BACS and Faster Payments are two of the most popular payment methods used by businesses in the UK. Both services are effective and reliable ways to pay customers, suppliers, and employees without the need to use cheques or cash.
But what are the main differences between the two?
BACS (Bankers Automated Clearing Services) is a secure and efficient method of transferring money electronically between UK bank accounts. Payments are made via a secure network and are usually processed within three working days.
Faster Payments, on the other hand, is a real-time payment service that sends money from one account to another instantly. It is the fastest payment service available in the UK and is perfect for businesses who need to make quick payments or those who need to make payments outside normal banking hours.
Here are five reasons businesses should use Faster Payments instead of BACS in the UK:
1. Speed and Convenience
Faster Payments transfers money between bank accounts in just a few seconds, making it ideal for businesses that need to make quick payments. This is in stark contrast to BACS, which can take up to three working days to transfer funds.
2. Improved Cash Flow
With Faster Payments, businesses can receive payments more quickly, allowing them to manage their cash flow more effectively. This is especially important for businesses that rely on regular payments from customers following trade credit, such as those in the manufacturing industry.
3. Lower Costs
Faster Payments can save businesses money in the long run. This is because it is generally cheaper than BACS, which charges a fee per transaction. Businesses can reduce costs and improve their bottom line by using Faster Payments instead of BACS.
4. Increased Supplier Satisfaction
With Faster Payments, businesses can provide their suppliers with better service. This is because suppliers will receive their payments faster improving the relationship.
5. Improved Security
Faster Payments typically use Confirmation of Payee, which provides an additional layer of security by verifying the identity of the recipient and their bank details before the payment is made. This helps to reduce the risk of fraud, as it ensures that payments are sent to the intended recipient and not to a fraudster.
The Faster Payments Scheme has one main disadvantage - the maximum amount of a single payment is limited to £1,000,000.