How do BACS and Faster Payments compare to CHAPS and SWIFT?

While BACS and Faster Payments are the main banking transfer systems for domestic transfers in the UK, CHAPS (Clearing House Automated Payment System) is typically used for high-value, same-day transactions, such as buying property. SWIFT is the standard network used for international transfers. Unlike BACS, these alternatives often incur higher costs per transaction and are distinct from standard banking systems. CHAPS and SWIFT therefore serve different needs compared to regular payroll transfers.

Are there extra fees involved?

Banks usually charge different rates depending on the service level. BACS is often the most cost-effective for bulk payments, whereas immediate transfer services may have higher fees unless you use a specialised provider to manage your transactions. Business banks usually have specific fee structures for these services, so it is important to read all of the terms.

What information do I need to process a payment?

To set up new accounts for payment, you must ensure you have the correct data, including sort codes and account numbers. It is vital to read any validation reports provided by your software to ensure the information and data is accurate before submitting. Always read the submission guidelines for your submission window to avoid errors that might have an impact on recipients and customers.

How does the processing work?

Understanding how the processing works is key. BACS operates on a 3-day cycle, whereas Faster Payments works near-instantly. This article highlights that the choice depends on your financial needs, and the time sensitivity of your payments and collections.

BACS vs Faster Payments: key differences for UK payroll

Key takeaways

Here’s a quick summary of the core differences between BACS and Faster Payments:

BACS is the traditional method, taking 3 working days to clear, but it usually comes with lower transaction fees.
Faster Payments allows you to send money instantly, 24/7, making it ideal for urgent transfers, though often at a higher cost.
Processing windows differ significantly. BACS has strict cut-off times, and excludes weekends, while Faster Payments offers more flexibility.
Choosing the right system depends on your specific business needs, such as payroll frequency and budget.

There are a few different ways to pay employees in the UK, the most popular method of payment being direct deposits to employee’s bank accounts (for employees on PAYE). However, what other banking options and systems are available to transfer money from your company’s account to your employee’s account?

This article will explain what BACS and Faster Payments are, in order to make it easier for you to understand and decide which of these options would work best for you and your business.

What are BACS Payments?

BACS payments, also known as Bankers Automated Clearing Services, is a type of bank transfer between bank accounts. It can either be a direct debit or direct credit, meaning it can be used to pay employees, and financial teams can also pull funds out of a customer’s bank account, to collect payments from customers.

Although BACS payments are not same-day payments, they are still the number one bank payment method UK businesses tend to use.

The processing time, or window, is 3 days, though it’s important to note that payments can only be made on standard working days, that is, from Monday to Friday, even though it’s an electronic system.

The main benefit of using BACS payments is that they generally have a lower cost per transaction than other payment methods. Charges then depend on the volume processed, as well as the bank used.

Another benefit of using BACS payment is that most payroll and accounting software supports BACS files.

BACS pros	BACS cons
BACS payments involve minimal fees and are the cheapest way to send payments	Bacs payments take 3 working days to clear
Most payroll/accounting software supports BACS files	BACS payments have cut-off times and only clear on working days

What are Faster Payments?

As the name suggests, Faster Payments are payments that clear on the same day or almost instantly, rather than 3 days like BACS payments do. With this payment option, the funds show on the recipient’s bank account in a matter of seconds.

Faster Payments don’t have a specific processing window or cut-off time, and they clear even on weekends and bank holidays. This is especially helpful for UK businesses that run weekly pay.

Faster Payments is one of the most expensive options to make bank payments, normally at £2.50 per transaction, unless you have a payment system such as Telleroo, with which the cost goes down to £0.45 or less.

Choosing Faster Payments puts you in control of your payroll times, eliminating any strict payment deadlines, and allowing you to create your own payment process.

Faster Payments pros	Faster Payments cons
Faster Payments clear instantly	Faster Payments can be expensive
Faster Payments gives more flexibility	Need for additional payment system

How do you choose between Faster Payments and BACS payments in the UK?

After going into the main differences between the two payment options, you might have an idea of which method works best for you.

However, to make things just a little bit easier, ask yourself these questions before deciding on BACS or Faster Payments:

What is your payroll frequency?
Have you got strict payment deadlines?
Would you benefit from having an additional payment system?
What payment times can your payroll system provider support?

When should I use BACS vs Faster Payments?

Understanding when to use each payment system becomes clearer with practical examples:

Scenario	Business context	Recommended method	Key benefits	Action to take
Monthly payroll for 50 employees	Predictable schedule, same payday each month	BACS	• Lowest cost • Bulk processing • Reliable for large teams	Submit 3 days before payday
Emergency bonus payment on Friday evening	Urgent payment needed outside working hours	Faster Payments	• Instant clearing • Works 24/7 • Weekend processing	Accept higher fee for speed
Weekly payroll on different days	Flexible schedule, no fixed payday	Faster Payments (via Telleroo/SmarterPay)	• No cut-off times • Full flexibility • No advance planning	Use payment integration
Supplier payment for small business	Mix of urgent and routine payments	BACS or Faster Payments	• BACS = Lower cost • FP = Speed when needed	Decide based on urgency

As these examples show, the 'best' payment method isn't fixed, and depends entirely on timing and urgency. A business paying 50 employees monthly via BACS saves over £1,300 annually compared to using Faster Payments for the same task. But when Friday evening arrives and you realise you forgot to process a leaver's final pay, those savings mean nothing, you need Faster Payments.

💡 The smart approach? Use BACS for everything you can plan ahead: regular monthly payroll, scheduled supplier payments, routine transfers. Reserve Faster Payments for genuine urgencies: same-day corrections, weekend payments, or situations where the 3-day BACS window simply won't work.

Want to experience the future of payroll?

Book a demo

What’s the difference between BACS and Faster Payments in the UK?