What are Faster Payments?

what are faster payments

Wednesday, 8 December 2021, 2 minute read

In today’s fast-paced digital world, we all want things to be quick and convenient - especially when it comes to transferring money. That’s where the Faster Payments System (FPS) comes in. 

Faster Payments is one of three bank payment systems that make it easy to pay money into someone else’s bank account. It’s one of the most popular ways to quickly send and receive payments in the UK. This is mostly thanks to its convenience, as it lets people and businesses make payments in a matter of seconds. 

In today’s article, we'll delve into how Faster Payments work, the security of Faster Payments, the payment limits and the costs involved. Let’s start with the most important question:

What are UK Faster Payments?

Faster Payments is a free electronic payment system that was introduced in the UK in 2008 to speed up the bank transfer time for low-value transactions. As its name suggests, it lets people and businesses send and receive payments quickly - in a matter of seconds, if not within a few minutes or hours. It’s rare for payments processed by Faster Payments to take longer than one day to clear. This makes Faster Payments a popular method for quickly transferring low-value funds between UK bank accounts. Over the past decade, it’s become the standard way for consumers to transfer money. 

If you regularly make bank transfers below the value of £1,000,000, then you’ll have used Faster Payments yourself. However, Faster Payments is one of three main types of bank payment systems in the UK; the others being BACS payments and CHAPS payments.

How do Faster Payments compare to other transferring methods?  

In the United Kingdom, there are three primary types of transferring methods: Faster Payments, BACS, and CHAPS, but how do Faster Payments compare to these?  

BACS payments are mainly made by organisations handling both direct debit and credit payments. This makes BACS payments the primary option for businesses. However, it does take around three working days for BACS payments to clear, meaning Faster Payments is a far more efficient way of transferring money to and from UK bank accounts. 

CHAPS is also used a lot in the UK, but its primary purpose is for transfers over £1,000,000. With CHAPS, funds can be transferred on the same day. However, you’ll typically be charged a £25 fee per transfer (although some banks don’t charge this if you’re considered a “premium” customer), whereas using Faster Payments is 100% free.

Find out more about the difference between BACS and CHAPS payments

Faster Payments are the best method for transferring low-value funds to UK bank accounts. However, this doesn’t mean that CHAPS and BACS don’t have their uses within the banking world. Each provides their own benefits and undoubtedly aid our financial services. 

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What type of bank transfers can be made with Faster Payments?  

Faster Payments services provide four payment options called single immediate, forward dated, standing orders, and direct corporate access payments. Each has its purpose, and here’s what you need to know about them:   

Single immediate payments

The most common payment service processed by Faster Payments is a single immediate payment. These are also referred to as one-off payments. Typically, these are executed through mobile, online, or in-branch banking. Payments of this type can be sent 24/7, instantly, with a limit of £1,000,000.  

Forward-dated payments

For those that want to set up singular prearranged payments would use the forward-dated option. With this service, you can select a specific date to transfer the funds. Once this date comes, the money will automatically be withdrawn from your account and deposited into the other bank account.  

Standing orders

These payments can also be known as “subscriptions”. With standing orders, you’ll set the total amount, how often you’d like to transfer funds (daily, weekly, monthly), along what day you’d like the funds to be withdrawn from your account.  

Direct corporate access payments

Lastly is direct corporate access payments, and businesses commonly use these. It allows them to directly upload payment details of customers to Faster Payments in bulk. Afterwards, Faster Payments can process these all at once, instead of individually.  

How do Faster Payments work? What happens behind the scenes of the fast transaction system?

To make a Faster Payment, you need to have the account details of the recipient, including their name, sort code, and account number. You can then initiate the payment via your online or mobile banking app, or by visiting a branch of your bank.

Once you’ve initiated your payment, your bank sends a payment instruction to the recipient's bank via this network. The recipient's bank confirms that the payment has been received and credits the funds to the recipient's account. And this generally all happens in a matter of seconds!

What do you need to make a Faster Payments bank transfer?

To make a bank transfer using Faster Payments, you’ll only need the following information:

  • The recipient’s name

  • The recipient’s sort code 

  • The recipient’s bank account number

  • The amount of money you’d like to transfer

You may also be asked to provide a reference or a message to accompany the payment, but this is generally optional.

Are UK Faster Payments safe?

Generally speaking, Faster Payments is a safe and secure method of transferring money. All transactions are processed using the latest encryption and security protocols to ensure that your money is protected at all times. 

Additionally, all banks and financial institutions that offer Faster Payments are required to follow strict regulations and guidelines to ensure the safety and security of their customers' money.

However, Faster Payments can still be susceptible to fraud, and the safest way to make an online payment is to use an open banking solution like Crezco

What are the Faster Payments limits in the UK?

The limits for Faster Payments vary depending on your bank and the type of account you have. However, most banks will allow you to make payments of up to £1,000,000 per transaction, depending on your own personal/business banking limits. 

Some banks may impose lower limits for certain types of accounts or customers, so it's always best to check with your bank to find out what your specific Faster Payments limits are.

For very large payments above £1,000,000, you’ll need to make a CHAPS payment. And for payments below £1,000,000, you can use Faster Payments or an online payments solution like Crezco to make account-to-account payments easily, safely and instantly.

How much does it cost to make a Faster Payment?

The cost of using Faster Payments varies depending on your bank and the type of account you have. 

In most cases, there are no additional charges for making a Faster Payment, and the cost is included in your account's standard fees and charges. 

However, some banks may impose fees or charges for certain types of accounts or transactions, so it's always best to check with your bank to find out what the costs are.

Final thoughts

Overall, Faster Payments is a safe and efficient UK payment system that lets people and businesses send and receive payments quickly and easily. 

With most banks allowing payments of up to £1,000,000 per transaction, Faster Payments is an ideal payment method for relatively large business transactions or urgent payments.

All you need to make a Faster Payment is the recipient's account details and access to online or mobile banking. With the ability to make payments instantly, you can rest assured your payment will arrive quickly, securely and cost-effectively.

With the continued growth of digital banking, Faster Payments is set to become an even more essential part of our financial lives. 

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