When it comes to paying your employees, UK businesses have several solid options: bins and faster payments.
Although both transfer money from one account to another, Bacs and Faster Payments work very differently, and choosing the right one can make a real difference to security, administration time and cash flow.
This begs the question: what is the difference between them and which is the best option for your business?
Let’s break it down.
What are BACS payments?
The banks’ automated clearing system, also known as Bacs, has been the backbone of payroll in the UK for decades.
Simply put, a Bacs payment is a digital method used to transfer money between different bank accounts – this includes transactions such as payroll processing, direct debits and payments to creditors.
Bacs offers a reliable and cost-effective option, designed to handle large volumes of batch payments.
However, Bacs is a ‘closed system’: to use it directly, your bank must issue you with a 6-digit Service User Number (SUN), which usually requires a specific turnover and a clean credit history.
The payment process for Bacs
Bacs payments are processed on a rigid three-day cycle:
- Day 1: you submit the payment file to your bank
- Day 2: the payment is processed by BACS (the money leaves your available balance that day, even if the recipient has not yet received it)
- Day 3: the money arrives in the recipient’s bank account
Because of this three-day cycle, BACS is ideal for regular, non-urgent payments, such as monthly payroll, direct debit collection and paying suppliers.
How much does Bacs cost?
Bacs’ ability to handle bulk payments makes it extremely cost-effective, with transaction fees often amounting to just a few cents.
With Bacs, the price per transaction typically ranges from 5p to 50p.
However, don’t forget the ‘hidden’ costs of Bacs: you often have to pay for Bacs-approved software licenses or use a Bacs-approved office, and if you make a mistake, application rejection fees can cost between £50 and £100 per incident.
Presentation of the bac
In summary, Bacs is the traditional payroll option for many businesses, taking a “slow and steady” approach.
- Speed: takes 3 business days to arrive
- Cost: low fees per transaction (5p – 50p)
- Availability: Monday to Friday only – no weekends or holidays
- Flexibility: requires 3 days notice (can be called back)
- Volume: perfect for big prizes and high value amounts
- Ideal for: regular monthly paychecks where cost matters more than speed
What are faster payments?
As the name suggests, Faster Payments is the fastest alternative to Bacs, offering instant transactions.
Faster payments are perfect for time-sensitive transactions, such as:
- Pay last minute supplier invoices
- Correct a payroll error
- Pay a newcomer who joined your team after your main pay cycle
The goal of Faster Payments is to ensure that critical payments can be made and received without the delay associated with Bacs.
Note: the use of a faster payments platform that usesConfirmation of Beneficiary (CoP) to verify that the name you entered matches the name of the bank account holder.
How long do faster payments take?
Faster payments were designed for the digital age: they let you send money that arrives almost instantly, usually within seconds.
The service also operates 24 hours a day, 365 days a year, including weekends and public holidays.
How much do faster payments cost?
The flexibility associated with faster payments comes with increased cost.
With faster payments, the price per transaction typically ranges from 30p to £2.50.
Overview of faster payments
Faster Payments takes a modern approach, offering much more flexibility but at a higher cost.
- Speed:up to 2 hours, but usually arrives within seconds
- Cost:higher cost per transaction (30p – £2.50)
- Availability: 24/7, 365 days a year
- Flexibility:instant check – pay the day it’s due
- Volume:best for small batches or flexible on-demand payments, up to £1,000,000 per transfer
- Ideal for:weekly salary, expenses, or last-minute emergency payments
Bacs vs Faster Payments: the main differences
When it comes to Bacs vs Faster Payments, the main considerations come down to four key factors: speed, cost, availability and flexibility.
Speed
Speed is the biggest distinction.
BACS payments take three working days to clear, while faster payments are almost instant.
If you need money to move quickly, Faster Payments is the clear winner.
For scheduled payments, where timing is not critical, the three-day BACS cycle is perfectly adequate.
Cost
At first glance, Bacs is the most economical option, especially for bulk transactions, with the cost per payment being much lower.
Faster payments, being a premium service, come with higher transaction fees.
For a one-time urgent payment, the cost is often worth it, but for a large monthly payroll, these additional fees can add up quickly.
However, for many SMEs, the “list price” of the Bins does not tell the whole story: to use the Bins effectively, it is often necessary to take into account the “hidden” overhead costs.
Availability
BACS only works on working days – this means that if you submit a payment on a Friday, it will not arrive until the following Tuesday.
Public holidays also add to the Bacs delay.
However, Faster Payments operates 24 hours a day, every day of the year.
Flexibility
Although the three-day BACS cycle gives you a window to recall a payment if you detect an error before it is processed, you are still limited to its inflexibility.
In contrast, while faster payments are irreversible once sent, Instant Transfer provides more general flexibility when it comes to sending payments.
Infographic: Bins vs. faster payments
To help you visualize the differences in a simple format, we’ve put together this handy infographic, offering a quick overview of how Bacs and Faster Payments compare.
Which payment method suits you best?
There is no single “best” option when it comes to bins and faster payments.
The right choice depends entirely on your specific needs.
Choose Bins if:
- You process large volumes of payments, such as monthly payroll
- Your payments are scheduled in advance and are not urgent
- Keeping costs to a minimum is your top priority
- You have a SUN issued by a bank
Choose Faster payments if:
- You need to make urgent or last minute payments
- You manage weekly payroll or pay staff according to flexible schedules
- You appreciate the ability to make payments outside of normal bank opening hours.
- You have no SUN
Many businesses find that using a combination of the two services works best, using BACS for their predictable bulk payments and retaining Faster Payments as a tool for emergencies and time-sensitive transactions.
Partnership with Telleroo
By understanding the strengths of Bacs and faster payments, you can make an informed decision and choose the right option for your specific scenario.
At IRIS, we understand the importance of payroll – given it covers 1 in 6 people in the UK workforce – which is why we have now teamed up with Telleroo to offer our customers faster payments.
Learn more about our partnership and the options available here.
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