Faster Payments Service Enhancing electronic payments in the UK

Faster Payments is a new payment system that has been developed by the UK banking industry. The Faster Payments Service enables electronic payments, typically made via the internet or by phone, to be processed in hours rather than days. Faster Payments was launched on 27th May 2008.

Faster Payments

What is Faster Payments?

The processing of electronic payments in the UK is set to change significantly with the introduction of Faster Payments, which essentially gives us the ability to transfer funds quickly and cheaply between banks and large companies. Faster Payments replaces the BACS payments for Standing Order Payments, Internet Banking and Telephone Banking Payments. BACS Direct Credit submitters will be able to make Faster Payments. Note that Direct Debits and Direct Credits are not being replaced.

What types of Faster Payments are there?

There are three types of Faster Payments: Immediate Payments, Payments some time in the future and Standing Orders.

Can I use Faster Payments with BACS.IP for Free and BACS.IP Bureau?

Yes, this functionality will be included in the next release of our BACS.IP products.

What benefit is it to my organisation?

Faster Payments gives the benefit of fast transfer and low cost. It can be used when urgent payments are needed, perhaps salaries for new employees. It can also be used for making some of the larger payments without incurring the CHAPS charges. Faster Payments can be made 24 hours a day, 7 days a week and 365 days a year. A receiving bank can quickly confirm that the payment has been made to the beneficiary account giving a reassurance that the payment has gone through.

How much does it cost?

Cost is likely to be pence rather than pounds. Exact pricing will be determined by the individual banks and market forces.

How do I use it?

The next release of our BACS.IP products will include Faster Payments functionality. Further details will be provided nearer the release date.

What about BACS and CHAPS?

Faster Payments can be viewed as a partial alternative for both BACS (typically low value transfers taking 3 days to execute) and CHAPS (typically high value transfers with same day transfers). Faster Payments can be used in preference to CHAPS for medium sized payments. However, there will be a transaction limit on the size of each payment (£10,000 for an immediate payment, or £100,000 for a Standing Order) so Faster Payments won’t replace CHAPS for house purchases for instance.

Who runs it?

The Faster Payments infrastructure is run by IPL, a joint venture between VOCA (previously known as BACS) and LINK (who own the LINK ATM network).

How does it work?

IPL have set up a secure network similar to the BACSTEL-IP network which is used to send payments and notifications. The diagram below outlines the 8 steps typically taken when payment is made using the Faster Payments Service, starting with the initiation of the faster payment and the Payment notification.

Faster Payments benefits

The main benefit to users is the ability to send low-to-medium value payments quickly (in near real time) any time day or night. Standing orders are processed on a same day basis. This is a welcome change to having payments held in limbo by the banks for 3 days.

Which banks will participate?

The following banking groups have committed to implement the scheme:

In the future, other financial institutions will be able to join, either as members, or to access the system through agency arrangements with a member - just as they do with other payment systems.

Faster Payments restrictions

• Faster Payments is a Sterling only payments system.
• Faster Payments requires two-factor authentication (such as CHIP and PIN or some other token based process)