Moving money inside the United Kingdom might seem simple, but the way you route funds can have real consequences for your business. The scheme you choose determines your timing, cost, risk, and cash flow. When you work with Bacs, CHAPS, and Faster Payments, you need to know which one makes sense in a given moment and why. Below, we’ll discuss what you need to know to make that choice with clarity.

What’s in this article?

• What are the major UK payment schemes?
  
• How are the UK payment schemes different?
  
• When should a business use CHAPS vs. Faster Payments?
  
• How do settlement times and limits impact businesses?
  

What are the major UK payment schemes?

The UK’s domestic payments infrastructure is built around three major schemes, each of which has its own strengths, limitations, and ideal use cases:

• Bacs is the standard for low-cost, high-volume payments such as payroll and direct debits. It prioritizes batch efficiency and cost control.

• CHAPS is used for large, same-day transfers that require certainty of settlement. It guarantees time-sensitive delivery for large-value payments.

• Faster Payments is the go-to for real-time transfers that are less than £1 million and is available 24/7. It offers speed and convenience for instant, lower-value payments.

Businesses rely on these three schemes as foundational tools for managing cash flow, disbursing funds, and collecting payments. Here’s a closer look at each one.

Bacs

Bacs is the oldest of the three schemes but still powers billions of UK payments each year. It processes:

• Direct credits (often used for payroll, supplier payments, and benefit disbursements)

• Direct debits (used to collect recurring payments from customers)

Bacs operates on a fixed, 3-day cycle: payment requests are submitted on Day 1, the payment is processed on Day 2, and the funds move to the recipient’s account on Day 3. It has an extremely low cost per transaction and supports high-volume batch processing.

Bacs is ideal for predictable, scheduled payments that don’t require expedited speed. It’s best suited for business transactions where managing fees is the priority over immediacy, such as employers disbursing payroll and service providers collecting monthly fees.

CHAPS

CHAPS, which stands for Clearing House Automated Payment System, is the UK’s high-value, same-day payment system. It runs through the Bank of England’s Real-Time Gross Settlement system and was built to handle payments that are too large or too time-sensitive for the other schemes. CHAPS has no upper limit on transaction value, and funds settle on the same business day. It’s available only on business days during operating hours and typically carries a high fee per transfer.

CHAPS payments settle irrevocably and in real time. It’s well suited to property completions, large corporate payments, tax bills due on tight deadlines, and high-value treasury or interbank transfers. The cost and weekday-only availability mean most businesses use CHAPS selectively—only when the transaction amount or timing justifies it.

Faster Payments

Faster Payments is the UK’s 24/7 real-time payment network. Payments typically settle within seconds, and it’s always available—365 days a year, including weekends and holidays.

This scheme has a transaction limit of £1 million per payment (although some banks impose lower caps). It’s fairly affordable to use, typically costing more than Bacs but less than CHAPS.

Faster Payments is now the default for many day-to-day business and personal transactions. It’s used for numerous tasks, from paying contractors to refunding customers and transferring funds between accounts. It also provides the underlying infrastructure for many open banking use cases, such as pay-by-bank options.

How are the UK payment schemes different?

The UK’s three core payment schemes operate differently in terms of speed, cost, limits, and availability. Each one is designed for a specific kind of transaction. Here’s how they compare.

Speed and settlement times

Bacs follows a fixed cycle of three working days.

CHAPS settles payments on the same business day, usually within a few hours.

Faster Payments typically settles within seconds.

Availability

Bacs and CHAPS operate only during UK business hours. If you initiate a CHAPS transfer on Friday after close of business, the funds won’t move until Monday morning. Both schemes are also unavailable on bank holidays.

Faster Payments runs continuously: day or night, weekend or weekday. It’s the only UK scheme that’s open 24/7.

Transaction limits

CHAPS doesn’t have an official transaction limit; you can transfer millions of pounds, if necessary.

Banks impose their own caps on Bacs payments, usually between £50,000 and £250,000.

Faster Payments has a scheme-wide limit of £1 million per transaction, but banks can set their own lower limits as well. High-volume or highly trusted users might be approved for larger Faster Payments limits, but beyond a certain transaction amount, CHAPS is more commonly used.

Cost

Bacs is the lowest-cost option, which makes it ideal for high-volume scenarios such as payroll, direct debits, and supplier runs.

CHAPS is the most expensive of the three schemes. Banks typically charge a high fee per payment.

Faster Payments is a low-cost option, generally costing a little more than Bacs. It can be bundled for business accounts.

User experience and accessibility

Businesses can access the Bacs network through their banks, a Bacs-approved bureau, or a payments service provider (PSP). Stripe, for example, offers Bacs Direct Debit as a payment method.

CHAPS typically requires manual setup or a bank’s internal processes, which might include security checks or verbal confirmation.

Businesses can receive Faster Payments through their banks or a PSP via Pay by Bank methods. No special setup is required.

When should a business use CHAPS vs. Faster Payments?

Both CHAPS and Faster Payments are built for speed, but they’re designed with different needs in mind. Choosing the right one depends on how much money you’re moving and how quickly you need it moved. Here’s when to use each scheme.

CHAPS

• The payment amount exceeds Faster Payments’ scheme-wide cap of £1 million. If you’re sending £2 million to a supplier, you should use CHAPS.

• Timing is important. CHAPS guarantees same-day settlement as long as it’s sent before the bank’s cutoff time. This makes it ideal for time-sensitive payments such as property completions, large tax bills, and treasury moves.

• You want irrevocable settlement. Once a CHAPS payment clears, it’s final. That’s a key distinction when the stakes are high.

• You’re operating during standard UK business hours. CHAPS doesn’t run evenings, weekends, or holidays. If you miss the cutoff, the payment won’t be processed until the next working day.

Faster Payments

• The amount is within the limit and timing matters. Most everyday payments clear in seconds.

• You need to send money outside of banking hours. Faster Payments is always available, including on weekends, bank holidays, and after business hours.

• Cost is a factor. Faster Payments has a lower cost than CHAPS. If you’re making a dozen transfers per week and don’t need same-day finality, the fee differential adds up.

• The user experience matters. With Faster Payments, you can initiate transfers straight from UK online banking portals.

In practice, many businesses set rules: they send payments under £1 million via Faster Payments by default and reserve CHAPS for amounts Faster Payments can’t accommodate. Some companies build these rules directly into their finance systems to help staff route payments correctly and avoid delays or unnecessary fees.

How do settlement times and limits impact businesses?

Payment settlement times and transaction limits can affect everything from cash flow to the customer experience. The impact varies depending on your size, industry, and payment process setup, but these factors shape day-to-day decisions across the board.

Settlement timing directly affects liquidity, and fast settlement can reduce the need for short-term borrowing or reserves. Scheme limits, meanwhile, are mostly a constraint on outbound payments. They shape how you structure high-value transactions and whether you can use automation or need to send money manually.

Different sizes and types of businesses have different needs when it comes to payment timing and transaction size. Here’s how these factors typically affect payment decisions for different types of companies.

Small and medium-sized enterprises (SMEs)

Faster Payments’ settlement times and limits tend to be a good fit for SMEs.

Instant settlement via Faster Payments means SMEs can get paid and use that money the same day. Waiting three days for a Bacs payment can cause overdrafts or operational delays.

Faster Payments also allows SMEs to react in real time. If they need to pay a contractor on a Saturday night, the payment goes through in seconds. That helps small teams move faster and keep people paid without banking delays.

The £1 million cap isn’t a barrier for SMEs that don’t regularly move that much money in a single transaction. But a business might still exceed its bank’s internal limits, especially if its account is new or not on a business tier. It’s worth checking in advance to avoid getting stuck when a payment is urgent.

Ecommerce and platforms

Ecommerce businesses and platforms value Faster Payments’ quick settlement times and typically don’t struggle with the value cap.

Receiving payments via Faster Payments lets online businesses move quickly from order confirmation to fulfillment. This is particularly important when customers expect same-day shipping or instant refunds. On the payout side, platforms and marketplaces often use Faster Payments to disburse funds to sellers. Quicker access to money can mean better seller retention.

Limits are rarely an issue here. Most ecommerce payments fall well under the Faster Payments limit, and platform-level disbursements can be split into multiple payments, if needed.

Large enterprises

Big businesses rely on all three schemes, but they use each one strategically.

Bacs is still the go-to for high-volume, routine transactions such as payroll, batched vendor payments, and collecting direct debits. Its three-day cycle isn’t an obstacle so long as companies plan ahead. When speed or value becomes a factor, Faster Payments and CHAPS are used. Urgent supplier payments, client refunds, and end-of-day treasury transfers all demand faster settlement.

Enterprises usually have more direct bank integrations and formal payment controls. These allow them to automate around scheme limits by splitting payments, prescheduling CHAPS transactions, or routing large batches dynamically. But limits still matter. If a company is running a batch of 100 payments and 2 exceed the Faster Payments cap, those need separate CHAPS handling. Finance teams often build threshold rules into their enterprise resource planning (ERP) or treasury systems to make things easier.