What are Faster Payments? Everything UK businesses need to know

Whether or not you’ve heard of Faster Payments, the likelihood is that you’re already using them in your personal life every day – without even realising it. But for your business, it’s a different story. For UK businesses, Bacs payments have long been the default method for payroll and supplier transfers.

If you want to learn more about Faster Payments and how they can support your business, keep reading. We’ll explain what Faster Payments are, clear up common confusion about them, and explore how they work for your business.

What are Faster Payments?

Faster Payments – also known as same-day payments – are a UK bank payment scheme that allows businesses to send and receive money almost instantly. Transfers usually land within seconds, making Faster Payments one of the quickest ways for businesses to move money between accounts.

This provides a much faster alternative to traditional bank-to-bank methods like Bacs, which operate on a three-day cycle.

How do Faster Payments work?

The Faster Payments Service (FPS) processes payments 24/7, including weekends and bank holidays. The system checks the sender’s account, validates the transaction, and routes funds securely to the receiving bank almost immediately.

While most payments clear within seconds, some can take up to two hours if additional fraud or security checks are required.

What’s the difference between Faster Payments and Bacs?

Bacs (the Bankers’ Automated Clearing System) is an electronic money transfer system that still stands as the default for many businesses – especially for regular payroll runs.

But more businesses are making the switch to Faster Payments, and the main reason comes down to speed.

Bacs takes three working days to process payments, which isn’t a problem when you’re carrying out predictable, high-volume tasks such as monthly payroll or collecting Direct Debits.

But Faster Payments is much better for urgent payments like last-minute supplier invoices or correcting payroll errors, because they typically complete within seconds.

Find out more about the difference between Bacs and Faster Payments here.

What’s the difference between Faster Payments and CHAPS?

CHAPS (Clearing House Automated Payment System) is similar to Faster Payments, in that it is another UK-based same-day payment system designed for time-critical or high-value transactions. 

It also allows businesses to make same-day payments; however, there are a few key differences.

CHAPS offers guaranteed same-day settlement with no upper limit, making it suitable for large corporate transfers. But it also comes with significant fees, usually costing £20+ per transaction, so Faster Payments are more cost-effective for smaller or more frequent payments.

What are the Faster Payments limits for UK businesses?

Generally, Faster Payments allow transfers up to £1 million, although individual banks may impose lower limits depending on your account type. If your business frequently processes high-value transactions, it’s worth checking your bank’s specific threshold and approval process.

How much do Faster Payments cost?

Many banks offer Faster Payments free of charge, especially for standard business accounts. However, some may apply small fees depending on transaction volume or account tier, so it’s worth checking with your bank before using the service.

Even with the small fees, however, Faster Payments are usually much cheaper than CHAPS and more flexible than Bacs for urgent or one-off payments.

Are Faster Payments secure?

A key benefit to Faster Payments is their security. They are protected by strong UK banking security standards including:

• Encryption
• Fraud monitoring
• Strong customer authentication

Even though the transfer is fast, all standard fraud and identity checks still apply. However, businesses should maintain internal approvals as best practice for added peace of mind – especially when handling payroll or large payments.

What are the benefits of Faster Payments?

Switching to Faster Payments may feel like a small operational change, but it can offer powerful advantages for UK businesses.

Improved cash flow

One of the most immediate benefits is better control over your cash flow. With Bacs, you must commit funds up to three days in advance. However, Faster Payments allow you to hold onto your money until the moment its sent, giving you tighter financial control.

More time and flexibility

Because Faster Payments are instant, you effectively gain two extra working days to finalise payroll or payment data – giving you valuable breathing room and reducing the risk of late payment penalties.

Cost-effective urgent payments

Emergency payments, generally offered via CHAPS, can be expensive. Faster Payments, on the other hand, offers a fast and much more affordable alternative.

Security and compliance

You already know that security is non-negotiable when it comes to payments. Modern Faster Payments tools are built with robust fraud protection and other security features to help your business stay secure and compliant with financial regulations.

Reliable backup

Even if Bacs is your primary payment method, having Faster Payments available provides built-in resilience for emergencies, holidays, system issues or unexpected payroll changes.

Who benefits from Faster Payments?

Faster Payments offer practical benefits to nearly all businesses; if you’ve ever felt the pressure of a looming deadline, you’ll understand the value of same-day payments.

However, there are some businesses that stand to gain the most.

• High-frequency payroll teams. For sectors like hospitality, retain and construction, weekly or bi-weekly payroll cycles often require quick turnaround times
• Risk-averse businesses. Faster Payments prevent missed deadlines and reduce the risk of costly errors caused by delays, even if issues arise at the last minute
• Businesses without a Service User Number. Not every business qualifies for a Service User Number (SUN) to access Bacs directly, so Faster Payments provides an accessible alternative

Use cases for Faster Payments

It’s one thing to know what Faster Payments are, but seeing them in action can help you understand where they support real-world business scenarios.

Emergency situations

Sometimes things just don’t go to plan and you need to process last-minute overtime payments or a crucial payment needs to be made over a bank holiday when Bacs is closed.

Faster Payments lets you handle these urgent issues instantly, ensuring your staff and suppliers are paid without delay.

Seasonal or special events

The run-up to Christmas or the end of the financial year can be hectic. 

Faster Payments removes the stress of waiting for funds to clear, giving you more control during busy periods.

Business growth

As you start scaling your operations, your payment processes need to keep up.

Faster Payments offers a flexible and reliable way to manage an increasing number of transactions, whether it’s paying new suppliers or onboarding more staff.

Partnering with Telleroo

Faster Payments is a game-changing feature for modern payroll and is now available for IRIS customers, in partnership with Telleroo.

Payment data seamlessly syncs between IRIS and Telleroo to process payroll payments more efficiently than traditional BACS transfers.

Frequently asked questions (FAQs)

What are Faster Payments?

A Faster Payment is a near-instant UK bank transfer, allowing money to move between accounts within seconds.

How long do Faster Payments take?

Faster Payments typically clear within seconds, including weekends and bank holidays. However, some payments may take up to two hours, depending on the bank or payment provider.

What is the Faster Payments service?

The Faster Payments Service is a UK banking system enabling secure, real-time money transfers between bank accounts 24/7.

Is Faster Payments safe?

Yes, Faster Payments is safe! The service uses robust security measures like strong authentication, encryption and ongoing fraud monitoring.

Do Faster Payments work on weekends and bank holidays?

Yes, Faster Payments work during the weekend, and bank holidays ensuring money transfers are processed instantly.