Transferring money between banks has never been easier in recent years thanks to digital payment methods, meaning you can send money to anyone, anywhere in the world, with the click of a button.
But when a business sends money, the stakes are a little bit higher, especially when you’re sending large sums of money.
But what are Bacs payments, and what do they mean for businesses? We’ll explore everything there is to know about this payment method.
What does Bacs stand for?
Bacs — also known as Bankers’ Automated Clearing Services — is a type of bank transfer in the UK. It refers to the network of banks and building societies that participate in the Bacs payment scheme.
The Bacs payment service has been managed and operated by pay.uk since 2018, and since its inception in 1968, over 160 billion transactions have been debited or credited using the Bacs payment method. In 2022 alone, there were 6.7 billion Bacs payments, amounting to an impressive £5.3 trillion.
What is a Bacs payment?
A Bacs payment is one of the most common bank-to-bank transfers in the UK. There are two types of payments:
Direct Debit — When you have given permission for another party to take money from your bank account. This could be in the form of monthly direct debits like utility and internet bills, council tax payments and more.
Direct Credit — Most commonly referred to as a ‘bank transfer’, this is when another party deposits money into your account. This could be in the form of refunds, salary payments, pension contributions and more.
Are Bacs payments safe?
In short, yes. Bacs is one of the safest ways to make and receive payments — particularly for businesses. In fact, Bacs has famously never misplaced a payment since its launch!
Bacs uses Bacstel-IP, a system protected by SSL encryption. It also requires a secure, encrypted password and the system is constantly monitored to validate data and user authentication.
Are Bacs payments the same as Faster Payments?
Sometimes, people can get confused between Bacs and Faster Payments.
A Faster Payment is a type of electronic transfer designed to speed up the process of sending money within the UK. With Faster Payments, you can send real-time payments of up to £1m online, via telephone banking, in a branch or through mobile banking apps.
In June 2023, Faster Payments processed 379.4 million payments, an 18% increase in the amount processed in June 2022. 2022 also saw Faster Payments break the record for the highest amount of payments processed in a single year (correct as of November 2023).
What are the advantages of using Bacs payments?
Bacs payments can offer a wide range of benefits to businesses, including:
Safe and secure payments — Security is usually a business's top priority, particularly when it comes to making payments, whether you’re paying an invoice or setting up a salary payment. Bacs is one of the most trusted methods of payment in the UK.
Payment scheduling — When you’re running a busy business, it can be easy to miss payment deadlines when you have to set it up yourself. Bacs allows you to schedule regular payments via direct debit and direct credit payment options. This is why the UK Government uses Bacs for welfare and pension payments.
Quick payments — While Bacs isn’t as fast as CHAPS Payments — which guarantees same-day payment as long as instructions are received before a cut-off time — it still does process payments within two to three business days. Bacs also states that it will never take longer than this, regardless of any unexpected delays or other issues.
What are the disadvantages of using Bacs payments?
While Bacs does have its advantages, like most things, it also comes with its disadvantages. These include:
Only clears on business days — While it’s great that Bacs payments clear within three days, it’s important to remember that it’s only on business days. If you’re sending or receiving a time-sensitive payment, it’s important to factor in the weekend when calculating how many days you need. If you need to pay a supplier on Monday, you’ll have to process the payment the Wednesday of the week before, not Friday.
Strict cut-off times — In addition to only processing on business days, Bacs have a strict cut-off time policy; however, this is also impacted and chosen by the bank you use. Santander, for example, has a cut-off time of 7 PM on business day one for funds to be cleared by business day three.
Limited use — Bacs payments are only available in the UK and can only be used for payments between UK bank accounts.
How much does a Bacs payment cost?
Bacs payments are one of the cheapest ways for businesses to transfer money between banks. You can expect to pay between 5 and 50p — plus any additional fees charged by your bank — per transaction.
How long does a Bacs payment take?
Bacs payments usually take up to three days to process and for funds to be credited to the recipient's account.
It’s also important to remember that Bacs is only available on weekdays from 7 AM to 10:30 PM, and they won’t be processed or cleared on weekends.
If you can’t submit a Bacs payment within its working hours, the funds will reach the destination account on the 3rd working day (excluding weekends) in the early morning, usually around 7 AM.
Which UK banks support Bacs payments?
Almost all major UK banks have adopted and support the Bacs payment method. According to pay.uk, there are currently 31 banks offering Bacs (correct as of December 2023):
- Allied Irish Bank
- Atom Bank
- Bank of England
- Bank of Scotland plc
- Barclays Bank plc
- Barclays Bank UK plc
- Citibank NA
- ClearBank
- Clydesdale Bank plc
- Coutts & Co
- Goldman Sachs
- HSBC Bank plc
- HSBC UK Bank plc
- LHV
- Lloyds Bank plc
- Metro Bank
- Modulr
- Monzo Bank Limited
- Nationwide Building Society
- NatWest
- Northern Bank Limited t/a Danske Bank
- PayrNet
- Santander
- Starling Bank
- The Access Bank UK
- The Bank of London
- The Co-operative Bank
- The Royal Bank of Scotland
- TSB
- Turkish Bank UK
- Virgin Money
Is there a limit on Bacs payments?
There is a limit to how much money you can send using Bacs. Currently, you can send payments up to £20 million per transaction; however, your bank can impose a lower limit should they wish.
Get in touch with takepayments today
Bacs payments are one of the most reliable payment methods that UK businesses can rely on. And no matter how your business operates, if you run a brick-and-mortar store, you’re going to need a card machine that can hold up. Whether you decide to opt for portable, countertop or mobile devices, our card machines for small businesses can help make payments more manageable.
To find out more about any of our payment solutions or discuss your options in more detail, contact our dedicated experts today! Or, check out our blog to learn more about takepayments' technology.
Jodie Wilkinson Head of Strategic Partnerships