust customer network. Besides the rapid completion of transactions, most of the FPS service is free of charge for personal customers. But, business customers will pay a fee depending on their usage and their bank’s fee structure.
Types of Payments You Can Make with Faster Payments
The Faster Payments Service handles four types of payments. Each of these works differently and appeals to a different market.
Single immediate payments
This is the most common type of payment on the FPS. These payments are initiated by customers as one-off payments through mobile banking, phone banking or online banking. Sometimes, the customer can also set up this type of payment directly from their branch.
The payments can be sent 24 hours a day, seven days a week, for customers using methods other than going to their physical branch.
The limit allowed by the system for this type of payment is £1m per transaction. However, individual banks also determine the limit, so yours could be lower depending on your preferred bank.
Forward-dated payments
These are also one-off payments that are sent and received on a pre-arranged date decided by the customer. A good example of such a payment is paying bills.
Standing orders
These are regular payments that pay a set amount to the same recipient regularly on set dates. The customer decides when they want to make the payments and how much they are.
Direct corporate access payments
This is a service that is tailored to the business community. It allows business customers to send payment messages in bulk to the Faster Payment Service to disburse funds. The processing time and transaction limits are the same, and the system has various software solutions available to provide the service to businesses according to their needs.
How Do Faster Payments Work?
At the core, FPS works by reducing the time it takes to send information between banks. Instead of taking three days to complete the transaction, FPS allows for nearly instant transactions. Here’s a look at how the system works in a nutshell:
Filling out the payment details
You must fill in the details of the individual or business you’re sending the payment to. This can be done using an app, the internet, or a phone call. The recipient’s details include the following:
- Name
- Sort code
- Account number
- Reference details
- The transaction amount
Once you provide the information, the process can continue.
Sending the payment
The sender’s bank will send the information provided to the recipient’s bank. The bank will verify that the information is correct. If it is, the bank will accept the payment on behalf of the recipient. If it is incorrect, the transaction will be rejected. Either way, you will be notified of the status of the transaction.
Complete the transaction
If the payment is rejected, the sender has to verify the information and try again. You will be notified if the payment is accepted, and the amount will be transferred to the recipient’s account. The entire process happens within minutes. It’s easy and makes sending and receiving money simple.
Are Faster Payments Secure?
Faster Payments are quick and convenient on the front end. But behind the scenes, banks do a lot to maintain security while processing transactions.
Let’s say your business needs to pay £1,000 to a supplier. You will start by instructing your bank to make the Faster Payment using one of the methods mentioned above. But, first, the bank will verify your identity and require you to enter your password.
The next security level is a sort code and account number. Used as an identifying address for Faster Payment. Some banks will even ask for a reference to identify the payment on the supplier’s bank statement. It describes the purpose of the payment.
These checks and balances also include end-to-end encryption and other security features. On the front end, you send and receive money in real-time, but in the back end, your money is safe.
How Long Do Faster Payments Take?
Usually, a Faster Payment arrives within minutes. Sometimes, it can take up to two hours. A Faster Payment will always be accredited by the end of the following business day if the payment is being made to another bank that’s also a member of the Faster Payment scheme.
For this to work, the receiving bank should also be using Faster Payments. The amount sent must also be within that bank’s limit. If there’s confusion, the banks must perform extra security checks, which may delay the payment further.
Which Banks are Participants of Faster Payments?
Most banks in the UK can receive Faster Payments. But some banks, building societies and financial services companies are direct participants of the Faster Payments Service. That means they connect directly to the service without the need for a third-party sponsor. Directly connected participants of the Faster Payments Service include:
- Pay iO (app not a bank)
- The Access Bank UK
- Atom Bank
- Barclays
- BFC Bank
- Cashplus
- Citi
- Clear Bank
- Clydesdale Bank
- The co-operative Bank
- CreDec
- Danske Bank
- Ebury
- Elavon
- HSBC
- HSBC UK
- JP Morgan
- LHV
- Lloyds Bank
- Metro Bank
- Mettle
- Modulr
- Monzo
- Nationwide
- NatWest
- PayrNet
- PPS
- Prepaid Financial Services
- Revolut
- Santander
- Equals Money
- Square
- Starling Bank
- Tandem
- Tesco Bank
- Wise
- TSB
- Turkish Bank UK
- Virgin Money
If you’re not sure whether your bank can receive Faster Payments, you can use the sort code checker to verify.
Faster Payments Vs CHAPS Vs BACS
Faster Payments is not the only rapid money-sending system in the UK. There are others like BACS and CHAPS. Each of these has different features and appeals to different users.
BACS is another common way to send money in the UK. It differs from Faster Payments in several ways, most notably the speed.
BACS payments are from one bank account to another and are mainly used for handling direct debit and direct credit payments from organisations. Unlike Faster Payments, BACS payments take three working days to clear.
CHAP is another same-day payment system that guarantees the money’s arrival on the same day. Unlike Faster Payments which is largely cost-free to private users, CHAPS has a £25 fee. But some banks might offer the service free of charge for premium account holders. CHAPS is mainly used for high-value transactions above the £1 million limit.
CHAPS is commonly used by financial institutions and the largest businesses to settle money market and foreign exchange transactions and pay suppliers and taxes.
Solicitors also use CHAPS to complete housing and other property transactions. Among individuals, CHAPS is mainly used to buy high-value items such as a car or pay a deposit for a house.
Are Faster Payments the Same as a Bank Transfer?
Faster Payments is a type of bank transfer. In many cases, the two terms are used interchangeably. But, there are other types of bank transfers which include BACS and CHAPS.
Final Thoughts
Faster Payments is one of the most efficient and commonly used methods to send money in the UK. Because most banks carry it, it makes it easier for senders and recipients to send and receive money at competitive rates and sometimes free of charge.
With other bank transfer methods available, users must carefully choose which is best suited for their needs. Faster Payments is an ideal option for individual use, while BACS and CHAPS are better suited for commercial applications.
With exceptional security features that include 2-factor authentication, Faster Payments provides a fast, safe and secure method to send money across the UK.
