Skip to content
Solutions
Products
Why Us
Resources
Pricing
Contact
Sign in
Get started
Back to Glossary
Modulr glossary

Bacs (Bankers' Automated Clearing Services)

Bacs is a UK-based interbank payment system that processes Direct Debit and Direct Credit transactions. It is widely used for payroll, supplier payments, and recurring billing due to its reliability and cost efficiency. Bacs is a long-standing UK GBP payment scheme and is operated by Pay.uk, which is also responsible for the Faster Payments payment rail. The third major UK payment scheme, CHAPS, is operated by The Bank of England. Bacs processes payments through two electronic payment schemes: Direct Debit, which is often used by individuals to pay bills and Bacs Direct Credits, which is often used by employers to pay salaries and wages. Unlike Faster Payments, BACS transactions typically take three business days to clear. The Bacs payment limit is £20 million for customer-grade participants and £999 million for government and bank-grade participants. Bacs-approved bureaux and facilities managers are organisations that submit Bacs and Faster Payment transactions on behalf of other organisations. Direct and indirect submitters of Bacs requests via need to be sponsored by traditional banks, acquire Bacstel-IP Gateway software themselves or use a Bureau’s solution. Bacs ‘direct participation’ is open to banks, building societies, authorised electronic money institutions and authorised payment institutions, looking to join the Bacs Payment System. This allows an organisation to build and maintain their own Bacs integration. Organisations can be sponsored by a Bacs Direct Participant to Originate transactions themselves - this makes them a Service User. Along with Faster Payments, Modulr is a direct participant of the BACS scheme. We enable customers to receive inbound BACS such as salary payments and other business transactions. This means we provide the same level of access to BACS as a bank, but backed by our powerful automation engine to give our customers reliability and ease of use.

Applications

E-commerce:

Reduces fraud in online card payments by verifying the cardholder's identity

Banking and fintech:

Helps issuers and payment providers comply with Strong Customer Authentication (SCA) requirements.

Advantages

  • Enhanced security: Reduces unauthorised transactions by verifying that the genuine account holder is authorising the payment
  • Fraud prevention: Helps reduce chargebacks related to fraud.

Challenges

  • User Experience: Additional authentication steps can cause friction and increase checkout abandonment
  • Implementation complexity: Requires integration with card schemes and issuer systems.

Related Terms

OTP Compliance Strong Customer Authentication PSD2
Item created by Modulr, Updated on
Search glossary
Subscribe to our newsletter
More Glossary Articles
Press Release
Wire Transfer / Telegraphic Transfer
July 24, 2025
Press Release
Counter Terrorism Financing (CTF)
July 24, 2025
Press Release
Straight-Through Processing (STP)
July 24, 2025
Press Release
Loan Disbursement
July 24, 2025

Sign up to our newsletter for our latest news and insights