Launched in May 2008, Faster Payments is an electronic funds transfer between banks, designed to improve the speed of payment transfer compared to other electronic transactions.
As of December 2021, there are 37 banking and financial institutions that are connected to the Faster Payments service – including Barclays, NatWest, HSBC, Virgin Money and Tesco Bank, amongst others.
Faster Payments and Faster Payments payroll allow real-time money transfers 24 hours a day, 365 days of the year. For employers looking to optimise their payroll process, Faster Payments is an extremely valuable tool.
Faster Payments currently has a limit of £250,000, though this is set to rise in February 2022 to a limit of £1 million per individual payment. Banks and financial institutions using Faster Payments will be allowed to set their own limits up to and including £1 million.
BACS stands for ‘Bankers Automated Clearing Services.’ It is commonly referred to as a bank transfer. BACS is available through 16 banks and financial institutions in the UK and was launched in 1968. Since 1968, over 140 billion transactions have been processed using BACS. The single-day high of 124 million transactions processed was in late November 2019.
There are two types of BACS payments – Direct Credit and Direct Debit.
Whilst BACS payments are the cheapest way to send payments and the system is supported by all major payroll and accounting software solutions, there are some disadvantages to the process. Not only do BACS payments only clear on business days, but they also have strict cut-off times within the business week. For example, a payment that needs to be sent on Wednesday must be set up by Monday by 3pm. This reduces flexibility and speed of making payments. BACS payments also take three days to clear, so this legacy system is not perfect for businesses needing to transact quickly with their employees.
Guaranteed same day payments are available through CHAPS. CHAPS stands for ‘Clearing House Automated Payment System.’ CHAPS offers unlimited transfer amounts, subject to sufficient cleared funds being in the sender’s account. CHAPS is often used for high value transactions and there is a cut off time, set by the bank, for when transfers can be made. The downside of using the CHAPS system is that there is a fee of £25 per payment made, irrespective of the value of the transaction.
In comparison with BACS, using Faster Payments means that funds are transferred almost immediately. In some instances, the transaction can take up to two hours, but in most cases the transaction is completed within minutes. Using Faster Payments means there’s no ambiguity around payment timescales.
Using Faster Payments helps cash flow management for businesses and supports employees with speedy payments. It allows employees quicker accessibility to their money. In turn, this can help employees reduce unintentional overdraft charges, eliminate the need for costly interim financial measure such as payday loans and give them capability to meet their financial obligations.
Faster Payments is currently available through 37 financial institutions.The businesses signed up to Faster Payments are subject to rigorous checks before approval and they have a responsibility to ensure security of data.
Speed – Faster Payments are sent and received almost instantaneously. They can also take place 24 hours a day, 7 days a week and are not reliant on transactions taking place on a business day. There is no lead-time for sending Faster Payments, nor time to clear into employees’ bank accounts.
This is particularly advantageous if errors have been made in payroll processing. If an employee is reliant on funds arriving on a specified date, if there are errors, they can be corrected and additional monies sent in real-time at the push of a button.
Security – only banks and financial institutions that have met strict security requirements and who uphold extensive security protocols can use the Faster Payments system. Businesses and employees are protected for losses from any fraudulent transactions.
Convenience – Payroll payments can be set up with much more flexibility because of the instantaneous transactions. There is no need to schedule payments at least three days in advance and payments are made at the touch of a button. Payments can also be ‘batched’ for organisations with multiple employees and payments are easy to reconcile.
Faster Payments allows you to transfer money from a business account directly into an employee’s bank account, without having to use legacy payment processing systems like BACS or CHAPS.
With Faster Payments, more time is available to process payroll and make any last-minute adjustments to employee’s pay. Businesses can also avoid recall or late-change fees incurred by BACS or CHAPS if an error is discovered. If an error is discovered, a subsequent payment can be made in real-time to correct the employee’s pay, which is better for employee morale and helps reduce financial stress brought about by an error in payroll.
PayCaptain is built on the Faster Payments platform for near-instantaneous transfer of funds. The legacy BACS system will be phased out at some point in the future, so PayCaptain is future-proofed for when this happens.
PayCaptain has functionality like On-Demand Pay built into the solution that helps employee financial well-being. This functionality gives employees access to payments when they need them, even if it’s outside of the regular pay period. On-Demand Pay advances a portion of accrued wages before the normal salary run so that employees can meet their financial commitments. Offering On-Demand Pay reduces employee stress and helps them financially by avoiding overdraft fees or costly advances through payday loans companies, or the need to use credit cards.
With Faster Payments, employers can make instantaneous payments to employees if the need arises. The option to access money in an emergency is a highly valued benefit and is quick and easy to receive money instantly via the PayCaptainApp. Funds can be helpful for employees to manage their budgets on a weekly basis and keep funds protected for their bills and direct debits at the end ofthe month.
PayCaptain also handles all the payments to both employees and third parties such as HMRC or pension and benefits providers. Using Faster Payments, employers can be assured of the payment timescales and their financial obligations have been met.
In summary, Faster Payments and PayCaptain offers businesses an enhanced level of service for payroll processing. Payments can be made at any time of the day or night, 365 days a year. Lead times and expensive fees for legacy systems, such as BACS and CHAPS, do not apply. Faster Payments offers a new level of flexibility, security, speed and convenience for employers to make sure they offer the best level of payroll support for their employees.
To learn more about how we can help your business, contact usfor an informal, no obligation chat. We’ll be happy to demo PayCaptain for you and talk about how we can help your business future-proof your payroll and support your employees’ financial well-being.
PayCaptain Payroll Solutions Limited, www.paycaptain.com is an HR/FinTechcompany that delivers a fully automated cloud payroll service. The solution contains many unique and innovative features for employees, helping them to take control of their pay and increase their financial well-being. PayCaptain is a payroll solution that helps employers pay their workforce, regardless of income and personal circumstances. The solution also incorporates functionality that is specifically designed to positively impact financial resilience for people struggling with money, or vulnerable and low-income employees.
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