The Faster Payments Service (FPS) is a banking initiative in the United Kingdom, with the aim of reducing payment times from three days to a few seconds.
How does the faster payments service work?
More than 95% of payments traffic within the UK uses the Faster Payments Service. The initiative is focused on handling the large number of small payments that take place every day within the UK, with certain banks allowing faster payments up to £1,000,0000. Transfer time is expected to be a few seconds, but this is not guaranteed. The sender will need the recipient’s account name, account number, and the sort code for their bank branch to send a Faster Payments.
Since 2018, non-banks have also been allowed to join FPS, and today, more than 35 financial institutions offer Faster Payments within the UK. There is no cost for personal accounts, and corporate customers should expect a fee of around £2.50 per transaction. FPS was the first new payments system to be introduced in the UK for more than 20 years. In 2021, 3.4 billion transactions were completed using Faster Payments.
Faster payments compared to BACS
While BACS transfers take up to three working days to complete, FPS reduces payment times down to a matter of a few seconds. That makes BACS good for regular, non time-sensitive payments, and FPS better for payments which need immediate settlement. BACS is cheaper than FPS, which is also something to take into consideration.
Faster payments service compared to CHAPS
CHAPS was also introduced to reduce the time for payments that were previously completed using the BACS system, but only for higher value transactions. It also only guaranteed a transfer by close of business day, and was impacted by the time of day the transfer was made. In contrast, FPS offers near-immediate transfers for smaller payments, with limits on the transaction value set by each bank individually. Faster Payments is available 24 hours a day, 7 days a week. Finally, CHAPS usually incurs a fee of £25 per transaction, which is much more expensive than FPS.
Four FPS payment options
The types of transfers that can be made using Faster Payments are:
- Immediate and single: These are one off transfers, where funds will be available immediately, guaranteed within 2 hours. Individuals can make these transfers using mobile banking, over the telephone, online, or even in person.
- In advance: Individuals can forward-date payments, scheduled to be paid ahead of time for a bill or to settle an invoice.
- Standing orders: With a standing order, the account holder will set up the payment, in contrast to a direct debit where the recipient sets up the payment instead. The recipient will receive a regular, fixed payment on a specific day.
- Corporate Access: Direct corporate access is for business customers, and allows for bulk payments to be made simultaneously. However, not all members of the Faster Payments Service offer this capability.