Faster Payments is a UK banking initiative that enables mobile, internet, and telephone payments to move between customer accounts, usually within a few seconds. Almost all internet and telephone banking payments in the UK are processed through the Faster Payments Service (FPS).
In 2019 alone, the initiative processed 2.4 billion transactions worth £1.9 trillion. With 35 directly connected participant organizations and 400 financial institutions supporting the service, Faster Payments is available to more than 52 million current account holders in the UK.
Usually, Faster Payments arrive instantly but can take up to two hours, depending on the service provider. A real-time payment can be made and received 24/7, including bank holidays. Delays may occur if the other bank or building society is not a participant of the Faster Payments Service or if there is confusion over the sender’s identity and additional security checks are needed.
How Faster Payment works. Source: Faster Payments
It is possible to send up to £250 thousand using an FPS transfer, but individual banks and building societies may have their own thresholds and limitations in place for personal and corporate customers. For transfers over the limit, customers need to use Bacs.
Faster vs. Bacs payments
Bacs is an older UK payment system founded in 1968. Bacs payments are transferred directly from one bank account to another, usually taking three working days to clear. Organizations widely use Bacs payments as it allows them to transfer amounts over the £250 thousand faster payments limit.
How to connect Faster Payments
If you are considering providing real-time payments to your customers, Faster Payments Service outlines the following ways to connect:
Directly Connected Settling Participants (DCSPs) – connect directly into the Faster Payments Central Infrastructure to send and receive payments in real-time, 24 hours a day. DCSPs set their own transaction limits and perform their own settlement with the Bank of England.
Connecting to Faster Payments Service as a DCSP provides the fastest service, but it is limited to organizations that handle a high volume of payments and are eligible to open a settlement account at the Bank of England. This option requires a significant investment to build a direct gateway, hire technical experts to implement it, and adhere to initial and ongoing compliance obligations.
Directly Connected Non-Settling Participants (DCNSPs) – connect directly into the Faster Payments Central Infrastructure via a sponsoring Participant that performs Bank of England settlement on the PSP’s behalf.
Companies that are not eligible to open a settlement account at the Bank of England can connect as a DCNSP, but most transactions will take from seconds to several hours because of additional relays. Companies operating as DCNSPs report high transaction costs and more outages as directly connected participants are prioritized.
Indirect Agency – This option enables a PSP to connect to Faster Payments via a sponsoring Participant, which manages the direct connection on its behalf. Sponsoring Participants provide various options to send and receive Faster Payments, and also perform Bank of England Settlement on the Indirect Agency PSP’s behalf. This option is beneficial for PSPs that find a direct connection is not commercially viable.
FinTechs, smaller banks, and institutions can use the Indirect Agency model to access Faster Payments with APIs without the need for scheme approval. This option provides real-time payments without sacrificing speed and resources.
With a quality core payments software provider and the Indirect Agency model, financial institutions can connect to the Faster Payments Service without long and costly development cycles. SDK.finance, a global core payments software provider, enables companies of all sizes to launch their real-time payment products with ease.
Contact the SDK.finance team directly to learn more about what type of banking software will be perfect for your business needs.