Faster Payments in United Kingdom
Faster Payments is a banking service that allows you to send and receive low-value sterling payments in almost real time. Fast Payments all year round.
Faster Payments is a payment service which allows most customers of UK banks to be able to make and receive sterling payments within the UK
The Faster Payments Service (FPS) is used to make electronic payments to accounts held with other UK banks, usually by phone or online banking, to pay bills
Faster Payments service. This means electronic payments from your account arrive at their destination more quickly.
How long will a Faster Payment take? – Ask Barclaycard a question
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Payments sent via the Faster Payments Service will be credited to your Barclaycard on the same day if we receive the funds before 6:00pm and the next working
the next step in the continuing success of Faster Payments is bringing payments to every pocket through the new mobile payments platform.
Faster Payments is only for low value transactions so any payment you want to make will have to be below the limit set by either the banks or the Faster Payments.
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Organisation of FPS
APACS was responsible for the development and delivery of Faster Payments, but after May 2008 transferred day-to-day operations and management of the service to the CHAPS Clearing Company (a member-based organisation responsible for the CHAPS sterling high-value same-day payment system.) Towards the end of 2011 Faster Payments Scheme Limited (a member-based organisation) was set up to separate out the day to day operations and management of the service from CHAPS
The design of Faster Payments was a joint project between Immediate Payments Ltd. (IPL), APACS and the founder members, based on a commitment made to the OFT Payment Systems Task Force in 2005. IPL, a VocaLink company, supplies the central network for the service.
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Faster Payments is a new service, introduced mid-2008, which will enables users to make near real-time payments in the UK. The service was agreed by the APACS Member Banks in May 2005 following a recommendation from the Office of Fair Trading Payments Systems Task Force.
In April 2006, LINK, the organisation that runs the UK’s cash machine network, and Voca, the organisation that operates the Bacs service, were jointly awarded the contract to provide the Faster Payments service. In addition to banks accessing the service, corporates will be able to link directly to the Faster Payments service to make bulk payments.
Advantages of Faster Payments
The majority of information relating to Faster Payments has focused on the benefits to banks and their customers of using the new service. However, there are significant advantages for corporate organisations who decide to adopt Direct Corporate Access (DCA).
Faced with an increasingly competitive market place, Faster Payments offers corporates the opportunity to improve customer service, differentiate their products and services, control costs and reduce risk.
Customer service
When a payment is made via internet or telephone banking, customers can often be confused as to why it is not received by the Beneficiary straight away. It can be equally frustrating for a customer to be told that they are due a refund by a service provider, but it will not reach them for three to five working days. As Faster Payments allows corporates to credit customer accounts in near real-time this substantially improves the service provided and removes the perception that the payment is being delayed by the supplier.
In addition, the direct notification and increased traceability provided as part of the Faster Payments service means that corporates will not have to rely on their bank for confirmation that a payment has been received. The ability to track payments will allow corporates to advise their customers within minutes that payments have been credited. Increased payment traceability will also reduce the time and resource required by the corporates to track payments and the costs associated with this.
Competitive differentiation
Customers are becoming more demanding and they expect much more from their suppliers. If they are not receiving a satisfactory level of service, or feel they are not getting the best offering, they are increasingly likely to change suppliers. An example of this is the fierce competition in the utility sector where there are many companies vying for market share with prices and product offerings changing on a regular basis.
This has resulted in customers leaving long-standing suppliers and switching to an alternative to get the best arrangement and improved service. Organisations such as U-switch and Simplyswitch offer comparative information to actively encourage consumers to move between suppliers of gas, electricity, water, digital TV, insurance, credit cards, loans and bank accounts.
A report released by Ofgem in March 2006 found that customers are increasingly looking for the best offering, with switching levels at their highest for over four years. In March 2006, more than 900,000 of the UK’s 26 million domestic energy customers switched suppliers.*
Faster Payments has the potential to be a value added service that corporates can offer their customers thereby allowing them to differentiate themselves in the market. By adopting this new initiative corporates will be able to instantly resolve discrepancies in customer accounts, such as over-payments.
In addition, the internal cost savings that corporates can make through improved payment traceability means that they have the potential to pass these savings on to customers, leaving competitors offering an identical product at a higher cost.
As customers become increasingly aware of Faster Payments, the expectation of having this service available is heightened, forcing it to become the industry standard for all suppliers. Therefore, over time, corporates will be at a distinct disadvantage if they do not choose to provide this alternative payment method to their customers.
Cost control
With the introduction of a new payment method corporates have the opportunity to assess their existing processes and consider the potential cost advantages. For corporates that make large volumes of CHAPS payments, the Faster Payments initiative presents the opportunity to make notable savings.
CHAPS payments currently cost around £25-£30 for the general public; however this fee is typically a lot lower for corporates. Although there will be an initial transaction limit of £10,000, it will cost significantly less to process a payment using the Faster Payments scheme. Some banks have suggested that the charge will reduce over time or even be waived.
In its Financial Stability Report published in December 2005, the Bank of England disclosed that half of all CHAPS payments are for less than £10,000. For those corporates making large amounts of payments through CHAPS, transferring them onto the Faster Payments service will result in considerable cost savings.
Risk reduction
A clear view of cash-flow is essential for the effective running of an organisation. With Faster Payments offering almost instantaneous notification of payments, and enabling return payments to be rectified quickly, the risk involved in missed payments is significantly reduced.
Currently, if a payment fails, depending on where the failure is picked up in the payments cycle, it can take several days for notification from the bank to reach the corporate. With Faster Payments, if a payment fails, notification is received instantly. This enables the corporate to re-submit a correct payment inside of the payment deadline.
The extra flexibility will reduce the risk of missing payment deadlines, saving the corporate from incurring late payment charges.
What is the future for Faster Payments?
Faster Payments is more than a new way to make and receive payments. Although initially designed to speed up the payments process, the Service’s technology and scope will continue to evolve and bring about changes to UK payments and clearing. While initially limited to credits, the Faster Payments technology does not prohibit the future expansion into debits.
As more payments are made through the Faster Payments scheme, the cost to make them could decrease. The initial limit of £10,000 for payments is also likely to increase, which would result in even more payments passing through the scheme. As this occurs, it is quite possible that Faster Payments will supersede CHAPS.
Although most European legislation in the area of payments is focussed on countries that have adopted the euro, the current draft of the European Commission’s Payment Services Directive requires all payments in the EU, including the UK, take no longer than two days. It is therefore possible that Faster Payments could eventually completely replace the UK’s current three day clearing cycles.
What should you do now?
2008 may seem a long way off, but to be able to take advantage of the benefits of Faster Payments it is vital to start thinking now about how the new service will affect you and your customers.
There are several areas for corporates to investigate:
Assess how you can differentiate yourself competitively. Faster Payments will enable you to provide a value-added service to your customers.
Review how many failed, missed or delayed payments you experience and the costs incurred. The opportunity to make payments on the same day could help to avoid charges for payments made after deadlines.
Evaluate how many payments you make through the CHAPS system and their value. If you are making large volumes of payments below the limit of £10,000, it will be worth transferring the payments to the Faster Payments service.
Faster Payments is an optional service. However, it is one that will enable you to improve customer service, reduce costs and gain a competitive advantage. If you do not want to be left behind, it is something that you should start thinking about now.
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The Faster Payments Service allows customers to make electronic payments almost instantaneously, seven days a week, 24 hours a day. The payments are typically made by phone or internet banking to transfer money between accounts, to other people), pay bills, or make regular standing order payments. The service was launched in May 2008.
What would I use this for?
Faster Payments is used for processing the vast majority of internet and phone payments. Each bank or building society has a limit on the amount of money that can be sent using this service and you can see the limits of all Faster Payments members here.
How do I use it?
When making a Faster Payment, it’s vital to use the correct sort code and account number and name of the person/business you want to pay, as once you have made a payment this way, it can’t be cancelled. Entering these details incorrectly could mean your money ends up in someone else’s account and it may be difficult to get it back.
In addition to the sort code and account number, you also need to give a reference when making any online or phone payment. This lets the person or company receiving the payment know what it’s for. Sometimes entering the wrong reference stops a payment from being credited at all, so it’s particularly important to get the information right when paying bills. If you’re not sure of the reference number to use, it’s a good idea to contact the company you are paying to find out.
Since the end of 2011, all sort codes able to receive Bacs payments can receive Faster Payments (including credit card and utility companies). The Payments Council publishes The Sort Code Checker to see whether the sort code you’re sending money to can receive Faster Payments.
Faster Payments are commonly used to pay bills, for one-off payments to small businesses or tradesmen; and to make transfers to other bank accounts, savings accounts, or other people.
Security
Keep all of your passwords, passcodes and PINs for both internet and phone banking safe; always be wary of any unsolicited emails or calls asking you to disclose any personal details or card numbers. Your bank, building society or the police will never contact you to find out your PIN.
Know who you are dealing with – always access your online bank’s website by typing the name in yourself. Never go to a website from a link in an email and then enter personal details – the email could be sent by a fraudster who is trying to get you to login to a fake bank website.
Check your statements regularly (this is much easier with internet banking) and keep an eye out for transactions you don’t recognise. If you spot something suspicious report it to your bank immediately.
Some banks have introduced card readers and secure devices to use in addition to your normal internet banking login details. Some may require you to enter details when making online payments – this provides an extra layer of security against fraud.
Take a look at our ‘online security’section for more security tips.
Useful information
Since 1st January 2012, all internet, phone and standing order payments must now reach the recipient’s account the business day after they have been initiated by the payer. The types of payments impacted include those made to pay bills, one-off payments to friends and businesses and regular payments, such as charity donations or life assurance.
In the UK, all standing orders and one-off internet and phone banking payments exceed this requirement, being processed end-to-end within two hours through the Faster Payments service.
The new maximum timescale for electronic payments, technically known as D+1, forms part of the Payment Service Regulations. The D+1 change is expected to bolster the number of Faster Payments by 25% in 2012.
For more information, see: All Internet and Phone Payments to be Faster From 2012
– See more at: https://www.payyourway.org.uk/new-technology/faster-payments/#sthash.MeTUFS09.dpuf