What Are Faster Payments & How Do They Work? UK Payments Basics
Time is money, and slow payments can’t help us make money any faster. When people send a payment or are expecting a payment, they want it to be there as soon as possible. Peer payments should be quick. In some situations, instant payments are possible, but many times there is a three day wait. If you’re tired of waiting for your money, then Faster Payments is for you. Today we’re going over all of the basics associated with Faster Payments. Learn all you need to know here!
Here’s What We’ll Cover:
What Is Faster Payments?
Faster Payments, also known as Faster Payments Service, is a UK banking initiative. The point of the initiative is to reduce the time of payments between clients’ accounts. Faster Payments wants to make a real-time network, with real-time payments. The ability to send and receive payments within seconds would assist individuals and businesses.
What Was the System Like?
At this point in time, about 38 banks are utilizing the Faster Payments Service. However, before that, a system existed called CHAPS. CHAPS allowed for high-value transactions to be transferred by the end of the business day. These were normally business to business based, and had to be a large amount of money. As such, payments systems for individuals continued to function under banking industry standards.
What Is the System Like Now?
The Faster Payments Service, or FPS, was introduced in 2008. At the time, 13 banks joined the central infrastructure. The system allowed customers of those businesses to send payments to others who had accounts directly. Within the first year, 10 million payments were being sent a month. Within 7 years, 5 billion payments were sent. The ability to send faster payments was helping individuals and businesses.
How Does Faster Payments Work?
The FPS system works by sending information from bank to bank quickly. Rather than taking three days for a transaction to take place, FPS allows for nearly instant transactions. Take a look at the basic steps below:
Step 1: Filling Out Payment Details
The individual or business sending the payment will provide information about the recipient. This can be done using an app, the internet, or a phone call. The sender has to have the recipients:
- Sort code
- Account number
- Reference details
- The transaction amount
Once this information has been provided, the process can continue.
Step 2: Sending the Payment
The sender’s bank will send all of the information to the recipient’s bank. Then, the bank will verify that the information is correct. If it is, the bank will accept the payment on behalf of the recipient. If it is incorrect, they’ll reject it. Either way, the sender is notified.
Step 3: Completing the Transaction
If the payment is rejected, the sender will have to verify the information and try again. If the payment is accepted, the sender will be notified, and the amount will be transferred to the recipient’s account.
All of this can happen within minutes. The process is easy, and it makes sending or receiving money simple!
What Payments Can Be Made Using FPS?
There are four types of payments that can be arranged using FPS. Each one is listed below.
Single Immediate Payments
Single immediate payments are one-time payments sent immediately. They are initiated using the internet, an app, a telephone, or a banking branch. In most cases, transactions are completed within seconds, but sometimes the recipient may have to wait up to 2 hours for payment. Users can send up to £250,000 per transaction, depending on their bank.
These payments are scheduled ahead of time. They follow many of the same standards as the single immediate payments. However, if you set a forward-dated payment on a weekend or holiday, it may not be processed until the next working day.
These are recurring payments. They can be scheduled to occur on the same day of every month. They cannot be scheduled for weekends or bank holidays, though. If the predetermined date falls on one of those, it will be processed the next working day.
Direct Corporate Access Payments
This service is exclusive to FPS business customers. They are secure transactions and allow businesses to send the bulk of their payment messages directly to FPS. They still fall under the same transaction limit but are available 24 hours a day.
Faster Payments is a service in the UK that allows for transactions to take place in minutes. They can be used by individuals or businesses. They are slowly replacing the old, three-business-day systems of the past.
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