Understanding Faster Payments: everything businesses need to know

The likelihood is that you use Faster Payments in your personal life every day without even realising it.

However, it’s a different story for businesses as Bacs payments have long been the default.

Want to learn more about Faster Payments and how they can support your business?

This blog will explain what Faster Payments are, clear up confusion and explain how they can 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 immediately.

This provides a quicker way for businesses to manage their bank-to-bank transactions when compared to other payment schemes like Bacs.

Difference between Faster Payments and Bacs

A Bacs, which stands for Bankers’ Automated Clearing System, is an electronic money transfer system and the default for many businesses when it comes to paying employees.

The main difference between Faster Payments and Bacs comes down to payment speed.

Bacs payments take three working days to process and are typically used for high-volume, non-urgent payments such as monthly payroll or collecting Direct Debits.

On the other hand, Faster Payments provide near-instant transfers, with money arriving in seconds, making them ideal for urgent payments like last-minute supplier invoices or correcting payroll errors.

Difference between Faster Payments and CHAPS

CHAPS (Clearing House Automated Payment System) is another UK-based payment system designed for time-critical transactions. 

Similar to Faster Payments, it allows businesses to make same-day payments; however, unlike Faster Payments, CHAPS often comes with significant fees, usually costing £20+ per transaction.

While expensive, CHAPS can benefit businesses as there’s no upper limit, making it ideal for large payments or corporate deals.

What are the benefits of Faster Payments?

Switching to Faster Payments may feel like a small change, but it can offer businesses some great benefits.

Improved cash flow

One of the most immediate benefits is better control over your cash flow.

With Bacs, you have to commit funds up to three days before they are paid out.

However, Faster Payments allow you to hold onto your money until the moment it needs to be sent, keeping funds in your account longer for enhanced financial control.

More time

Faster Payments gives you valuable breathing room.

Because payments are instant, you gain two extra days to make your data submission without risking late payment penalties.

Tackle urgent payments

Emergency payments can be expensive.

If you’ve ever had to use a CHAPS service for an urgent transfer, you’ll know the fees can be quite high.

Faster Payments, on the other hand, provides a much more cost-effective way to handle same-day payments.

Secure and compliant

Security is non-negotiable when it comes to payments.

Modern Faster Payments solutions are built with robust security features to protect your business from fraud and ensure compliance with financial regulations.

Backup

Even if you primarily use Bacs, having a Faster Payments solution ready to go acts as a perfect backup for emergencies, holidays or seasonal pay.

Who benefits from Faster Payments?

Faster Payments offer practical benefits for a wide range of 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: if you run weekly or bi-weekly payroll, especially in sectors like hospitality, retail or construction, Faster Payments gives you the speed needed to make short turnaround payments
• Risk-averse businesses: Faster Payments means you can meet critical deadlines and avoid costly errors, even if issues arise at the last minute
• Businesses that struggle to obtain a SUN: 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 it may be more helpful to see how they work in real-world business scenarios.

H3: 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)

Here are some of the questions we hear most regarding Faster Payments!

What is a Faster Payment?

A Faster Payment is a near-instant bank transfer system in the UK, 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 near-instant money transfers between bank accounts, 24/7.

Is Faster Payments safe?

Yes, Faster Payments is safe! It uses robust security measures, including encryption and fraud detection.

Do Faster Payments work at weekends?

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

Do Faster Payments work on bank holidays?

Yes, Faster Payments work on bank holidays.