Connectivity and access

As a financial institution, moving money for end customers is a given. The question is: which UK payment schemes will you use to do that? And importantly: how will you access those schemes?

In the UK’s centralised clearing system, money moves automatically between the largest financial institutions – those with the appropriate liquidity needs and risk appetite to participate in the system. The movement of money is facilitated and simplified by using a finite number of payment schemes.

A payment scheme is a body that sets out the rules for how money moves from one party to another. These rules cover the steps that need to be followed to make a payment and provide the processes to settle cleared transactions, as well as the payment system and infrastructure that needs to be used to settle transactions. A payment scheme creates these rules and acts as their guardian, taking responsibility for overseeing them.

The primary payment schemes in the UK are CHAPS, Bacs and Faster Payments. Most recently, the Bank of England also launched a new payment scheme supporting the UK housing market through PEXA Pay.

But connectivity alone is not the only factor. Firms must also consider the technical aspects of how a provider accesses the schemes and their uptime. While a scheme may run 24/7 365, a provider may not offer the same availability. You should also examine how it performs, communicates any updates and monitors performance.

The Clearing House Automated Payment System (CHAPS) is the UK payment scheme most commonly used for high-value payments. Most end customers will only use CHAPS when buying a house, but its small volumes hide the fact that it moves more money than any other scheme.

Its the oldest payment scheme in the UK and is based on Real Time Gross Settlement (RTGS), which means money moves from one account to another on a near real-time basis, subject to checks and controls imposed by the banks in the payment chain.

There’s no limit on how much money you can transfer using CHAPS, which is why the scheme is best placed for settling high-value payments in a single transaction. CHAPS is also used for money market and foreign exchange transactions, urgent corporate payments and large public sector transfers.

The Bankers’ Automated Clearing System (Bacs) is the UK’s bulk payment scheme that is most often used for high-volume, recurring payments. You can use Bacs for transactions up to £20,000,000.

There are two main types of Bacs payments:

1. Direct Debit: where a customer gives prior permission for money to be taken out of their bank account – for example to pay a utility bill or subscription.
2. Bacs Direct Credit: where money is deposited into a customer’s bank account – for example, 80% of salaries in the UK are paid in this way.

Bacs is open for submission between 07.00 and 22.30, Monday to Friday (excluding bank and public holidays). However, Bacs isn’t instantaneous, with payments settled two working days after submission. This means payments submitted on a Monday will be applied on a Wednesday, while payments sent on a Friday will typically be applied on a Tuesday.

Faster Payments (FPS) is owned by Pay.UK and was launched in 2008 as the UK scheme best suited to making low-value transactions quickly. It facilitates real-time instant payments for transactions, allowing customers to make and receive payments within minutes and have near-instant access to funds.

FPS supports four payment types:

• Single immediate payments: typically, off-the-cuff transactions for general use. This is the most common type of payment.
• Forward-dated payments: Pre-arranged one-off transfers which are sent and received on a set date.
• Standing orders: recurring transactions scheduled to be repeated within a set time frame.
• Direct corporate access payments: payments that can be sent in the form of bulk files, primarily used by businesses.

Since its launch, FPS has consistently achieved record-breaking success, recently obtaining the highest number of transactions processed in a single year. In June 2023 alone, Faster Payments processed approximately 38 million payments, which amounted to a total of £315 billion.

In 2022, Pay.UK quadrupled the Faster Payments transaction limit from £250,000 to £1,000,000. This is particularly beneficial for sending business payments immediately, knowing they’ll be received in near real-time.

It’s the backbone of UK payments, being available 24/7 for 52 weeks of the year.

You could choose to become a direct participant in one or more of the schemes. That way you’d maintain the tightest data controls and autonomy over your payment capabilities. But becoming a direct participant also has its drawbacks:

• It takes a substantial capital investment to build the integration and then keep up with the regulatory and testing requirements of a payment scheme.
• The process of becoming a direct participant is often long, and always complex.
• Building and maintaining a team to support the 24/7 and real-time requirements of the schemes is costly.
• It takes up time, focus and resources that could be better spent on developing your products and services.

• Which schemes do you provide direct access to?
• How do you connect to the schemes?
• How do you process payments? Are there any cut off windows?
• Can you provide ‘out of hours’ payment processing?
• How many customers do you have connecting to those schemes?
• What volumes are your customers transacting across the schemes?

ClearBank is a purpose-built, technology-led bank with an API-first tech stack that delivers near real-time, rather than batch-based, processing.

We are a direct participant in CHAPS, Bacs, Faster Payments and PEXA Pay – which means you don’t have to be. We take away the regulatory burden, providing an experience to clients akin to being a direct member. All connectivity has been built and is managed by our in-house teams of experts rather than collaborating with third parties or external technology providers.

You can connect to any or all of the UK payment schemes instantly through our single API. Say goodbye to batch payments and messy processes by linking up with Faster Payments, CHAPS, Bacs and more. Make real-time payments standard for your customers.

When you connect to the UK payment schemes through ClearBank:

• The regulatory and testing requirements (along with the capital investment needed to do so) are already taken care of.
• You’ll be up and running in half the time – with support from our team and testing in our API sandbox to make sure launch day arrives on time and goes off as planned.
• Your team will have the time and resources to focus on building world-class products and services, while we take care of the tech innovation.