What’s the difference between Bacs and Faster Payments?

When it comes to paying your employees, UK businesses have a couple of solid options: Bacs and Faster Payments.

While both move money from one account to another, Bacs and Faster Payments work quite differently, and choosing the right one can make a real difference to your security, admin time and cash flow.

This poses the question: what’s the difference between them, and which is the best option for your business?

Let’s break it down.

What are BACS payments?

Bankers’ Automated Clearing System, also known as Bacs, has been the backbone of UK payroll for decades.

Simply put, a Bacs payment is a digital method used to move money between different bank accounts – this includes transactions such as payroll processing, direct debits and creditor payments.

Bacs offers a reliable and cost-effective option, designed to handle large volumes of payments in batches.

However, Bacs is a ‘closed system’ – to use it directly, your bank must issue you with a 6-digit Service User Number (SUN), which usually requires a specific turnover and a clean credit history.

The Bacs payment process

Bacs payments are processed over a rigid three-day cycle:

• Day 1: you submit the payment file to your bank
• Day 2: the payment is processed by BACS (the money leaves your available balance on this day, even though the recipient hasn’t received it yet)
• Day 3: the money arrives in the recipient’s bank account

Because of this three-day cycle, BACS is ideal for regular, non-urgent payments, such as a monthly payroll, collecting Direct Debits and paying suppliers.

How much does Bacs cost?

Bacs’ ability to handle bulk payments makes it extremely cost-effective, with transaction fees often being just a few pence.

With Bacs, the price per transaction typically ranges from 5p-50p.

However, don’t forget the ‘hidden’ Bacs costs: you often need to pay for Bacs-approved software licenses or use a Bacs-approved bureau, and if you make an error, file rejection fees can cost between £50 and £100 per incident.

Bacs overview

To summarise, Bacs is the traditional payroll option for many businesses, taking a ‘slow and steady’ approach. 

• Speed: takes 3 working days to arrive 
• Cost: low fees per transaction (5p–50p)
• Availability: Mon–Fri only – no weekends or bank holidays
• Flexibility: requires 3 days’ notice (can be recalled)
• Volume: perfect for large bulk batches and high-value sums 
• Best for: regular monthly payrolls where cost matters more than speed 

What are Faster Payments?

As the name suggests, Faster Payments is the speedier alternative to Bacs, offering instant transactions.

Faster Payments are perfect for urgent transactions, such as:

• Paying last-minute supplier invoices
• Correcting a payroll error
• Paying a new starter who has joined after your main payroll run

The goal of Faster Payments is to provide peace of mind that critical payments can be made and received without the delay associated with Bacs.

Note: there are improved security benefits with using a Faster Payments platform that uses Confirmation of Payee (CoP) to verify that the name you entered matches the bank account holder’s name.

How long do Faster Payments take?

Faster Payments were designed for the digital age – they enable you to send money that arrives almost instantly, usually within seconds.

The service also operates 24/7, 365 days a year, including weekends and bank holidays.

How much do Faster Payments cost?

The flexibility associated with Faster Payments comes with an increased cost.

With Faster Payments, the price per transaction typically ranges from 30p-£2.50.

Faster Payments overview

Faster Payments takes a modern approach, offering far more flexibility but at a greater cost.

• Speed: up to 2 hours, but usually arrives in seconds
• Cost: higher cost per transaction (30p–£2.50)
• Availability: 24/7, 365 days a year
• Flexibility: instant control – pay on the day it’s due
• Volume: better for smaller batches or flexible, on-demand payments, up to £1,000,000 per transfer
• Best for: weekly wages, expenses or last-minute emergency payments

Bacs vs Faster Payments: the key differences

When it comes to Bacs vs Faster Payments, the main elements to consider come down to four key factors: speed, cost, availability and flexibility.

Speed

Speed is the biggest distinction.

BACS payments take three working days to clear, while Faster Payments are near-instant.

If you need money to move quickly, Faster Payments is the clear winner.

For planned payments, where timing isn’t critical, the three-day BACS cycle is perfectly adequate.

Cost

At first glance, Bacs is the more budget-friendly option, especially for bulk transactions, with the cost per payment being far lower.

Faster Payments, being a premium service, comes with a higher transaction fee.

For a one-off urgent payment, the cost is often worth it, but for a large monthly payroll, those extra fees can add up quickly.

However, for many SMEs, the ‘sticker price’ of Bacs doesn’t tell the whole story – to use Bacs effectively, you often have to factor in ‘hidden’ overheads.

Availability

BACS operates on business days only – this means if you submit a payment on a Friday, it won’t arrive until the following Tuesday.

Bank holidays also add to the Bacs delay.

Faster Payments, however, works around the clock, every single day of the year.

Flexibility

While the three-day BACS cycle gives you a window to recall a payment if you spot an error before it’s processed, you’re still confined to its rigidity.

On the other hand, while Faster Payments are irreversible once sent, the instantaneous transfer offers more general flexibility when it comes to sending payments.

Infographic: Bacs vs Faster Payments

To help visualise the differences in a simple format, we’ve put together this handy infographic, offering a quick snapshot of how Bacs and Faster Payments stack up against each other.

Which payment method is right for you?

There’s no single ‘best’ option when it comes to Bacs and Faster Payments.

The right choice depends entirely on your specific needs.

Choose Bacs if:

• You process large volumes of payments, like monthly payroll
• Your payments are planned in advance and not time-sensitive

• Keeping costs to a minimum is your top priority
• You have a bank-issued SUN

Choose Faster Payments if:

• You need to make urgent or last-minute payments
• You run weekly payroll or pay staff on flexible schedules

• You value the ability to make payments outside of standard banking hours
• You don’t have a SUN

Many businesses find that using a combination of both services works best, using BACS for their predictable, bulk payments and keeping Faster Payments as a tool for emergencies and time-sensitive transactions.

Partnering with Telleroo

By understanding the strengths of Bacs and Faster Payments, you can make an informed decision and pick the right option for your specific scenario.

At IRIS, we understand the importance of payroll – being trusted to pay 1 in 6 of the UK’s working population – which is why we’ve now partnered with Telleroo to offer customers Faster Payments.

Learn more about our partnership and the options on offer here.