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
Payroll processing:
Businesses use BACS to pay employees' salaries.
Regular payments:
Subscriptions, rentals and other recurring payments are commonly taken via Direct Debit.
Advantages
- Cost-effective: No end user transaction fees
- Reliability: Ensures predictable and automated payment processing
- Security: Adheres to strict UK banking regulations
- Trusted: BACS has worked successfully for many years and is a reliable, trusted payment scheme.
Challenges
- Slower processing times: Funds take up to three business days to clear.
- Limited real-time capabilities: Does not support instant payments like Faster Payments or SEPA Instant.
