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What is the difference between Faster Payments and same day payments?

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Last editedMay 20222 min read

If your business works with customers based in the UK, you might see a reference to Faster Payments services. It’s important to understand how the system works to choose the best payment methods for your UK client base.

So, what are Faster Payments and how do they compare to same day payments? Here’s a closer look at each system.

What are Faster Payments?

There are several ways for businesses to send payments from one account to another. The UK’s BACS (Bankers’ Automated Clearing Services) payment system enables payments between accounts, both in the form of Direct Debits and direct credits. However, the downside is that BACS payments usually take three working days to clear.

The Faster Payments service was launched in 2008 as a quicker alternative to BACS, allowing UK account holders to make electronic payments online. They can also be made over the phone, in a bank branch, or using an automated machine. Provided that the receiving bank is part of the Faster Payments system, the funds are transferred immediately.

Faster Payments supports three types of bank transfers:

  1. Scheduled payments

  2. One-time immediate payments

  3. Standing orders

They cost more than BACS transfers and are best used for relatively smaller amounts of funds transfers. The upper limit for Faster Payments transfers is £250,000 (or roughly $310,000).

How long do Faster Payments take?

As the name suggests, this system is faster than the usual Direct Debit – but how long do Faster Payments take? In most cases, the transfer goes through in a matter of seconds. However, in some cases it can take up to two hours for the funds to appear in the recipient’s account. This applies even on weekends and holidays for the most part, although there are occasional delays. You can find out more details about these on the Faster Payments website.

What are same day payments?

Another option for businesses that need to send money from one UK bank account to another is CHAPS, or Clearing House Automated Payment System. This system has been around for longer than Faster Payments and is also known as the same day payment system. Same day payments are designed to arrive in the receiving account on the day that they are sent, provided you make the bank’s cut-off time.

While Faster Payments can be made on weekends, same day payments must be sent on weekdays in order to arrive on the same day. The cut-off time for business customers is usually 3pm, though it can be extended until later in some cases. When the order is submitted after this cut-off time or on the weekend, it won’t go through until the next working day. Keep in mind that these are UK working hours, so you’ll need to take time zone changes into account.

Unlike Faster Payments, same day payments have no upper limit. However, some banks charge a hefty per-transaction fee of $25 or more for larger transfers. This makes it better for high-ticket transfers within the UK.

What is the best way to accept international payments?

Both Faster Payments and same day payments apply for transfers between UK-based bank accounts. If your business has a UK bank account, these can be useful tools for accepting transfers from regional customers. But what are your options when it comes to accepting international payments within your US bank account? The Society for Worldwide Interbank Financial Telecommunication, or SWIFT network, connects international financial institutions to enable bank transfers abroad. SWIFT payments involve multiple banks, and as a result can take up to five business days for processing.

GoCardless provides a faster, more convenient way to collect international payments from your customers. While taking international payments is often expensive due to the associated exchange rates and transfer fees, GoCardless cuts the cost by offering the local bank debit option in supported countries. You can receive international payments from over 30 countries, including the UK, at the real exchange rate. There’s no need to open a foreign bank account – instead, you can receive the transfer in your own currency from customers based abroad.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.

Article sources

https://www.fasterpayments.org.uk/

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