What are Bacs payments? Complete guide to Bacs (2025) (original) (raw)

What is a Bacs Payment?

A Bacs payment is one of the most common bank-to-bank transfers in the UK. There are two main types of Bacs payment; Direct Debit, where one party has been given permission to pull money from the bank account of another party, and Direct Credit, where a party deposits the money in the other party's account.

What is the meaning of Bacs?

Bacs stands for Bankers' Automated Clearing Services. Bacs payment services are operated and managed by Pay.uk, an organisation responsible for the UK’s retail interbank payment systems. In 2021, Bacs processed over 4.6 billion Direct Debit payments, an increase of 114 million compared to the previous year (source).

Alongside this, bank-to-bank payments can also be made through Faster Payments and CHAPS. Faster Payments allows for near real-time payments between bank accounts in the UK. Meanwhile, CHAPS is a same-day payment method for high-value transactions (e.g. for buying property).

In this article, we'll also look at:

• how to make a Bacs payment
• how much Bacs costs
• how long Bacs takes

We'll also compare the different payment methods so you can choose the most appropriate method based on your requirements.

Types of Bacs Payments

Bacs Direct Debit

Direct Debit may be the best option for you if you want to take payments and get paid on time. It's a simple and cost-effective way to take recurring (and one-off) payments where same-day payment isn't required.

What is Direct Debit?

A Direct Debit is an instruction from a customer to their bank authorising an organisation to collect payments from their account as long as the customer is given advance notice of the payment amounts and dates. A customer gives this authorisation by completing a Direct Debit Mandate form – this can be a paper form or a web page that you complete online. Once authorised, the organisation can automatically take payments from you (provided that they comply with the scheme rules).

Direct Debit is the safest way of making payments in the UK, as the Direct Debit Guarantee means that customers are protected from fraudulent payments.

Direct Debit has traditionally been seen as a payment method only available to large corporations. However, with the advent of Direct Debit providers such as GoCardless, organisations of any size can now enjoy the business benefits of accepting Direct Debit payments.

This is possible without going through the long and complex process of getting a sponsor bank and applying for a Service User Number because GoCardless offer a done-for-you Direct Debit collection service.

Read more about the many business advantages of collecting payments via Direct Debit with GoCardless.

What is Bacs Direct Debit used for?

Direct Debit is typically used for taking regular or recurring payments like household bills, subscriptions, memberships or charitable donations. However, Direct Debit is extremely flexible and can be used to collect a wide variety of payments, including:

• one-off payments
• invoice payments
• irregular recurring payments
• subscription payments

With GoCardless you can also combine Direct Debit with Instant Bank Pay to enable you to take an initial payment instantly and further payments on a recurring basis.

Direct Debit is a popular payment option in the UK. 90% of the UK population pay at least one regular bill by Direct Debit. According to UK Finance, in 2021 there were 4.6 billion payments made by Direct Debit, with an overall value of £1,243 billion. This is forecast to grow to over 5 billion payments by 2024.

Advantages of Direct Debit

• Lower cost per transaction than credit and debit cards.
• Great for recurring payments. Once you have a Direct Debit in place, you can sit back and forget about it.
• With the Direct Debit Guarantee, customers are protected against payments made in error or fraudulently.
• Unlike credit and debit cards, which can be stolen, lost or expire, a Direct Debit is relatively future-proof. That means failed payments are minimised. The success rate of Direct Debit with GoCardless is 97.1% and above, compared to just 85% - 90% for cards.

Disadvantages of Direct Debit

• Direct Debit is not suitable for same-day payments, as payments take 3 working days to process. Although with the advent of Instant Bank Pay, this is no longer the issue it once was.
• Traditionally, Direct Debit could only be offered by larger businesses with the financial and legal resources to be scheme-compliant. Though Direct Debit still requires Bacs-approved software, third-party payment platforms such as GoCardless are making Direct Debit accessible to SMEs and smaller businesses.
• Though ‘set and forget’ is usually seen as a benefit of using Direct Debit, some customers may prefer to keep complete control of their payments and manually action each transaction themselves.
• If a customer does not have the necessary funds in their bank account, then their bank could refuse to pay the Direct Debit.

Bacs Direct Credit

Bacs Direct Credit (also known as “bank transfer”) is a secure service enabling organisations to make payments directly into another bank or building society account.

What is a Bacs Direct Credit used for?

Bacs Direct Credit is one of the most popular ways for UK businesses to make payments. There are about 2.1 billion Bacs Direct Credit payments made in the UK each year. It's typically used for making regular payments such as salaries, pensions, state benefits and tax credits. However, with the introduction of Universal Credits in the UK, the volume of state benefits paid through Bacs Direct Debit may fall. 80% of the UK workforce is paid using Bacs Direct Credit.

Advantages of Bacs Direct Credit

• In comparison to some payment methods, such as cheque, Bacs Direct Credit is a much easier payment method to administer, with much of the process, including remittance and reconciliation, benefitting from automation.
• There are some immediate cost savings of using Bacs Direct Credit. For example, when comparing it to handling paper money, such as cash and cheques, there are fewer security requirements. You also save on postage costs when sending out cheques. All of these have a positive impact on your carbon footprint and will help you meet your business’ environmental targets.
• Bacs Direct Credit is available to any business with a UK bank account.
• Improved cash flow is another key benefit of Bacs Direct Credit. By using it to process regular payments, you get greater control and oversight of money leaving your business. This makes it easier to accurately plan and forecast.

Disadvantages of Bacs Direct Credit

• Bacs Direct Credit takes three working days to clear, with strict cut-off times for processing payments, so it is not suitable for immediate and same-day payments.
• Unlike Direct Debit, Direct Credit is a push-based payment method. So ultimately, you are relying on the payer to action the payment on time.

How do you make a Bacs payment?

Bacs Direct Credit

Your bank allows you to credit another account using either your personal or your business banking service. You'll need the name of the payee, the name of their bank, the payee’s bank account number and the sort code. You will need the same details for the account to be debited.

Direct Debit

With Direct Debit, your customer authorises you to take payments from their bank account. You'll need the name of the payee, the name of their bank, the payee’s bank account number and the sort code.

If your business wants to collect Direct Debit payments, there are three methods you can choose from:

1. You can use the Bacs-approved Bacstel-IP software to set up direct access via a bank.
2. You can use a Bacs-approved bureau.
3. You can use a third-party provider, such as GoCardless.

If you’d like to find out more about each of these options, you may find our guide to accessing Direct Debit helpful.

How to collect Direct Debit payments with GoCardless

1.

Create your free GoCardless account, access your user-friendly payments dashboard & connect your accounting software (if you use one).

2.

Easily set up & scheduleDirect Debit paymentsvia payment pages on your website checkout or secure payment links.

3.

From now on you'll get paid on time, every time, as GoCardless automaticallycollects paymenton the scheduled date. Simple.

Get started in minutes

Learn more

How much does a Bacs payment cost?

Bacs payment - Direct Debit or Direct Credit - is one of the cheapest ways to collect payments. However, if you’re setting up Direct Debit directly with your bank, you’ll need to invest in Bacs-approved software, which adds cost.

Equally, taking Direct Debit payments via a bureau will probably include a fee to cover the cost of the software. So it can work out cheaper to go with a Direct Debit platform instead. Here’s what you can expect to pay with each Direct Debit option:

• Via a bank: setup fees = £5,000 (+ costs of Bacs-approved software, which are typically £2495+). You will also be charged transaction fees, which can range from between 5p - 50p + additional fees charged by banks
• Via a Bacs-approved bureau: setup = £400 - £800; transaction costs = 20p - 50p + monthly fees, submission fees, new mandate fees and penalty fees.
• Via GoCardless: We offer different packages depending on your business needs, with no sign up costs, no commitments and no hidden fees. Simple.

See our full list of plans and pricing here.

Faster Payments cost a little more than Bacs transfer payments but will still cost less than using CHAPS (which costs between £25 to £30 per payment).

How long does a Bacs payment take?

Both Bacs Direct Credit and Direct Debit payments work on a three-day cycle, taking three working days to clear. Payments are submitted to Bacs on the first day, processed by the banks on the second day, and simultaneously taken from the sender account and credited to the recipient account on the third day.

With the Faster Payments Service, payments typically take fewer than 2 hours.

How safe is making payments using Bacs?

Bacs is an incredibly safe way to collect and make payments and is renowned worldwide for the secure delivery of electronic payments:

• Bacs has been responsible for the clearing and settlement of automated payments in the UK since 1968.
• It has been used to make more than 130 billion transactions and, according to recent research, has never misplaced a payment.
• 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 authorisation.
• With Direct Debit, only approved organisations are allowed to collect Direct Debit payments, and the Direct Debit Guarantee protects customers against fraudulent or unauthorised payments.

Other types of bank-to-bank payments

Faster Payments

In 2008, Faster Payments was introduced in the UK. It provides near real-time payments between bank accounts in the UK.

Faster Payments are electronic payments that can be made online, over the phone, in a branch or through self-service kiosks. Payments normally clear in less than 2 hours, provided both the sending and receiving banks are part of the Faster Payments Service. If either bank is not part of the service, the payment will automatically be processed through Bacs Direct Credit instead (and will therefore be subject to a longer processing timeline).

The Faster Payments system is operated by Faster Payments Scheme Ltd (FPSL), an organisation consisting of a number of UK banks and building societies.

What are Faster Payments used for?

Faster Payments is primarily used for making large numbers of small value payments. This includes bills, expenses, supplier payments and online transfers. As of February 2022, PayUK, owners of the FPS system, will allow transactions of up to £1m, but individual banks will often impose their own lower transaction limit. Last year, the Faster Payment System enjoyed a record-breaking 12 months, processing 3.4 billion transactions with a value of £2.6 trillion (source).

Advantages of Faster Payments

• Speed is the key benefit of Faster Payments. Recipients will typically get their money instantly or within 2 hours of the payer actioning the payment.
• With Faster Payments, you can send money to a mobile number with no need for a bank account number or sort code.
• Faster Payments is offered by all the major UK banks, and over 400 other financial institutions, meaning more than 52 million current account holders in the UK can access the service.

Disadvantages of Faster Payments

• Faster Payments is not universally available from every bank, and certain types of accounts, such as savings, cannot use the scheme.
• Payments are limited to £1m, though banks can set a much lower transaction limit.
• Because of the speed of Faster Payments, the payment can’t be cancelled once sent.

CHAPS

CHAPS, or the "Clearing House Automated Payment System", is a British company offering high-value bank-to-bank GBP fund transfers.

The CHAPS system guarantees same-day payment so long as instructions are received by 2pm on a working day. There’s no limit to the amount of money you can send through CHAPS, although it's a relatively expensive way to transfer money. Bank charges for using CHAPS vary but are typically between £25 to £30.

What is CHAPS used for?

CHAPS (Clearing House Automated Payment) is typically used for making high-value transactions where same-day payment is necessary, e.g. buying property or settling money market and foreign exchange transactions. More than 30 banks and 5,000 financial institutions participate in the scheme.

In 2021, CHAPS volumes grew by 7.7% to 48.0 million and the total value transmitted in CHAPS in the 12 months to December 2021 was £86.3 trillion (source).

CHAPS represent just 0.6% of all payments made in the UK, but 92% of their value!

Advantages of CHAPS

• The two main benefits of CHAPS are time and value. There is no limit on the amount of funds that can be sent by a CHAPS payment. And, as long as your payment instruction is sent before the cut-off time, it should be received the same day.
• CHAPS is typically designed for businesses and individuals that need to make time-sensitive and relatively large one-off payments. As such, there is a strict cut-off time for when a CHAPS payment can be processed that day.

Disadvantages of CHAPS

• Strict cut-off times - CHAPS is typically designed for businesses and individuals that need to make time-sensitive and relatively large one-off payments. As such, there is a strict cut-off time for when a CHAPS payment can be processed that day.
• Difficult to cancel payments - Once you make a CHAPS payment, there is little time to cancel the payment. If the payer has made a mistake, there is no guarantee that the bank will be able to recall the funds if they have been received by the beneficiary.
• Costly - Relative to other payment schemes, CHAPS is expensive to access. For the end user, costs vary between £25 to £30 per payment.

Which type of payment method should you use?

If you want to be in control of when you get paid, then Bacs Direct Debit may be your best option.

This is because it is a pull payment method, unlike other methods which rely on the payer to action the payment each time. Direct Debit offers a simple and cost-effective way of taking recurring (and one-off) payments where same-day payment is not required.

When you’re considering the best method to make a payment, choosing the right option will depend on the types of payments you want to make:

• If you are making one-off high-value payments (of over £100,000) where same-day payment is needed then CHAPS may be your best option.
• If you are making a large volume of payments below the limit of £100,000 and need the payment to be processed on the same day, it may be worth considering Faster Payments.
• If you are making fixed, regular payments, such as salaries, you may want to look at using Bacs Direct Credit.

GoCardless and Bacs

GoCardless is a Bacs-approved platform which provides a low-cost and simple way to collect online Direct Debit payments. You can access GoCardless via our partners - more than 200 third-party platforms, including all the leading accounting software providers.

Alternatively, you collect Direct Debit payments by using GoCardless directly.

1. GoCardless - GoCardless lets organisations of all sizes - from one-man bands to larger businesses - collect Direct Debit payments without the hassle or the cost traditionally associated with Direct Debit. Set up is free, and takes just a few minutes. Our competitive pricing makes GoCardless an incredibly cost-effective way of collecting recurring payments. Current users include Bike Club, TripAdvisor, Aon and Docusign.
2. GoCardless Advanced - With GoCardless Advanced, you can reduce failed payments through intelligent retries (with Success+)
3. GoCardless Pro - GoCardless Pro allows you to take full control of your payments with end-to-end fraud protection and access to all features. You can prevent fraud by intelligently identifying and verifying risky payers (with Protect+)

Bacs Direct Debit with GoCardless

GoCardless allows organisations of all sizes - from one-man bands to large businesses - to collect Bacs Direct Debit payments without the hassle or the cost traditionally associated with banks.

GoCardless is a Bacs-approved platform that provides an affordable and simple way to easily collect online Direct Debit payments.

• With GoCardless, it's free to get started, and setup takes just a few minutes.
• You can set up automated payment collection in just a few clicks using the merchant dashboard.
• You can also connect GoCardless with your favourite accounting software to further automate payment admin
• Our competitive pricing makes GoCardless an incredibly cost-effective way of collecting recurring payments.

Easily say hello to lower transaction fees and on-time payments with Bacs Direct Debit through GoCardless. It is quick and easy to set up and gets you paid on time, every time.

GoCardless makes it easy to accept Direct Debit. Automate payment collection. Reduce manual admin. Get paid on time, every time.

Get StartedLearn More

Related articles:

Still have questions about different payment types related to Bacs? Find out more about:

• Direct Debit
• Online Payment Methods
• Advantages and Disadvantages of Direct Debit

FAQs

What are Bacs payments? Complete guide to Bacs? ›

A Bacs payment is a bank transfer from one bank account to another, taking three business days to arrive. However, a Bacs payment can also be a Direct Debit, which is the opposite of a bank transfer - meaning your finance team pulls funds out of a customer's bank account.

What is a Bacs payment? ›

What is a Bacs payment? Bacs stands for Bankers' automated clearing system and it is the electronic way of transferring money from one bank to another within the UK. There are two different types of automated payments, Direct Debit and Direct Credit.

Is Bacs only in the UK? ›

What is a Bacs payment? A Bacs payment is a bank-to-bank transfer between banks in the UK.

Is Bacs the same as ACH? ›

The equivalent system to the UK's Bacs is the Automated Clearing House, or ACH. This network only works within the United States, so you won't be able to send payments to UK clients using ACH. It also only applies to banking rather than debit or credit card payments.

What is the 3 day process for Bacs? ›

Here's how the process works: Day 1: The Bacs payment request is submitted. Day 2: The recipient bank receives the payment request. Day 3: The transaction is settled, and funds cleared to the recipient account.

How do I send a Bacs payment from the US? ›

There are two options to process Bacs direct credit payments, or “Bacs out”. You either run it through your bank, or you go to a Bacs Approved Bureau to process your Bacs payments. Either way, in order to make a Bacs payment as a business you'd have to sign up with Bacs in one way or the other.

Why do people pay by Bacs? ›

Bacs allows you to schedule regular payments via its direct credit or direct debit payments options. This is the reason why the UK Government uses Bacs for pension and welfare payments, and why it is the most popular payment method for employers paying employees.

What banks accept BACS? ›

Bacs Payment participants

• Allied Irish Bank. Atom bank. Bank of England. Bank of Scotland plc. ​Barclays Bank plc. Barclays Bank UK plc. ...
• Adyen. Atom bank. Banking Circle. ​Barclays Bank plc. Barclays Bank UK plc. Citibank NA. ...
• Allied Irish Bank. Bank of Ireland (UK) plc. ​Barclays Bank plc. Barclays Bank UK plc. ClearBank®

What country is the BACS payment? ›

BACS is a form of electronic bank-to-bank transfer that is used exclusively in the UK. There are different transfer methods in the country, but BACS is the most popular and is mostly used for direct debit and edit transfers. Nine out of ten consumers in the UK use BACS payments for some form of regular payment.

Is BACS the same as a wire transfer? ›

Rather than going through an ACH system like BACS, which can take up to three days, a wire transfer is more direct. It is, theoretically, quicker too. You instruct your bank of the transfer you want to make, including the sum and the details of the recipient – whether domestic or international.

What are the disadvantages of Bacs? ›

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.

How much does a Bacs payment cost? ›

You can either set up Direct Debits directly with your bank or engage a Bacs-approved bureau. Setting up Bacs-approved software can also streamline your operations. For businesses transferring money between UK banks, a Bacs payment typically costs from 5p-50p per transaction.

Is Bacs payment safe? ›

Safe and more secure

Unlike cash or cheques, Bacs Direct Credit payments cannot be lost, stolen or delayed in the post. Your money arrives automatically into your account on the day it is expected.

How do I complete a Bacs payment? ›

To make Bacs Direct Credit payments you submit your payment data - including amount of each payment, PSP account numbers, sort codes and dates - via a bureau or direct access depending on which method you choose. The data is sorted into payments to each of the PSP and then transmitted to each institution.

What is the longest a Bacs payment can take? ›

A charge can clear in a matter of hours or in as many as 5 days but, generally speaking, most BACS payments will take around 3 days. Several factors will affect how long a pending change will appear on your account. These include the time and date the transaction was made and how long the transaction takes to process.

Why is Bacs so slow? ›

Banks only process BACS payments on working days, not weekends or bank holidays. This schedule can limit businesses that need to make transactions outside of regular business hours. Plus, every year BACS releases its own calendar that businesses must follow to make payments.

What is the difference between Bacs and Swift? ›

Swift payments vs BACS

BACS are ideal for everyday transfers such as utility bills, and are usually fee-free. BACS transfers can be made only within the UK and aren't instant, taking up to three working days. With Swift you have the security of tracked international payments, in any currency.

Is Bacs the same as a wire transfer? ›

Rather than going through an ACH system like BACS, which can take up to three days, a wire transfer is more direct. It is, theoretically, quicker too. You instruct your bank of the transfer you want to make, including the sum and the details of the recipient – whether domestic or international.

Is Bacs the same as direct deposit? ›

A Bacs transfer (or "Bacs Direct Credit" or "Direct Deposit") is a secure service which enables organisations to make payments direct into another bank or building society account. Using a Bacs transfer, your bank allows you to credit another account by using either your personal or business banking service.