The introduction of faster payments is a UK banking initiative designed to reduce payment times...
What is FPS payment method?
What is the FPS payment method?
Payments across businesses are usually an immediate process, with payments going from one organisation’s bank to another in quick time. This is all made possible by the UK’s Faster Payment Service (FPS). The Faster Payments Service was introduced back in May 2008 and was initially used to reduce payment times between different banks’ customer accounts from three working days to a matter of seconds.
Initially, nine banks and one building society committed to offering the Faster Payment Service to its customers, however in 2018, ten years on from its inception, this figure had moved to 21. Smaller building societies are now able to use the service through agency arrangements with a direct participant. Faster Payments became a subsidiary company of the New Payment System Operator (NPSO) on the 1st of May 2018, who had taken over responsibility for the operation of Bacs and Faster Payment Systems.
How do faster payments work?
Faster Payments are available through a variety of methods to customers. Some of the most common include:
- Your Bank’s website
- Mobile Banking Apps
- Telephone Banking
- In your local branch
There are still some banks and building societies that still do not use Faster Payments, so it is always worth checking. You can do this using the Faster Payments website’s Sort Code Checker.
Most banks have faster payment limits which they can set at their own discretion up to the amount of £250,000. It is also important to note that although in most cases faster payments will be virtually immediate, in some cases this is not always guaranteed. It is also not guaranteed that the receiving bank will process the payment immediately, although all financial institutions are bound by the Payment Services Directives to ensure that any mobile, internet or phone banking payments, including standing orders, at the very minimum, must arrive by the end of the following business day at the latest.
According to the same law, all beneficiary banks must make funds available to their customer as soon as they receive the instruction. (noting that some institutions do not operate on weekends or public holidays).
A simple Faster Payment instruction process might look a little like this:
- You instruct your bank to make the Faster Payment
- Provide the sort code and account number of the bank you wish to make the faster payment to
- Once the bank has checked you can afford the payment it sends the funds.
It really is as quick and as simple as that, however The Faster Payments Services will always check the payment instructions before forwarding them to the receiving bank, who again carries out checks to ensure the account number is valid.
Faster Payments vs other payment methods
So how does Faster Payments compare to some of the other payment methods in the market. We will look at the two most common to give you a better idea.
FPS vs Bacs
Bacs differs from Faster Payments in a number of ways, with speed being the main difference. When you apply for a Bacs payment, the payment takes place directly between banks and usually takes three working days to clear. So if you are looking for a quick payment solution, the Faster Payments should be your choice. However, Bacs is designed mainly to handle Direct Debits and Credit payments between organisations.
FPS vs CHAPS
Another common payment method is CHAPS. Like with Faster Payments, CHAPS enables you to make same day payments, with a guarantee that your payment will arrive on the same day. The main difference between CHAPS and FPS is that there is a fee of £25 per payment made in most cases. Also, CHAPs is predominantly used to process high-value transactions that exceed the maximum faster payment limit. So for smaller payments under £250,000 you would probably choose the Faster Payment System, however for larger business transactions, CHAPS has the edge.
Interbacs payment solutions
Combining over 30 years of industry experience, a friendly, reliable and professional approach, with perhaps most importantly, industry leading Bacs and Direct Debit Management Solutions, Interbacs can help you find the right solutions for your business. Our longstanding Bacs Approved Bureau status enables us to guarantee high-quality solutions for your business’ financial challenges.
See for yourself what our software can deliver by signing up for one of our free software demonstrations, or contact us today for more information. Alternatively, why not try our online solutions finder and discover the solutions that suit your business best.