What Is Faster Payments, and How Does It Compare to Bacs and CHAPS?
Three systems handle nearly all domestic transfers within the United Kingdom: Faster Payments, Bacs (also written as BACS), and CHAPS. While they each move money from one place to the next, the rail you choose determines the price, speed, maximum size, and potential operating days of your transfer.
While these methods overlap, they aren’t interchangeable. A business could use CHAPS for a small supplier invoice, for example, but it would likely pay a higher fee than it needs to. Sending payroll through Faster Payments may work, but Bacs can be easier and less expensive when thousands of payments share one scheduled date. If you don’t know the exact ways these systems differ, you could end up making the wrong choice more often than you realize.
That’s why we wrote this guide. Keep reading to learn how Faster Payments, Bacs, and CHAPS work, what they cost, and when businesses should use each method. If you’re a UK-based business owner looking for an easier way to manage your money, you may also want to learn about Slash. Slash is a business banking platform that supports Faster Payments alongside other worldwide transfer methods like SWIFT and Global ACH.¹ UK users can even access the US dollar without forming a US entity by opening a Slash Global Account.³
Key Takeaways
- Bacs is the only one of these three UK payment methods that can pull money from an account. Direct Debit collects authorized recurring payments from a customer’s account, which Faster Payments and CHAPS can’t do as credit-push systems.
- The three-day Bacs cycle isn’t necessarily a disadvantage. Submitting a file three working days ahead of time lets a finance team approve payroll as a single batch and know the exact date it settles.
- A payment sent late on a Friday can arrive within seconds through Faster Payments, but takes until the following week through Bacs or CHAPS.
- Faster Payments caps at £1 million and Bacs Direct Credit at £20 million, but banks and providers routinely set lower limits based on the account, channel, and customer type.
- The Direct Debit Guarantee gives Bacs a level of reversibility that the others lack. A customer can claim a full and immediate refund on a payment taken (if in error), while Faster Payments and CHAPS settle irrevocably.
What Is Faster Payments?
Faster Payments is the UK’s round-the-clock system for near-instant bank transfers with British pounds (£). Introduced in May 2008, it’s relatively new compared to most other payment rails. The system runs 24/7/365, allowing individuals and businesses to move money between UK accounts during evenings, weekends, and bank holidays.
When a business initiates a Faster Payment through online banking or a connected payment platform, the sending institution checks the account and submits the transfer through the system. The receiving institution identifies the destination account and usually makes the funds available within seconds, although some can take as long as two hours with additional fraud reviews, technical issues, or indirect access arrangements.
With speed comes irreversibility – a Faster Payment typically can’t be cancelled after being sent. Banks can follow recovery procedures for misdirected payments, and a service called Confirmation of Payee can doublecheck the recipient’s name against the destination account before submission, but recovery isn’t guaranteed in either case.
Faster Payments supports several transaction types, including less-common ones like standing orders and returns. Businesses usually use it for supplier invoices, contractor payments, refunds, transfers between accounts, and urgent corrections to scheduled payment runs.
The per-transaction ceiling is currently £1 million, but that doesn’t mean every business can actually send £1 million. Banks and payment providers can set lower limits based on the account, payment channel, and customer type. Pricing can also vary based on the provider; some banks include Faster Payments with a business account and/or charge a low per-transfer fee. In general, it costs more than a high-volume Bacs payment, but a lot less than CHAPS.
What Is Bacs?
Bacs (Bankers’ Automated Clearing System) is the UK’s long-standing system for routine, scheduled bank payments. Its history begins with the Interbank Computer Bureau established in 1968, followed by the launch of Direct Debit in 1970. The rail supports two main transaction types:
- Bacs Direct Credit pushes money into a recipient’s bank account. It’s often used for salaries, pensions, benefits, supplier payments, and other bulk disbursements.
- Bacs Direct Debit pulls an authorized payment from a customer’s account. Businesses use Direct Debit for subscriptions, utilities, insurance, memberships, loan payments, and other recurring charges.
Bacs operates on a fixed three-working-day cycle. On the first day, the business (or its payment provider) submits the payment file. The data is processed and distributed to the relevant institutions on day two. On day three, the payer’s account is debited and the recipient’s account is credited. You can also submit specialized instructions up to 30 days before the intended payment date.
While the three-day timeline is a problem when you want to send something ASAP, it’s an advantage when transfers need to be made consistently and predictably. A finance team can prepare a payroll or supplier file in advance, approve it as a batch, and know the date that the money should settle.
Bacs is usually the lowest-cost system of the three, costing somewhere between 5 and 50 pence on average. The exact pricing depends on whether the company connects through its bank, a Bacs-approved bureau, or another payment service provider. You’ll usually either pay a small per-item transfer fee or a batch processing fee, depending on the type of payment.
The maximum possible payment through Bacs Direct Credit is £20 million, but banks and platforms might impose their own lower customer limits in the same way they can with Faster Payments. Something to be mindful of if you’re using Bacs Direct Debit, meanwhile, is the “Direct Debit Guarantee”. This Guarantee is a UK customer protection policy that allows full and immediate refunds if a payment is taken in error.
What Is CHAPS?
CHAPS (Clearing House Automated Payment System) is a payment rail that began operating on February 9, 1984, and is currently operated by the Bank of England. The system is designed primarily for high-value wholesale payments and time-sensitive pound transfers that need to settle within the same working day.
Unlike the other two rails, CHAPS uses real-time gross settlement. “Real-time” means payments are settled during the working day rather than being held for a later batch. “Gross” refers to the fact that payments are settled individually instead of being combined with other obligations and reduced to one net amount.
Settlement occurs across accounts held within the Bank of England’s RTGS infrastructure. Once the transaction settles, it’s completely irrevocable. That may sound scary at first, but it makes CHAPS a great choice for payments where a delay or reversal could prevent a legal or commercial transaction from closing. Some typical uses include:
- Property completions
- Acquisitions
- Tax payments
- Treasury transfers
- Intercompany funding
- Large supplier invoices
Something like an acquisition or a property completion can be too high-value for Faster Payments’ £1 million limit or even Bacs’ £20 million limit. CHAPS, on the other hand, has no maximum transaction amount, and individual transfers may be worth millions or billions of pounds. As usual, banks can set their own limits, but since there has to be some way to send more than £20 million, these ceilings can be rather high in their own right.
The system runs from 6 a.m. to 6 p.m. on working days, excluding bank and public holidays in England and Wales. The deadline for customer payments is 5:40 PM, although some banks may ask you to send instructions a bit earlier so they have time to review and submit them. Any transfers submitted after the bank’s cutoff might not settle until the following working day.
Overall, CHAPS is the most expensive of the three systems. Banks commonly charge businesses approximately £20 to £35 per CHAPS payment, although account-specific prices vary. While that cost feels minor for a multimillion-pound transaction, it’s inconvenient for an ordinary invoice that could instead travel through Faster Payments.
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Differences Between Faster Payments, Bacs, and CHAPS
Speed isn’t necessarily the biggest differentiator between the three methods, even though it tends to stand out the most. Each system is mainly designed around a different payment pattern. Faster Payments handles individual transfers quickly, Bacs groups predictable payments into scheduled files, and CHAPS settles each high-value payment individually through central bank infrastructure.
Bacs is also the only one of the three that supports both push and pull payments through Direct Credit and Direct Debit. Faster Payments and CHAPS are primarily credit-push systems, where the payer sends money to the recipient. A company collecting recurring subscription payments from customers will almost always work through Bacs Direct Debit rather than Faster Payments or CHAPS.
Some businesses will make their choice based on availability. Faster Payments is the only one that stays open through nights, weekends, and holidays. Bacs follows a three-business-day cadence, while CHAPS is limited to business day operating hours. If you send a payment late on Friday, it would reach its destination almost immediately through Faster Payments. That transfer wouldn’t settle until the following week via the other two systems.
When Businesses Should Choose Each Method
Even when looking at these three rails laid out alongside each other, it can be tough to picture when and how you might utilize them for your own business. Let’s look at some general examples of when each method can come in handy:
When to Choose Faster Payments
- The recipient needs money immediately or outside banking hours: Faster Payments is helpful for urgent supplier invoices, contractor payments, customer refunds, and transfers between company accounts that can’t wait for a Bacs cycle. It’s also the only one of the three systems that’s available on weekends and bank holidays.
- You’re correcting or supplementing a scheduled payment run: If an employee was missed from payroll or a supplier’s bank details were corrected after the Bacs file was submitted, Faster Payments can allow you to make a quick fix.
When to Choose Bacs
- You’re sending a planned batch of payments: Bacs Direct Credit works well for payroll and other high-volume disbursements when the finance team can submit the file three working days before settlement. Its low per-payment cost becomes especially helpful when you’re sending these types of widespread payments.
- You need to collect recurring payments from customers: Bacs Direct Debit is the only rail that lets a business collect authorized subscription, membership, utility, or invoice payments from UK accounts on a schedule.
When to Choose CHAPS
- The payment is unusually large: CHAPS has no transfer ceiling (not counting possible bank limits), making it suitable for property transactions, acquisitions, major supplier settlements, and treasury movements that can’t be split or routed through Faster Payments.
- It needs to settle on the same day: When an asset purchase or other type of contractual obligation depends on confirmed settlement during the working day, CHAPS is the right pick due to its speed and irrevocability. Just make sure you double- and triple-check the transfer details first.
Get Paid in USD and Pay in GBP With Slash
A design studio in Manchester that invoices a client in New York gets paid in dollars, but its rent, payroll, and suppliers are all paid in pounds. Converting every payment as soon as it lands means paying a spread each time, and buying dollars back later for American software or freelancers means paying another.
With a Slash Global Account, the studio can keep its client revenue in dollars, cover dollar expenses straight from that balance, and convert to pounds only when bills at home come due. The account doesn’t require a stateside entity, and it connects directly to the Faster Payments system. The Global Account includes:
- US account and routing number: Give American clients domestic payment details, so they can pay your invoices the same way they’d pay any vendor in the States.
- Faster Payments, SEPA, and SWIFT: Pay suppliers and staff in pounds, euros, and other currencies.
- Stablecoin payments: Send and receive USDC and USDT across 15 blockchains through built-in on- and off-ramps.⁴
- Invoicing and bill pay: Send customized invoices, collect payments, and manage vendor bills from the same account.
- Card controls and spend policies: Issue unlimited virtual cards, set granular spend limits by team or individual, and see every transaction post in real time. Slash can also text employees for receipts and match them to transactions automatically.
- Financial dashboard: Track payments, card spend, and accounting sync in real time, in one place.
Keeping client revenue in dollars means software subscriptions, American contractors, and other dollar expenses can be paid straight from that balance, with conversions to pounds made only as needed.
Get started with Slash today to get more control over how your business moves money between pounds and dollars.
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FAQs
Can UK business owners use Global ACH?
Receiving money through Global ACH is common, since a US payer can send funds that a provider delivers into your UK account over local rails rather than SWIFT. Whether you can send Global ACH from a UK entity depends entirely on your provider, since “Global ACH” is actually more of a product name than a single scheme with uniform access rules. The easier route for a UK business paying US counterparties is holding US account and routing details, which the Slash Global Account allows you to do.
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What is Confirmation of Payee?
Confirmation of Payee is a name-checking service that verifies the recipient’s name against the account details you entered before the payment leaves. You’ll get a full match, a close match with the correct name shown, or no match at all. It reduces misdirected payments and certain scams, but it doesn’t guarantee recovery if you decide to send the payment despite the mismatch.
When can someone get their money back from a Bacs Direct Debit through the Direct Debit Guarantee?
The most common cases where someone can legitimately reclaim a debited amount of money include errors (wrong amount, wrong date, post-cancellation) or if they had no advance notice of a payment being taken.
ACH Credit vs. ACH Debit: What's the Difference, and How Should Your Business Use Them?
