BACS
Encyclopedia
Bacs Payment Schemes Limited (originally Bankers' Automated Clearing Services) is a United Kingdom scheme for the electronic processing of financial transactions. BACS direct debit
s and BACS direct credits are made using the BACS system. BACS payments take three working days to clear: they are entered into the system on the first day, processed on the second day, and cleared on the third day.
s and avoid the need for paper documents as part of the money transfer process. The company operating the service adopted the name "Bankers Automated Clearing Services Limited" in 1971. A telephone
service, BACSTEL, was introduced in 1983, reducing the need for magnetic tape
s. More banks and building societies
joined in 1985, and the company shortened its name to "BACS Limited".
On 1 December 2003, BACS Payment Schemes Limited (BPSL) was split from BACS Limited: BPSL is a "not for profit" body with members from the banking industry which promotes the use of automated payment schemes and governs the rules of the BACS scheme; BACS Limited owns the infrastructure to run the BACS scheme. BACS Limited was permitted to continue to use the BACS name for one year, and became Voca Limited on 12 October 2004. Voca Limited has since been merged with the UK national switch provider LINK Interchange Network Limited on 2 July 2007, the new company being called VocaLink. It is based at Rickmansworth
in Hertfordshire
.
Since 2003, BACS has been moving from the telephone dial-up BACSTEL service to an internet
-based service, BACSTEL-IP, which is claimed to be quicker and more secure. All BACS users, including businesses that make payments to their suppliers or operate their staff payroll electronically, were required to move to BACSTEL-IP by the end of December 2005 or return to using cheque
s. When the BACSTEL-IP service was introduced all software used to make a connection to BACS required BACS approval. It is now only possible to make a connection with software from the list of BACS Approved Solution Suppliers (BASS).
In March 2005, the Office of Fair Trading
proposed that such a system be introduced in the UK. In December of that year, plans were announced for its introduction in the period from the end of 2006 to 2008, with estimates of the time taken for such payments being between 15 minutes and 3 hours depending on the banks/building societies at each end of the transaction.
(FPS) went live. This new system has improved money transfer speeds between different banks in the UK enabling account holders with one bank to make virtually instant payments to those with another bank. The original founding members of the new service were: Abbey
(now Santander UK
), Alliance and Leicester (now part of Santander UK
), Barclays, Citi, Clydesdale
and Yorkshire Bank
s (National Australia Group), Co-operative Bank
, HBOS
, HSBC
, Lloyds TSB
, Nationwide Building Society
, Northern Bank
(Danske Bank
), Northern Rock
, and Royal Bank of Scotland Group (including NatWest and Ulster Bank
). Santander does now offer this service. Between them, they represent 95% of the payments made in the UK.
Following the initial launch of the central infrastructure, work was planned to provide a Direct Corporate Access
Channel and the first such payment was made in July 2009PR Newswire, First Payment via UK Faster Payments Service Direct Corporate Access 23 July 2009. This will ultimately enable businesses to submit large numbers of payments directly into the Faster Payments Service.
From 6 September 2010, the value limit for all payment-types was raised to £100,000. However, "individual banks and building societies will continue to set their own value limits for their corporate and consumer customers."UK Payments Administration, Faster Payments Scheme Boosts Banks’ Ability to Provide a Competitive Service to Customers 10 September 2010
Direct debit
A direct debit or direct withdrawal is an instruction that a bank account holder gives to his or her bank to collect an amount directly from another account. It is similar to a direct deposit but initiated by the beneficiary...
s and BACS direct credits are made using the BACS system. BACS payments take three working days to clear: they are entered into the system on the first day, processed on the second day, and cleared on the third day.
History
BACS was invented by Dennis Gladwell and was started in 1968 as the Inter-Bank Computer Bureau, set up to develop electronic transfer of funds between bankBank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s and avoid the need for paper documents as part of the money transfer process. The company operating the service adopted the name "Bankers Automated Clearing Services Limited" in 1971. A telephone
Telephone
The telephone , colloquially referred to as a phone, is a telecommunications device that transmits and receives sounds, usually the human voice. Telephones are a point-to-point communication system whose most basic function is to allow two people separated by large distances to talk to each other...
service, BACSTEL, was introduced in 1983, reducing the need for magnetic tape
Magnetic tape
Magnetic tape is a medium for magnetic recording, made of a thin magnetizable coating on a long, narrow strip of plastic. It was developed in Germany, based on magnetic wire recording. Devices that record and play back audio and video using magnetic tape are tape recorders and video tape recorders...
s. More banks and building societies
Building society
A building society is a financial institution owned by its members as a mutual organization. Building societies offer banking and related financial services, especially mortgage lending. These institutions are found in the United Kingdom and several other countries.The term "building society"...
joined in 1985, and the company shortened its name to "BACS Limited".
On 1 December 2003, BACS Payment Schemes Limited (BPSL) was split from BACS Limited: BPSL is a "not for profit" body with members from the banking industry which promotes the use of automated payment schemes and governs the rules of the BACS scheme; BACS Limited owns the infrastructure to run the BACS scheme. BACS Limited was permitted to continue to use the BACS name for one year, and became Voca Limited on 12 October 2004. Voca Limited has since been merged with the UK national switch provider LINK Interchange Network Limited on 2 July 2007, the new company being called VocaLink. It is based at Rickmansworth
Rickmansworth
Rickmansworth is a town in the Three Rivers district of Hertfordshire, England, 4¼ miles west of Watford.The town has a population of around 15,000 people and lies on the Grand Union Canal and the River Colne, at the northern end of the Colne Valley regional park.Rickmansworth is a small town in...
in Hertfordshire
Hertfordshire
Hertfordshire is a ceremonial and non-metropolitan county in the East region of England. The county town is Hertford.The county is one of the Home Counties and lies inland, bordered by Greater London , Buckinghamshire , Bedfordshire , Cambridgeshire and...
.
Since 2003, BACS has been moving from the telephone dial-up BACSTEL service to an internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
-based service, BACSTEL-IP, which is claimed to be quicker and more secure. All BACS users, including businesses that make payments to their suppliers or operate their staff payroll electronically, were required to move to BACSTEL-IP by the end of December 2005 or return to using cheque
Cheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...
s. When the BACSTEL-IP service was introduced all software used to make a connection to BACS required BACS approval. It is now only possible to make a connection with software from the list of BACS Approved Solution Suppliers (BASS).
Faster Payments Service
The BACS system, and in particular the time taken for money to move between accounts, had been widely criticised by consumer groups as inefficient and archaic, especially as it was the system used for money transfers made by telephone or internet banking. This compared unfavourably with other developed countries, particularly in Scandinavia, where the "Elle" system ("Early Late/Late Early") allowed money transferred before lunchtime to reach a payee's account on the same working day, or money transferred after lunchtime to reach the payee's account the following morning.In March 2005, the Office of Fair Trading
Office of Fair Trading
The Office of Fair Trading is a not-for-profit and non-ministerial government department of the United Kingdom, established by the Fair Trading Act 1973, which enforces both consumer protection and competition law, acting as the UK's economic regulator...
proposed that such a system be introduced in the UK. In December of that year, plans were announced for its introduction in the period from the end of 2006 to 2008, with estimates of the time taken for such payments being between 15 minutes and 3 hours depending on the banks/building societies at each end of the transaction.
Participating members
On 27 May 2008, the new Faster Payments ServiceFaster Payments Service
Faster Payments Service is a UK banking initiative to reduce payment times between different banks' customer accounts from three working days using the long-established BACS system, to near real time...
(FPS) went live. This new system has improved money transfer speeds between different banks in the UK enabling account holders with one bank to make virtually instant payments to those with another bank. The original founding members of the new service were: Abbey
Abbey (bank)
Abbey National plc was a UK-based bank and former building society, which latterly traded under the Abbey brand name. It became a wholly owned subsidiary of Grupo Santander of Spain in 2004, and was rebranded as Santander in January 2010, forming Santander UK along with the savings business of the...
(now Santander UK
Santander UK
Santander UK plc is a wholly owned subsidiary of the Spanish Santander Group. Based in the United Kingdom, it operates under the name of Santander. Santander is the third largest bank in the UK in terms of deposits, the second largest in terms of mortgages held, and the fourth largest in terms of...
), Alliance and Leicester (now part of Santander UK
Santander UK
Santander UK plc is a wholly owned subsidiary of the Spanish Santander Group. Based in the United Kingdom, it operates under the name of Santander. Santander is the third largest bank in the UK in terms of deposits, the second largest in terms of mortgages held, and the fourth largest in terms of...
), Barclays, Citi, Clydesdale
Clydesdale Bank
Clydesdale Bank is a commercial bank in Scotland, a subsidiary of the National Australia Bank Group. In Scotland, Clydesdale Bank is the third largest clearing bank, although it also retains a branch network in London and the north of England...
and Yorkshire Bank
Yorkshire Bank
Yorkshire Bank is a commercial bank in England and Wales, a division of Clydesdale Bank, which in turn is a subsidiary of National Australia Bank. It mostly operates in the North of England, especially in Yorkshire. In 2006 underlying profit rose 16.7 per cent to £454 million compared with a...
s (National Australia Group), Co-operative Bank
Co-operative Bank
The Co-operative Bank plc is a commercial bank in the United Kingdom and Guernsey, with its headquarters in Manchester.The bank markets itself as an ethical bank, and refuses to invest in companies involved in the arms trade, global climate change, genetic engineering, animal testing and use of...
, HBOS
HBOS
HBOS plc is a banking and insurance company in the United Kingdom, a wholly owned subsidiary of the Lloyds Banking Group having been taken over in January 2009...
, HSBC
HSBC Bank (Europe)
HSBC Bank plc is one of the four major clearing banks in the United Kingdom and is a wholly owned subsidiary of HSBC Holdings. The business ranges from the traditional High Street roles of personal finance and commercial banking, to private banking, consumer finance as well as corporate and...
, Lloyds TSB
Lloyds TSB
Lloyds TSB Bank Plc is a retail bank in the United Kingdom. It was established in 1995 by the merger of Lloyds Bank, established in Birmingham, England in 1765 and traditionally considered one of the Big Four clearing banks, with the TSB Group which traces its origins to 1810...
, Nationwide Building Society
Nationwide Building Society
Nationwide Building Society is a British building society, and is the largest in the world. It has its headquarters in Swindon, England, and maintains significant administration centres in Bournemouth and Northampton...
, Northern Bank
Northern Bank
Northern Bank , is a commercial bank in Northern Ireland. It is one of the oldest banks in Ireland having been formed in 1809. Northern Bank is considered one of the leading retail banks in Northern Ireland with 82 branches and four finance centres...
(Danske Bank
Danske Bank
Danske Bank is a Danish bank. The name literally means "Danish Bank" It was founded 5 October 1871 as Den Danske Landmandsbank, Hypothek- og Vexelbank i Kjøbenhavn ....
), Northern Rock
Northern Rock
Northern Rock plc is a British bank, best known for becoming the first bank in 150 years to suffer a bank run after having had to approach the Bank of England for a loan facility, to replace money market funding, during the credit crisis in 2007. Having failed to find a commercial buyer for...
, and Royal Bank of Scotland Group (including NatWest and Ulster Bank
Ulster Bank
Ulster Bank is a large commercial bank, one of the Big Four in both Northern Ireland and the Republic of Ireland. The Ulster Bank Group is subdivided into two separate legal entities, Ulster Bank Limited and Ulster Bank Ireland Limited...
). Santander does now offer this service. Between them, they represent 95% of the payments made in the UK.
Implementation
Information from APACS on the current availability of Faster Payments is maintained at their webpage: This information remains indicative, however, and occasional interruptions to users of the service have occurred.Following the initial launch of the central infrastructure, work was planned to provide a Direct Corporate Access
Direct corporate access
Direct Corporate Access is part of the Faster Payments Service which provides a same day clearing payment service to UK member banks. Direct Corporate Access will provide Banks' business customers with direct access to the Faster Payments Service clearing service in a very similar way that...
Channel and the first such payment was made in July 2009PR Newswire, First Payment via UK Faster Payments Service Direct Corporate Access 23 July 2009. This will ultimately enable businesses to submit large numbers of payments directly into the Faster Payments Service.
From 6 September 2010, the value limit for all payment-types was raised to £100,000. However, "individual banks and building societies will continue to set their own value limits for their corporate and consumer customers."UK Payments Administration, Faster Payments Scheme Boosts Banks’ Ability to Provide a Competitive Service to Customers 10 September 2010
See also
- APACSAPACSThe UK Payments Administration Ltd is a United Kingdom trade organisation that brings together all payment systems organisations and gives banks, building societies and card issuers a forum where they can work together on non-competitive issues...
- CHAPSCHAPSThe Clearing House Automated Payment System or CHAPS is a British company established in London in 1984, which offers same-day sterling fund transfers...
- EFTPOSEFTPOSEFTPOS is the general term used for debit card based systems used for processing transactions through terminals at points of sale. In Australia and New Zealand it is also the brand name of the specific system used for such payments...
- Payments CouncilPayments CouncilThe Payments Council is an organisation of financial institutions in the United Kingdom that sets strategy for UK payment mechanisms.-History:...
- SWIFTSwiftThe swifts are a family, Apodidae, of highly aerial birds. They are superficially similar to swallows, but are actually not closely related to passerine species at all; swifts are in the separate order Apodiformes, which they share with hummingbirds...
- Bankers' clearing houseBankers' clearing houseA bankers' clearing house is an organization that transfers money between member banks, originally to clear checks. For more than a century, this service has been expanded to include several other banking services now done electronically.- Predecessors :...
- historical origins
External links
- BACS website
- VocaLink website
- APACS - the UK Payments Association Information on Cheque Clearing
- Bacs Knowledge Articles
- Criticism of BACS in Daily Telegraph article
- OFT welcomes details on faster clearance on electronic payments
- BBC News - Clearing times
- BBC News - Banking hitch delays workers' pay (29 March 2007)
- BACS Approved Solution Suppliers List