CHAPS, BACS, SWIFT, Faster Payments – What do they mean?
The banking world is riddled with acronyms, abbreviations and potentially bewildering terminology, so much so that we've already created a guide to some of the more common banking acronyms.
Every country has its own preferences when it comes to how they pay for things, and the UK is no different. Unfortunately a lot of those payment methods are referred to by their acronym, which doesn’t tell you much unless you already know what it stands for.
If you’re in the UK or planning to do business here, here are some acronyms you should be familiar with.
What is CHAPS?
We all know an old chap or two in the UK, but what does CHAPS stand for? It stands for Clearing House Automated Payment System, and it’s one of the standard ways for large financial institutions to transfer money. Typically, these transfers are reserved for large sums of money, even into the billions.
One selling point of CHAPS is that there’s almost no delay between when transfers are initiated and when the other party gets their money. Transfers are settled individually the moment they’re processed. Because CHAPS is so quick, there’s little risk that senders will cancel their payment before it goes through.
What is CHAPS used for?
Most of the time the system is used by larger banks, but not always. Other businesses sometimes use it because of their partnership with larger firms. They use it for the same reasons: the speed and security of CHAPS payments makes it unlikely that the money they move will get lost, sent back, or intercepted.
CHAPS is usually used to pay suppliers for big orders, make tax payments, or similar high-value transactions. Daily transactions that are more routine and smaller are less suited to CHAPS because of the higher fees associated with the method.
What does BACS stand for?
BACS stands for Bankers' Automated Clearing System, and a BACS payment is just an ordinary electronic transfer between accounts.
BACS payments are one of the most common ways UK banks transfer money between accounts, and there are two main types. There’s Direct Debit and Direct Credit, which refer to withdrawing money from and depositing money into the other person’s account respectively.
How do BACS payments work?
For either type of BACS payment, you’ll need:
The payee’s name
Their bank account number
The name of their bank
Their sort code
Your own account details
For Direct Credit payments, your bank authorises you to deposit money to other accounts using either a personal or business bank account, and for Direct Debit transactions, there are three ways you could retrieve your money.
You could use Bacstel-IP, an approved bureau, or a third party provider to automate the process. BACS Direct Debit payments are very cheap once the functionality is set up; they typically cost you no more than 50p.
To make a BACS payment with your bank, you’ll have to set up the software first, and that’s the expensive part. The software and setup fees can be up to £5,000 if you’re using your bank, a bureau, or a third party provider.
How long does BACS take?
Payments are unfortunately not instant, but take up to three business days to show up in your account.
What is SWIFT?
SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication – it’s a good thing we don’t have to say the whole name every time. The network allows banks to communicate financial information securely. SWIFT is used in many places for international payments, but it’s especially prominent in the UK.
What is a SWIFT payment for?
They’re used when the receiving bank is abroad. If your payment involves converting currency, you’re looking at a SWIFT transfer. To send a payment, you’ll need:
The recipient’s name
The receiving bank's name and address
The bank’s SWIFT code (sometimes called a BIC)
The recipient’s account number or IBAN
SWIFT codes are usually found on bank statements, but if not you can also find them on bank websites.
Despite the name, SWIFT payments can be a bit slow. They take one to four business days depending on where you’re sending the money, the time zone difference, and the procedures of the banks involved. Still, SWIFT is a good payment option because of the many anti-fraud checks involved.
What is Faster Payments?
Faster Payments is a relatively new service in the UK that’s available 24/7, 365 days a year, and lets almost anyone with a bank account send money in real-time, meaning that the money will reach its destination near-instantly.
As of February 2022, PayUK, who own the Faster Payments system, are allowing up to £1 million to be sent during transactions. Despite the large upper limit, Faster Payments is used most commonly for smaller everyday payments.
How can you make Faster Payments?
They’re available on the bank’s website, on a mobile banking app, over the phone, or at the bank branch itself. Just verify your identity after ordering the payment and it’s all set to go.
Despite the speed, Faster Payments is impressively secure. In the minutes that a transaction takes, the bank checks your funds, confirms your identity, and makes sure the account number is valid. If any of these steps hit a snag, they’ll stop the process.
Provided the receiving bank also supports them, you can use a free SumUp Business Account to make near-instant bank transfers anywhere in the UK. Plus, we don't charge fees on incoming or outgoing transfers so you can move money for free.
You also benefit from:
A free UK current account and sort code
Zero monthly fees
A free Mastercard you can use in shops, online and at the ATM
3 free UK cash withdrawals a month
Next-day access to any sales made with a SumUp card reader, even on weekends and bank holidays
24/7 access to your money through the free SumUp app
Open your account in minutes and enjoy split-second payments to all UK accounts, with no charge.