The financial system employed by banks and major financial institutions in the UK is based on automated payments, which are without a doubt an essential service for both businesses and consumers. Bank Account Clearing System (BACS) is an electronic system that makes payments directly from one bank account to another. It is commonly known as direct bank transfer or wire transfer and is a gateway that saves you from making payments online.
It is popular for carrying out more transactions than the total number of people to have ever walked on earth. It is operated by 16 major UK Clearing Banks and building societies that are a part of the membership organisation. In order to understand how BACS has expedited the process and how quickly it can clear a payments, it is imperative to understand the basic types and uses.
BACS payment has two main payment types:
- BACS Direct Credit
- BACS Direct Debit
Use of BACS
Direct Debit in the UK is run by BACS as well as BACS Direct Credit Scheme used to pay salaries and pay invoices from suppliers. It is typically used for carrying out regular day-to-day transactions such as salaries, state benefits, pensions and tax credits.
According to a study, almost 90% of the UK workforce is paid using BACS Direct Credit. Over 150,000 organisations in the UK are currently utilising the benefits of BACS.
Payment Processing Time
The entire payment process takes three days, which is much quicker than cheques and primitive payment methods that existed prior to BACS. Here is a brief breakdown of the process:
Day 1 is the Input Day. It is the latest day that users can submit a payment file to BACS for a processing cycle using specialist software. Some software providers may have different transmission times, for example AccessPay bacs payments give users a portal to manage all debit and credit transactions. The time frame for bacs transfer is between 7:00 am to 10:30 pm. For internet banking users, this window ends earlier.
For example, if a customer decides to pay an electricity bill.In most cases, the amount will be debited to the customer’s account immediately after instructing the bank to make the payment. Overnight, the payments are submitted to the BACS centre for processing.
The second day is for processing the transaction. The files are delivered to the recipient’s banks to be processed. At this point, the option to recall the transaction is available. The transactions are processed and batched up ready to be sent overnight to individual banks.
This is the key entry day where payments are simultaneously debited from the sender’s account or credited from recipient’s account. Transactions are referred to as simultaneous as the funds don’t leave your bank and the beneficiaries’ bank does not receive the funds until the third day.
BACS transfer days are business days and no processing is done over the weekends or bank holidays. For example, if the first day falls on a Friday the payment cycle will complete on Tuesday. In fact, the bank will be holding your money for further two days without paying you interest.
One benefit of the BACS payment system is that one remains in control of the process at all times and submit payment instructions up to 30 days in advance of the payment date. Payments can also be recalled after submitting the payment information, notifying your bank in advance.
How does the BACS payment process work?
The BACS payment process is very simple and the only thing required is for you to have a bank account to carry out the electronic transactions. In order to set up the bank account, you need to supply the bank a sort code along with an account number and name of the person the account is held by.
One concern people have is regarding identity theft, but there is nothing to worry about because with these details the only thing that can be done is transfer money into your account. Owing to less paperwork, BACS payment is very safe with the operational time extending from 3 to 5 days maximum depending on the day of transaction.
BACS Service User Number (SUN)
A unique six-digit number is used to identify and recognize the business receiving or paying money through direct debit. To use the BACS services, a corporation needs to have access to the Service User Number. A guide can be downloaded easily off the internet to find out everything you need to know about SUNs.
Benefits of Using A BACS Approved Software
You can literally complete your online payment with a few clicks in an efficient way. Owing to the automated process, there is no manual intervention to reduce the operating time drastically. Human error is also reduced with automated reports reconciled with your back office.
Software setups are very quick, easy and just a call to the service delivery team will start your payment process. The contracts are usually based on short time commitments at fixed prices. Fee transparency and diversity of submitting file types are other advantages of using BACS payment software. You can easily be in control with the freedom to add details, change accounts and to add or remove users in just a few clicks.
It is always better to use payment software to make the most out of BACS.