UK Faster Payments

UK Faster Payments

Faster Payments is a system in the United Kingdom that enables near-instantaneous electronic fund transfers between banks and building societies. It allows individuals, businesses, and organizations to make payments and transfer money quickly and securely, typically within seconds or minutes.

The Faster Payments Service was launched in 2008 and is managed by the Faster Payments Scheme Limited (FPSL), an organization owned and operated by a consortium of major banks and building societies in the UK. Since inception, Faster Payments has become one of the primary methods for making payments in the UK, facilitating a wide range of transactions such as bill payments, salary payments, online purchases, and person-to-person transfers. Although Faster Payments primarily caters to domestic transfers within the UK, its versatility and ease of use have propelled its popularity. The service has experienced substantial participation growth, with more than 40 institutions, encompassing high street banks, building societies, challenger banks, and fintech companies, now involved. Prominent members include major banks like Barclays, HSBC, and Santander UK.

The system operates 24 hours a day, 7 days a week, including weekends and bank holidays, providing customers with greater flexibility and convenience in managing their finances – not unlike the United States’ Zelle payments platform.

Use & Benefits

Faster Payments is extensively utilized for a variety of transaction types, including single immediate payments, forward-dated payments, standing orders, and direct corporate access payments. To wit:

  1. Single Immediate Payments: This is the most prevalent form of payment within the FPS. Customers initiate these one-off payments through mobile banking, phone banking, online banking, or sometimes directly from their branch. Such payments can be made 24/7, excluding physical branch visits. The system permits transactions up to £1 million per transaction, although individual banks may set lower limits.
  2. Forward-Dated Payments: These are one-off payments scheduled for a predetermined date chosen by the customer. An example includes bill payments.
  3. Standing Orders: Regular payments of a fixed amount to the same recipient on specified dates. Customers determine the payment schedule and amount.
  4. Direct Corporate Access Payments: This service caters to the business community, enabling bulk payment messages to be sent to the Faster Payment Service for fund disbursement. Processing time and transaction limits remain consistent. Various software solutions are available to businesses to customize the service based on their requirements

Its adaptability renders it suitable for both personal and business purposes. The service accommodates diverse payment methods, including transactions initiated via online banking, mobile apps, and telephone banking.

In the UK, most banks and financial institutions do not charge customers for using Faster Payments for standard transactions. However, it’s essential to note that some banks or financial service providers may have specific terms and conditions regarding fees and charges for certain types of Faster Payments transactions. For instance, while Faster Payments are typically free for personal customers for standard transactions, some banks may impose fees for expedited or same-day payments. Similarly, businesses may face different fee structures depending on their banking agreements.

The platform facilitates real-time payments of up to £1 million, although this threshold may fluctuate based on the bank and account type. Despite its rapidity, the system upholds stringent security protocols. Banks conduct identity verifications and other security measures to guarantee transaction safety. It’s crucial for users to meticulously verify recipient details since payments are irreversible once initiated.

Faster Payments is specifically designed for domestic transactions within the United Kingdom. It facilitates near-instantaneous electronic fund transfers between banks and payment institutions within the UK only.

Faster Payments Outside of the UK

Financial institutions outside of the UK can only access Faster Payments indirectly through partnerships or correspondent banking relationships with UK-based banks or payment institutions that are members of the scheme. However, direct access to Faster Payments for non-UK financial institutions may be limited due to regulatory and operational considerations.

There are a number of FCA-licensed Electronic Money Institutions that offer access to Faster Payments for non-UK entities and individuals through various schemes. But, notably, Faster Payments cannot be used for international payments and thus the efficacy of onboarding through an EMI makes financial sense (as the EMI will charge for access) when the FI needs to make mass payouts within the UK.

UK Alternatives to Faster Payments

In addition to Faster Payments, there are other swift money transfer systems in the UK such as BACS and CHAPS. Each of these systems offers distinct features appealing to different user demographics.

BACS, a commonly used method for money transfers in the UK, differs from Faster Payments primarily in speed. BACS payments, typically utilized for direct debit and direct credit transactions between bank accounts, take three working days to clear.

CHAPS, on the other hand, ensures same-day payment arrival, but unlike Faster Payments, it incurs a £25 fee for most users. Some banks may waive this fee for premium account holders. CHAPS is predominantly employed for high-value transactions exceeding the £1 million limit.

Financial institutions and large enterprises frequently utilize CHAPS to settle money market and foreign exchange transactions, as well as to remit payments to suppliers and taxes. Solicitors employ CHAPS for finalizing property transactions, while individuals utilize it for purchasing high-value items like cars or paying house deposits.

Conclusion

Faster Payments is the current standard for real time payments in the UK.

Adam Tracy works with individuals and businesses seeking to make and receive mass payments in the UK via Faster Payments. Be sure to reach out with any questions or comments.

Book a free consultation here.

About Adam Tracy

Adam Tracy is a payments expert and entrepreneur who specializes in payment systems, blockchain technology, digital currencies, and other emerging technologies. He is the founder of Blockrunner, LLC that provides consulting services to clients in the blockchain, payments and cryptocurrency arenas.

Tracy has been involved in the payments industry as an attorney, consultant and entrepreneur since 2005, while he was become an expert in blockchain and cryptocurrency since its advent in 2013. Tracy has worked with a wide range of clients, including startups, established businesses, and investor – both in the United States and worldwide. He has advised clients on a wide range of compliance, legal and operational issues related to payment transfer systems, crypto token generation and architecture, cryptocurrency exchanges, regulatory licensing, smart contracts, and other blockchain applications.

In addition to his consulting work, Tracy has founded several companies in the payments, blockchain and cryptocurrency space, including a digital asset hedge fund, licensed electronic money institution and a blockchain-based tokenization platform. He is also a proponent of decentralized finance (DeFi) and has been involved in various DeFi projects.

Tracy is also a frequent speaker and writer on blockchain and cryptocurrency topics. He has been featured in a wide range of publications, including Forbes, Hollywood Reporters, CNBC, Reuters, CoinDesk, and Bitcoin.com.

Find Adam: https://linktr.ee/adamtracy

Blockrunner, LLC., is a financial services match-making marketplace and consulting company. We are not a bank, FI/NBFI, Payment Service Provider, deposit taking institution, trust, or money services business of any kind. We are not regulated by any financial regulator. Banking, Payment, Processing, and Licensing services are provided by our participating members. This website is for informational purposes only and does not constitute legal advice. If you need legal advice, please consult a licensed attorney in your jurisdiction.

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