Chaps vs BACS vs Faster Payments - What Are The Differences?

Table of Contents

• BACS, CHAPS And Faster Payments: An Introduction
• Getting To Know BACS
• Understanding CHAPS
• Overview of Faster Payments
• BACS, CHAPS And Faster Payments: Key Differences
• Which is faster: BACS vs CHAPS vs Faster Payments?
• Which is cheaper: BACS vs CHAPS vs Faster Payments?
• Which has higher transaction limits: BACS vs CHAPS vs Faster Payments?
• Which is more available: BACS vs CHAPS vs Faster Payments?
• Which is available on weekends: BACS vs CHAPS vs Faster Payments?
• Which has more adoption by banks: BACS vs CHAPS vs Faster Payments?
• Which is more secure: BACS vs CHAPS vs Faster Payments?
• When To Use BACS vs CHAPS vs Faster Payments? Our Recommendations
• When to use BACS?
• When to use CHAPS?
• When to use Faster Payments?
• Conclusion

The world of payments can sometimes be confusing and overwhelming, especially with numerous options available these days.

This cannot be truer in the case of the UK where 3 most commonly used payment systems exist in parallel. These are CHAPS, BACS and Faster Payments.

What sets these systems apart and how do you know which option is best for you? Which one is faster, or more secure, or allows sending large amounts of money? Which one is available over the weekends in case you need to make an urgent payment?

We will answer all these questions and much more in this article.

Below, we provide an overview of CHAPS, BACS and Faster Payments, highlighting the key differences between them so that you can make an informed decision when choosing the right payment method for your needs.

Whether you are making a large business transaction, paying bills, or transferring money to friends and family, understanding the advantages and disadvantages of each system will help you navigate the world of UK payments with ease.

BACS, CHAPS And Faster Payments: An Introduction

BACS, CHAPS and Faster Payments are 3 different payment systems used in the UK to make payments and transfer funds from one bank account to another. Below is a high level introduction to all these 3 financial systems.

Getting To Know BACS

BACS (Bacs Payment Schemes Limited, formerly Bankers Automated Clearing Services) is a payment system used in the UK to process direct debits and direct credits. BACS is a popular payment method for individuals and businesses, providing a convenient and cost-effective way to make and receive payments.

Some key features of BACS include:

• Cost-Effective: BACS is a cost-effective payment method, as there is no charge for making or receiving payments through the system.
• Secure And Reliable: BACS is a secure payment system that is backed by UK clearing banks, providing peace of mind for individuals and businesses making transactions.
• Regular Payments: BACS is often used for making and receiving regular payments, such as salaries, pensions, and rent.
• Three-Day Processing Time: BACS payments take three working days to process and clear, making it a slower option compared to CHAPS or Faster Payments.
• Direct Debits And Direct Credits: BACS is used for the processing of both direct debits and direct credits, making it a versatile payment method.

In conclusion, BACS is a cost-effective and secure payment method widely used in the UK for processing direct debits and direct credits. Its 3-day processing time may not be suitable for time-critical transactions.

However, its versatility and reliability make it an attractive option for individuals and businesses making and receiving regular payments.

Understanding CHAPS

CHAPS (Clearing House Automated Payment System) is a same-day payment system used in the UK for high-value and time-critical transactions.

CHAPS payments are processed and cleared on the same working day, provided that the payment is made before the cut-off time. This makes CHAPS an attractive option for individuals and businesses who need to transfer funds quickly and securely.

Some key features of CHAPS include:

• Same-Day Processing And Clearance: CHAPS payments are processed and cleared on the same working day, ensuring that the funds are available as soon as possible.
• High-Value Transactions: CHAPS is typically used for high-value transactions, such as those made by solicitors or accountants.
• Secure And Reliable: CHAPS uses the SWIFT network as its underlying payment backbone. This makes it a secure payment system as SWIFT has been around for decades and is the fundamental building block of both international and domestic bank transfers.
• High Cost: CHAPS is generally more expensive than other payment methods, such as BACS and Faster Payments. A CHAPS payment can cost you from GBP 25 up to GBP 30.

CHAPS is an important payment method for individuals and businesses in the UK who need to transfer large amounts of money quickly and securely. It is especially useful for time-critical transactions where speed is of the essence, such as property purchases or large business transactions.

Overview of Faster Payments

Faster Payments is a real-time payment system used in the UK to process electronic payments. Faster Payments provides individuals and businesses a fast and convenient way to transfer funds between bank accounts.

Some key features of Faster Payments include:

• Real-Time Processing: Faster Payments transactions are processed in real-time, providing near-instant access to funds.
• Widely Available: Faster Payments is available 24/7 and can be used by individuals and businesses with a UK bank account.
• Secure: Faster Payments is a secure payment method as it is only accessible via UK banks. Since banks employ strict security protocols as part of their legal and regulatory compliance, payments sent via Faster Payments are safe and secure.
• Cost-Effective: Faster Payments is a cost-effective payment method, as there is no charge for making or receiving payments through the system. Mobile and online banking: Faster Payments can be made through mobile and online banking, providing a convenient way to transfer funds.

In conclusion, Faster Payments is a fast, secure, and cost-effective payment method that is widely available to individuals and businesses with a UK bank account. Its real-time processing and 24/7 availability make it an attractive option for individuals and businesses who need to transfer funds quickly and securely.

Now that we have provided a brief introduction of BACS, CHAPS and Faster Payments, let's get down to the differences between them.

BACS, CHAPS And Faster Payments: Key Differences

In this section, we will compare BACS, CHAPS and Faster Payments on various criteria like transfer speed, weekend availability, transaction limits, safety and much more. Read on to see which system is the best in which aspects.

Which is faster: BACS vs CHAPS vs Faster Payments?

The processing speed of BACS, CHAPS and Faster Payments varies, with Faster Payments being the fastest option, followed by CHAPS, and then BACS.

Faster Payments transactions are processed in real-time, providing near-instant access to funds. In the worst case, Faster Payments transfers finish in up to 2 hours.

CHAPS payments are processed and cleared on the same working day as long as the transfer is initiated before your bank's specified cut-off time. If you miss the cut-off time, your transaction will clear on the next business day.

BACS payments take 3 working days to process and clear, making it a slower option compared to CHAPS or Faster Payments.

Faster Payments 🏆 provides the fastest settlement of funds with transfers finishing between seconds to up to 2 hours.

Which is cheaper: BACS vs CHAPS vs Faster Payments?

Of the 3 payment systems, CHAPS is the most expensive, followed by BACS and then Faster Payments which is completely free of cost.

Let's start with the most expensive system, i.e., CHAPS.

CHAPS payments can cost anywhere from GBP 25 to GBP 30, with various banks charging varying fees for using the service. This makes CHAPS a fairly expensive payment system, which is why its best suited for very large value transfers that can justify the cost of making a CHAPS payment.

BACS payments are much cheaper than CHAPS. The cost of sending BACS payments is in pennies, whilst it is totally free of cost to receive BACS payments.

Finally, Faster Payments wins when it comes to fees and charges since all Faster Payments transactions are totally free.

Faster Payments 🏆 charges 0 fees whilst both BACS and CHAPS come with a cost. Between BACS and CHAPS, CHAPS is much more expensive with transfers costing up to GBP 30.

Which has higher transaction limits: BACS vs CHAPS vs Faster Payments?

The good news is that none of the 3 UK payment systems - BACS, CHAPS or Faster Payments - impose any maximum transaction limits by themselves.

That said, various banks usually enforce their own limits to each of these services. Therefore, the best bet is to check with your bank on their transaction limits for each system.

For example, even though the Faster Payments service does not impose any limits, Barclays Bank has the below maximum transfer limits for one-off and forward dated Faster Payments transfers:

• Personal accounts that send via a branch - GBP 25,000
• Personal accounts that send via phone - GBP 15,000
• Personal accounts that send online - GBP 50,000
• Premier accounts (branch, phone or online) - GBP 50,000

It's a tie! BACS, CHAPS and Faster Payments do not enforce any transaction limits. But banks do; check with your bank for their upper transaction limits for all 3 systems.

Which is more available: BACS vs CHAPS vs Faster Payments?

Both BACS and CHAPS operate on business days only - this means that neither system works over the weekend or on public and bank holidays in the UK.

On business days, BACS is operational from 7 AM to 10:30 PM whilst CHAPS from 6 AM to 6 PM.

Faster Payments, on the other hand, is available 24x7 and 365 days a year. Note that your bank may still limit access based on their schedule.

Generally, you can make Faster Payments transfers online and via mobile banking any day, but to make them via phone or in your bank's branch, you will need to follow their operating hours.

Faster Payments 🏆 is available 24x7 all year round, while BACS and CHAPS only during business days.

Which is available on weekends: BACS vs CHAPS vs Faster Payments?

Faster Payments is the only one amongst the 3 payment systems that is operational over the weekend.

You may still be limited based on your bank's availability though. For example, if you wish to submit a Faster Payments transaction using phone banking or by visiting your bank branch, you may not be able to do so over the weekend.

Most banks will, though, allow you to use online banking and mobile banking to submit payments any time.

Faster Payments 🏆 is the only payment system that is operational during the weekend. BACS and CHAPS do not work on weekends and holidays.

Which has more adoption by banks: BACS vs CHAPS vs Faster Payments?

All 3 popular payment systems in the UK - BACS, CHAPS and Faster Payments - see decent adoption from banks and financial institutions in the country.

Below are some statistics as of this writing around how many banks support each system:

• BACS¹ is supported by 30 or so mainstream UK banks.
• CHAPS has been adopted by 30 banks as Direct Participants and is further used by more than 5,000 Agency and Correspondent banks that rely on the 30 direct participant banks for making CHAPS payments and transfers.
• Faster Payments¹ is supported by 40 or so banks, payment service providers (PSPs) and financial institutions in the UK.

CHAPS 🏆 has the widest adoption with 30 Direct Participant banks and more than 5,000 Agency and Correspondent banks using CHAPS for making payments in UK.

Which is more secure: BACS vs CHAPS vs Faster Payments?

BACS, CHAPS and Faster Payments are all safe and secure payment systems in the UK, and there is not much to choose from amongst them when it comes to security.

All 3 systems are well regulated and monitored by UK's legal, compliance and regulatory agencies and financial watchdog institutions, and have to comply with strict standards to ensure the safety of customer funds and information.

Additionally, since customers do not directly interact with any of the 3 systems, the chances of fraud and unauthorized access are further reduced. You can only make payments via BACS, CHAPS and Faster Payments using your bank.

It's a tie! BACS, CHAPS and Faster Payments are all secure systems and your money and information should be safe when making payments with them.

That was a lot of information. To make it easier to quickly compare BACS, CHAPS and Faster Payments on the various criteria we presented above, the below table can be used as a quick comparison guide.

In the next section, we will look at what types of payments and transfers are best suited for BACS, CHAPS and Faster Payments.

When To Use BACS vs CHAPS vs Faster Payments? Our Recommendations

The choice of the best payment method between BACS, CHAPS and Faster Payments will depend on several factors, including the value of the transactions, the processing speed required, and the cost.

Below are some guidelines that we propose when it comes to choosing between the 3 systems.

When to use BACS?

BACS is great for low to moderate value payments that are recurring in nature but are not time sensitive. For example, paying bills or receiving salary and pension payments are perfect use cases for BACS Direct Debits and Direct Credits.

Since the cost is almost negligible (and goes down the more transfers you send), BACS is perfect for regular payments and transfers.

However, given that payments process in 3 working days, BACS is not a great option if you need to make urgent payments or money transfers.

Use BACS for lower value, recurring payments that are not urgent. Good examples include recurring bill payments and receiving payments like your salary or pension.

When to use CHAPS?

CHAPS may be the best option for high-value transactions, as it provides same-day processing and is specifically designed for these types of payments.

The biggest drawback of CHAPS is its high transfer fee; you may end up paying anywhere from GBP 25-30 for every CHAPS transaction. Fees vary by bank so make sure to check with your bank for their applicable charges for sending CHAPS payments.

Given the fee, CHAPS is most suitable for very high amount transactions like FX transactions, large tax payments, housing and real estate transactions, big insurance payments, etc. As a result, CHAPS payments are typically done by businesses and organizations.

CHAPS comes with a fee, and is best suited for high value payments that need to process within a day.

When to use Faster Payments?

Faster Payments is a secure payment method that provides near-instant access to funds. It is also widely available 24x7 and 365 days a year.

Additionally, Faster Payments supports all types of payments like personal as well as business payments, direct debits for bill payments and recurring transfers, receiving salaries, refunds and pensions, and so on.

This makes Faster Payments a great choice for all types of payments and money transfers.

The only drawback may be bank-imposed transaction limits. Even though the Faster Payments network imposes no upper transaction limits, most banks have transfer limits in place. Check with your bank to see what limits are in place for your account.

Faster Payments is an always available payment system that moves money fast. Be aware of transaction limits that your bank may have in place.

Conclusion

The UK payment landscape has 3 great options in BACS, CHAPS and Faster Payments. Each payment type has its pros and cons, and choosing the right one for your needs may require some consideration.

It is important to consider your needs when weighing the benefits of each payment method before making your decision. We suggest you compare all 3 systems on various factors like speed, fees and limits before you decide which one to go with.

Check out our analysis and recommendations above to see which of these systems is best suited for which payment scenarios.

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References:
1. Participating banks in the UK