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What is a Bacs payment?

A Bacs payment is an electronic transfer of funds from one UK bank account to another.

Bacs payment is one of the most common bank-to-bank transfers in the UK. 

What is the meaning of Bacs?

Bacs stands for 'Bankers Automated Clearing Services’. Bacs payment services are operated and managed by Bacs Payment Schemes Limited, a membership organisation consisting of 16 of the UK's leading banks. In 2020 there were 4.5 billion payments made by Direct Debit and almost 2 billion Direct Credit payments.

Alongside this, you can also make bank-to-bank payments through Faster Payments and CHAPS. Faster Payments allow for near real-time payments between bank accounts in the UK. Meanwhile, CHAPS is a same-day payment method for high-value transactions (e.g., for buying property).

Types of Bacs Payments

There are two main types of Bacs payment; Direct Credit and Direct Debit.

  • Bacs Direct Credit is a 'push' payment where your customer deposits the money in your account. 

The payer controls push payments, both how much is paid and when it is paid.

  • Bacs Direct Debit allows your business to 'pull' money from a customer's bank account. 

With Direct Debit, you, the payee, control how much and exactly when you pull funds from the customer account.

 

Bacs Direct Credit Payments

Bacs Direct Credit (also known as “bank transfer”) is a secure service enabling organisations to make payments directly into another bank or building society account.

What is a Bacs Direct Credit used for?

Bacs Direct Credit is one of the most popular ways for UK businesses to make payments. It's typically used to make regular payments such as salaries, pensions, state benefits, and tax credits. There are about 2.1 billion Bacs Direct Credit payments made in the UK each year. 

Bacs Direct Credit is available to any business with a UK bank account.

Unlike Direct Debit, Direct Credit is a push-based payment method. So ultimately, you are relying on the payer to action the payment on time.

Bacs Direct Debit Payments

If you are looking for the most effective way to accept payments in your business, then Bacs Direct Debit may be the best option for you. It's a simple and cost-effective way to make recurring (and one-off) payments where same-day payment isn't required.

Direct Debit makes sense for business owners because it is a 'pull' payment. With pull payments, you control when you get paid, saving you the time and stress of dealing with and chasing late payments.

"GoCardless gives us control over when we get paid and takes away the uncomfortable conversations about money." - Steve Leighton, Founder, Has Bean Coffee

What is Direct Debit?

A Direct Debit is an instruction from a customer to their bank authorising your business to collect payments from their account.

A customer gives this authorisation by completing a Direct Debit Mandate form – this can be a paper form or a web page that they complete online. 

Once authorised, your business can automatically take payments from the customer without waiting for them to take action.

Direct Debit is the safest way of making payments in the UK as the Direct Debit Guarantee protects customers from fraudulent payments.

Direct Debit has traditionally been seen as a payment method only available to large corporations. However, with the advent of Direct Debit providers such as GoCardless, organisations of any size can now benefit from the advantages of taking Direct Debit payments. 

 

Now Small Businesses Can Enjoy the Benefits of Direct Debit Just Like Larger Brands

Direct Debit is easy for small businesses to set up with GoCardless. You control when you get paid and can automate recurring collection to ensure late payments are a thing of the past. Save valuable time, improve cash flow, and reduce stress with GoCardless.

"Customers paying invoices up to 4 months late drove us crazy. Now we can automatically take payment when issuing invoices." - Steve Leighton, Founder, Has Bean Coffee

"Our clients like that they don’t have to schedule payments against our invoices – it’s one less task they have to do." - George Ford, Director, Veriphy

Sign up for free today and enjoy the same business-boosting benefits of Direct Debit as larger brands do! 

 

Business Advantages of Bacs Direct Debit

  • Direct Debits enjoy a lower cost per transaction than credit and debit cards.
  • Great for recurring payments. Once you have a Direct Debit in place, you can enjoy peace of mind knowing that you will automatically be paid every month. 
  • With the Direct Debit Guarantee, customers are protected against payments made in error or fraudulently. 
  • Significantly reduces failed payments, as, unlike credit and debit cards, Direct Debits cannot be stolen, lost, or expired.
  • The success rate of Direct Debit payments is 95-100%, compared to just 80-95% for cards.

 

How do you make a Bacs payment?

Bacs Direct Credit

Your bank allows you to credit another account using either your personal or your business banking service. 

You'll need the name of the payee, the name of their bank, the payee's bank account number, and sort code. You will need the details for the account from which you are sending the money.

Bacs Direct Debit

With Bacs Direct Debit, your customer authorises you to take payments from their bank account. 

You'll need the name of the payee, the name of their bank, the payee's bank account number, and sort code.

If your business wants to collect Direct Debit payments, there are three methods you can choose from:

  1. You can use the Bacs approved Bacstel-IP software to set up direct access via a bank.
  2. You can use a Bacs-approved bureau.
  3. You can use a third-party provider, such as GoCardless, to simplify and automate the process for you. Click here to learn more.

If you'd like to learn more about each of these options, you may find our guide to accessing Direct Debit helpful.

How much does a Bacs Direct Debit cost?

Bacs Direct Debit is one of the cheapest ways to collect payments. However, setting up Direct Debit directly with your bank, you'll need to invest in Bacs-approved software, which significantly adds to the cost.

Equally, taking Direct Debit payments via a bureau will probably include a fee to cover the software costs. So it can work out cheaper to go with a Direct Debit platform instead. Here's what you can expect to pay with each Direct Debit option:

  • Via a bank: setup fees = £5,000 (+ costs of Bacs-approved software, typically £2495+). You will also have to pay transaction fees, ranging from between 5p - 50p + additional fees charged by banks.
  • Via a Bacs approved bureau: setup = £400 - £800; transaction costs = 20p - 50p + monthly fees, submission fees, new mandate fees and penalty fees.
  • Via GoCardless: We offer different packages depending on your business needs. With our standard package, we only charge on your transactions: 1% + 20p per transaction, capped at £4. Click here to learn more.

 

How long does a Bacs payment take?

A Bacs payment takes 3 working days to be available in your bank account. 

A common question asked is: are Bacs payments instant?

Neither Bacs Direct Credit nor Bacs Direct Debit payments are instant, they work on a three-day cycle, taking three working days to clear. 

Payments are submitted to Bacs on the first day, processed by the banks on the second day, and simultaneously taken from the sender account and credited to the recipient account on the third day.

With the Faster Payments Service, payments typically take fewer than 2 hours.

 

GoCardless and Bacs

GoCardless allows organisations of all sizes - from one-man bands to larger businesses - to collect Bacs Direct Debit payments without the hassle or the cost traditionally associated with Direct Debit. Set up is free and takes just a few minutes. 

GoCardless is a Bacs-approved platform that provides a low-cost and simple way to collect online Direct Debit payments. You can access GoCardless via more than 200 third-party platforms, including all the leading accounting software providers. Alternatively, you collect Direct Debit payments by using GoCardless directly.

Our competitive pricing makes GoCardless an incredibly cost-effective way of collecting recurring payments. Current users include Funding Circle, PieMinister, The Foundation of Hearts, and Crowdcube, along with 70,000 other businesses.

Say goodbye to expensive transaction fees and late payments with Bacs Direct Debit through GoCardless. It is quick and easy to set up and gets you paid on time, every time.

"GoCardless is a 10 out of 10 solution. The team is always so helpful and responsive." -Diego Passarela, Head of Billing & Payments, Quandoo