Resources
Welcome to the Fondy knowledge hub
If there’s a topic we’ve missed, let us know, and we will be happy to dive into it.
- What are split payments, and how do they work on Flow Payments?
- The gig economy’s impact on traditional industries
- Integrating electronic health records with payment systems: advancing efficiency in MedTech billing
- The crucial role of payments in empowering gig platforms
- An introduction to recurring payments
- What is the Faster Payments Service (FPS)?
- A guide to eCommerce split payments
- A guide to instant and global payouts
- What is the SEPA payment method?
- What are quick payments in one click?
- What are cross-border payments?
- What is a payment link?
- What are open banking payments?
What is the Faster Payments Service (FPS)?
Need information about using Faster Payments? Look no further. Discover all you need to know, including:
- The meaning of Faster Payments
- The creation of Faster Payments
- The advantages of the Faster Payments Systems
- The drawbacks of the Faster Payments Service
- Which banks and financial companies can process Faster Payments?
- The types of Faster Payments available with banks
What are Faster Payments?
The Faster Payments Service or System (or simply Faster Payments or FPS scheme or FPS Payments) are electronic, digital, or online financial bank transfers that enable the transmission of payment messages and, subsequently, the availability of funds and money to the recipient instantaneously or in near-real time, at any time of the day.
Faster Payments were created in the UK banking ecosystem in 2008 to reduce payment times to as near to real-time as possible. Historically, older payment systems and schemes like BACS, CHAPS, and SWIFT would take up to three days long, sometimes more, for banks to complete, making account-to-account payments slow, expensive, and, above all, inconvenient.
But while older payment schemes like BACS are still in use for larger bank account payments, Faster Payments are focused on a much larger number of smaller bank payments and checks.
However, it’s worth noting that “smaller payments” under the Faster Payments System mean any online, mobile, or via telephone banking code transactions of up to £1 million. While this might not be of benefit to individual bank account holders, this payment high watermark is a boon for merchants and entrepreneurs of marketplaces, platforms, and various types of small business accounts.
What are the benefits of the Faster Payments Service for individuals and businesses?
Some of the main advantages of the Faster Payments banking System include:
Speed
Most FPS transactions settle in seconds. In the slowest instances, payments can sometimes take around two hours long to check and process with both bank accounts.
Cost-effectiveness
Most banks and financial institutions waive the charges and fees for FPS bank transactions. Where there is a fee, it’s normally a nominal one.
High payment limits
The Faster Payments System network has a £1 million limit on single transactions, which is ideal for a high frequency of smaller account business payments.
Anytime accessibility
Faster Payment System transfers can be processed at any time of day, including after banks and financial institutions have closed and on bank or public holidays.
How does the Faster Payments System work?
If you’ve sent money from one UK bank account to another bank in the UK, you probably sent the payment via BACS, CHAPS, or the Faster Payments Service (FPS). But there’s no little difference for the sender when FPS is used, except for the speed at which the funds arrive or settle.
That’s because Faster Payments work via the same methods, codes, and security checks you would normally use to make a typical UK bank transfer, be it through a banking app, online banking portal, or making the transfer in-branch at your local bank.
With Fondy, everyone from marketplaces to platforms and merchants to consumers can benefit from access to the Faster Payments Service thanks to Fondy’s partnership with ClearBank.
If you need access to the fully regulated UK banking infrastructure and service, ClearBank offers financial institutions just that with their custom API code. That way, businesses can focus on providing the best service for their current and incoming customers.
Limitations of the Faster Payments Service
Although the Faster Payments Service is an easy way to transfer funds, there are some pitfalls to using the system, including:
Irreversible payments
As most Faster Payments settle almost instantly, there’s no immediate way to reverse a payment if you make an error, unlike using a CHAPS or BACS transfer. However, this might work out as a good way to prevent chargebacks.
Lower transaction limits
Although the FPS advertises a £1 million transaction limit, some UK banks and financial companies set their own lower daily and individual transaction limits. In cases like this, you’ll need to use the BACS, CHAPS, or SWIFT payment system to set larger limits.
International restrictions
The Faster Payments Service works best for domestic UK bank transfers but not international payments where Faster Payments aren’t available. A good payment service provider will revert to overseas networks like SWIFT and BACS.
How many banks can receive Faster Payments?
Around 40 banks, building societies, and financial providers use Faster Payments in the UK. As the Faster Payments System is a type of bank transfer and the two terms are often used interchangeably, almost any bank in the UK can take Faster Payments either directly or via a third party.
Many banks, building societies, and financial services, such as HSBC UK, The Access Bank UK, and The Turkish Bank UK, are direct participants of the Faster Payments Service, which means that these connect directly to the service. For other banks and financial services, they’ll need a third-party partner or API code to accept the FPS.
The different types of Faster Payments
Faster Payments take the form of many types of account-to-account (A2A) payments. The most common types of Faster Payments Services include:
- Single immediate payments – these are usually unique one-off outgoing payments that can be made online, over the phone, or in person.
- Direct corporate access payments – a feature for business customers that enables mass files of payment messages to be sent directly to the FPS network. Not all Faster Payment participants, i.e., banks and financial providers, work using direct corporate access but will usually provide alternatives for their business clients.
- Standing orders – just like regular standing orders (STOs) that pay a predetermined amount to the same recipient on regular dates, such as rent or UK tax returns.
- Forward-dated payments – work like STOs, but are one-off in nature. For example, you can set up a forward-dated payment to pay a deposit in an account for a house on a pre-arranged date and time.
How much does it cost to use Faster Payments?
The Faster Payments Service isn’t free, but nearly every bank waives the cost for personal bank transactions. For merchants, marketplaces, and platform owners, a nominal fee is usually attached for business account transfers. The fee is usually included in the price of using a payment service provider like Fondy or directly with a bank service.
As Faster Payments are primarily used to send money from one bank account to another bank account, they offer a fast, cost-effective, and simple way to transfer money and checks online 24/7.