How the three systems differ

The fastest way to compare the UK systems is to put them side by side on four questions. How fast is the credit, what is the value range, when does the system operate, and what does it cost. Faster Payments credits within seconds, works around the clock, and is free or very cheap for most customers, but it has a per transaction limit that varies by bank. CHAPS credits in real time during business hours, has no upper limit, and is expensive, with a fee per payment that the customer usually pays. BACS credits on the third working day, works on a file based cycle, has no practical value limit for direct credits, and is the cheapest of the three. An analyst who can state this comparison in one paragraph can answer any system selection question. Timing is where analysts most often make mistakes in the UK, because the words fast and same day mean different things on different systems. Faster Payments is fast in the sense that the beneficiary is credited within seconds at any hour. CHAPS is fast in the sense that the payment settles in real time, but only during business hours and only if it is submitted before the cut off. BACS is not fast at all. It is a three day cycle, and a file submitted on Monday is credited on Wednesday. A requirement that says fast payment must be translated into a specific system and a specific service level, or the development team will build the wrong thing. The analyst must ask the business what fast means: credited in seconds, settled today, or credited by Friday, and then choose the system that delivers that promise. Settlement is the second comparison, and it separates the three systems cleanly. CHAPS settles each payment individually in central bank money, in real time, with finality. Faster Payments credits the customer instantly but settles the net positions between banks at defined times during the day, in central bank money through the Bank of England. BACS settles in batches on the value date, three working days after submission. The finality follows the settlement: a CHAPS payment is final the moment the Bank of England moves the money, a Faster Payments payment is final for the customer when credited but the interbank settlement follows later, and a BACS payment is final on the value date when the debit and credit are applied. The analyst must state the finality for each system in the requirements, because a customer who assumes a BACS payment is final on submission will be disappointed. Value range is the third comparison. Faster Payments has a scheme limit of one million pounds per payment, and most banks set lower limits for their own customers. CHAPS has no upper limit and no lower limit in the system rules, and is used for payments from a few thousand pounds to hundreds of millions. BACS has no practical value limit for direct credits, and is used for payroll files worth millions of pounds in total, made up of hundreds of small payments. The analyst should not choose a system on value alone: a 50,000 pound payment can go through Faster Payments or CHAPS, and the choice depends on whether it must be final in central bank money today or simply credited today. Value is one input, not the decision. Operating hours are the fourth comparison. Faster Payments runs 24 hours a day, 7 days a week, including weekends and bank holidays. CHAPS runs on business days during extended hours, and a payment submitted after the cut off waits until the next business day. BACS runs on business days with a three day cycle, and a bank holiday inside the cycle extends it by a day. A payment that must move at midnight on a Sunday can only use Faster Payments. A payment that must settle in central bank money today can only use CHAPS, and only before the cut off. A payment that can wait three days can use BACS, and will be the cheapest. The analyst must build the calendar into the routing logic, so a payment instructed outside business hours is offered the system that is actually open. Cost is the fifth comparison, and it is the sum of three things. The per payment fee the customer pays is highest for CHAPS, often twenty to thirty five pounds, low or zero for Faster Payments, and bundled into a corporate service agreement for BACS. The liquidity cost is highest for CHAPS, because the sending bank must hold the full amount in its Bank of England settlement account, lower for Faster Payments, because only the net position settles, and lowest for BACS, because the settlement is batched and predictable. The operational cost is highest for BACS at scale, because files, ARUDD reports and indemnity claims need a team to process them, and lowest for Faster Payments, because most payments need no manual work. The analyst should present all three costs to the business, not just the fee. Cost and limits are not fixed forever, so the analyst should treat them as configuration rather than hard coding them into requirements. The Faster Payments limit has risen over time and may rise again. CHAPS fees vary by bank and by channel. BACS charges are usually bundled into a corporate service agreement. A good design stores the limits and the cut off times in a configuration table, shows the current limit to the customer before they type the amount, and gives a clear error when the amount is above the limit for the chosen system, including a suggestion to use another system. The same principle applies to cut off times. Show the cut off, warn the customer when they are close to it, and offer the alternative that will still meet the deadline. These small design decisions are what make a payment product feel reliable instead of frustrating. A decision matrix brings the comparison together. For a payment under the Faster Payments limit that must arrive today at any hour, choose Faster Payments. For a payment that must be final in central bank money today, choose CHAPS. For a payment that can wait three working days and is one of many, choose BACS. For a payment above the Faster Payments limit that must arrive today, choose CHAPS. For a payment that must move at the weekend, choose Faster Payments, because the other two are closed. For a payment that is one of a thousand in a file, choose BACS, because no other system can move a thousand payments that cheaply. The analyst who writes this matrix into the requirements document makes the system selection transparent and reviewable, which is exactly what a payments BA is expected to do.