The incredible rise of mobile payments and digital transfer systems means that the world is inevitably moving into a cashless society.
Some nations, however, are slow on the uptake and are taking longer to adopt innovative payment and money transfer solutions. But the United Kingdom isn’t one of them. In fact, the UK is the biggest cashless spender with more than 27.7 billion digital transactions in 2017 and 2018.
Regardless of the UK moving with the times, some of their three main domestic payment systems — Bacs, CHAPS, and Faster Payments, which are used by both businesses and individuals to electronically transfer money — have been around for over 50 years.
So let’s dive deeper into current UK payment systems and what to expect for the future.
Bacs
Bacs is the oldest UK payment system first introduced over fifty years ago. Regardless of its age, Bacs is still responsible for a large portion of regular payments in the UK, these include salaries, utility bills, benefits, and subscriptions. One of the reasons Bacs has stood the test of time and is the most popular system is because the cost per transaction is low for businesses and is free for individuals. Bacs transfers take approximately three days to complete so it’s not good for critical payments as deposits and collections can only be made Monday to Friday. Not ideal in today’s 24/7 society.
CHAPS
CHAPS which stands for Clearing House Automated Payment System is a real-time gross settlement system (RTGS). It was introduced to speed up payment processing of high-value transactions in the UK. This payment system is used to transfer one-off high-value payments, such as property purchases, wholesale payments, and corporate treasury; there is no minimum or maximum payment limit. Even though CHAPS is fast and reliable, it costs users up to £35 per transaction and is not available at all banks.
Faster Payments
Also known as FPS, Faster Payments is the newest payment system to launch in over 20 years. FPS was created to facilitate instant pound sterling fund transfers — capped at £250,000 — between financial institutions in the UK. It can also be used for standing orders, bill payments, and forward payments.
Faster Payments allows for 24/7 sending and receiving of low-value, real-time transfers with zero fees (a higher cost per transaction for businesses than Bacs, however), all of which can be completed online, at the bank, or on the phone.
The not so distant future
Current payment systems in the UK allow for secure fund transfers but they are all built on withstanding legacy infrastructures. Even though they are robust and work well, there is always a need for innovation and growth, especially as society evolves.
This has never been more apparent than today, especially with more and more people turning to e-commerce. According to the European eCommerce 2019 report, 87% of UK residents are e-shoppers.
And with Gen Z and Millennial shoppers adopting mobile like never before, consumers in the UK use mobile and apps (as well as desktop) to facilitate their e-shopping habits. In-app purchases may very soon take over other payment options as smartphone use grows exponentially.
We are seeing new digital real-time payment apps being created to fill in the gaps of what current systems just cannot do.
As more and more people shop and pay online using their smartphones (also with the growth of e-commerce), it is important for financial apps to keep up with consumer habits so they have on-the-go payment and transfer capabilities at their fingertips.
If you want an app that will keep up with your instant transfer needs, check out Fin.do. We help you transfer and receive money from anywhere in the world, yes we really mean that! Transfer any currency to any currency from and to anywhere.
