What is Faster Payments?

TCS emerged as a leading contender earlier this week to take over the running of the UK’s Faster Payments Service, according to Sky News. This would mean they take over from the previous operator Vocalink, owned by Mastercard.

My colleague Dom previously covered what instant payments are, but here I’m going to look at the UK Faster Payments scheme and how it is different from other payments schemes.

What is the difference between CHAPS, BACs, and Faster Payments?

Faster Payments is the UK interbank payment system which is father than both Bacs Payment Schemes Limited (Bacs) and Clearing House Automated Payment System (CHAPS).

BACs was founded in 1968 for bank-to-bank transfers within the UK, either bank transfers or direct debits. It became a subsidiary of Pay.UK in 2018.

BACs payments were reliable and cost-efficient, but they are now viewed as quite slow.

CHAPS emerged in 1985 and provides same-day settlement for large amounts of money, the lower limit of this depends on the bank. Banks generally charge a fee for this service, for example Starling charges £20 according to their website.

Faster Payments was created in 2008for bank-to-bank transfers. It largely deals with smaller amounts of money but allows payments up to £1 million, depending on the bank. These are normally free for customers, but some businesses may be charged by their bank.

How long do fast payments take?

Faster Payments are generally relatively instant but can take a little longer in some cases, up to two hours. The service is available seven days a week, all day.

BACs payments take within three days, and can only be used during the week between 7am to 10:30pm.

CHAPS can only be sent during weekdays between 6am and 6pm, but individual banks will often have a cutoff for the payment to remain same day.

The advantages of Faster Payments are clear, leading to their rise over other the other two payments forms, as seen in the diagram below. Yet, this does not mean that use cases do not still exist for the other payments forms.

Source: Pay.UK

Which banks use Faster Payments?

Faster Payments continue to grow as a popular payment method, helped by the fact most banks accept them.

According to the Pay.UK website, who run Faster Payments, these banks, building societies, and fintechs are participating in the scheme: Atom bank, Banking Circle, Barclays Bank, Barclays Bank UK, Cashplus Bank, Citibank NA, ClearBank, Clydesdale Bank, Goldman Sachs, HSBC, HSBC UK, iFast Global Bank, JPMorgan Chase & Co, Lloyds, Metro Bank, Mettle, Modulr, Monzo, Nationwide, NatWest, Danske Bank, Revolut, Santander, Starling Bank, Tesco Bank, The Access Bank UK, The Bank of London, The Co-operative Bank, TSB, Turkish Bank UK, and Virgin Money.

Some payment service providers and fintechs such as Wise, Ebury and SumUp are also part of the scheme.

Are Faster Payments safe?

Once Faster Payments are sent they cannot be cancelled or reversed. Due to the instant nature of the system, it has been leveraged by criminals such as through social engineering or authorised push payment (APP) scams.

This is an ongoing battle for banks and customers who fall victim to these schemes. Most banks have implemented and continue to develop new ways to deal with this type of fraud.