What is Bacs?

Bacs Payment Schemes is the UK authority for the clearing and settlement of automated payments through Direct Debit and Direct Debit. Bacs is their system for processing payments.

Bacs is the most popular method for UK businesses to send and receive payments. An electronic network operated by the 16 major UK clearing banks and building societies, Bacs is the cheapest and most efficient way to transfer recurring payments from customer to service provider.

Bacs is responsible for two of the most popular payment methods used by businesses: Direct Credit and Direct Debit.

Direct Debit

Direct Debit is the most common payment method for collecting recurring payments like memberships and subscriptions, bills and charitable donations. It is the third most popular payment method in the UK behind cash and cards. 9 out of 10 people with a bank account have at least one Direct Debit.

Direct Debit is far cheaper and easier to manage than standing orders, recurring card payments and other payment methods.

Direct Debit Guarantee

Businesses that collect Direct Debit payments are subject to the Direct Debit Guarantee. This makes Direct Debit one of the safest payment methods available. The Direct Debit Guarantee acts as a safeguard for customers, reducing the risk of mis-payments and compensating them immediately when problems occur.

Direct Credit

Bacs Direct Credit is used by organisations across the UK to send regular, secure and efficient electronic payments. This includes salaries, pensions, benefits and tax credits. Almost 90% of the UK workforce receives their wage through Direct Credit.

Direct Credit carries three primary benefits:

1It’s significantly cheaper and much safer than cash handling or sending cheques
2It reduces the burden of administration compared with other payment methods. Direct Credit is simple to prepare and incredibly quick to process, saving your in-house team time and money
3It’s significantly cheaper and much safer than cash handling or sending cheques

How long does a Bacs payment take to process?

Bacs processing works on a three-day cycle, starting from the submission of a payment and ending at the point of entry into the service provider’s account. This takes place in three stages.

Day 1 – input

Payment requests must be submitted to Bacs between 7:00am and 10:30pm. This info is dispatched to recipient banks overnight

Day 2 – processing

Data is then processed, and the bank prepares to respond as necessary – generally, the response will be debiting a customer’s account or, occasionally, refusing the payment.

Day 3 – entry

Accepted payments are debited from the payer’s bank account and credited into the merchant’s account.

Those looking for a faster way to transfer money can use the Clearing House Automated Payment System (CHAPS) as an alternative to Bacs. CHAPS offers high value bank-to-bank transfers and same-day payment is guaranteed.

CHAPS payments are substantially more expensive than Bacs, with transactions costing anything from £15 to £35 per payment. It is also not available at all banks, and in this instance, you would be required to use Bacs.

About DFC

At DFC, we offer a full service approach to collecting Direct Debit membership payments for gyms, leisure centres and other health & fitness operators.

We are focused on making running your business easier. Reducing time spent on admin work, and helping you take control of your entire member journey to increase retention and revenue.

DFC is brought to you by Xplor, the first global platform integrating software, payments, and commerce-enabling services to help businesses thrive.

Click here to get in touch today to find out how we can help your business.

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