The Financial Side Of MasLife - Transfers 

 

 

You may have gathered that we are really (really!) into mindfulness, meditation and wellbeing. But let's now focus on the serious stuff - the financial side of MasLife, let’s start with transfers.

 

Within the United Kingdom, there are three types of bank transfers: BACS, CHAPS and Faster Payments. 

 

Lets start with BACS:

BACS is an electronic system used to make bank to bank transfers. Founded in 1968, it is now the standard payment method throughout the UK, handling more than 130 billion transactions since its launch and an average of 100 million transactions per day. Businesses primarily use BACS to pay employees and suppliers, whilst the UK government pays welfare and pension payments through BACS too. One of the major limitations of BACS is the time it takes to process the transactions. Payments clear in three days – meaning that BACS may not be the best option for time-sensitive transactions.

There are two main types of BACS payments:

Direct Debit - A party has been given permission to withdraw money from the bank account of another party Eg. Utility Bills 

Direct Credit - A party deposits money into another party’s bank account Eg. A Salary Payment 

 

 

BACS Transfer Times 

Despite the fact that BACS payments are not instant (or same-day) payments, it is still the most popular bank-to-bank transfer method used by UK businesses. From start to finish, a BACS transfer time usually takes three days. On day 1: the payment is submitted. Day 2: the file is delivered to the recipient bank and Day 3: the payment is settled. BACS payments can also only be sent and received on business days (Monday to Friday).

Charges

BACS payments are one of the cheapest ways to send payments in the UK. It usually only costs a few pennies (depending on the volume of payments and the bank) and it doesn’t cost anything to receive a BACS payment. 

 

 

What about CHAPS?

CHAPS, or the Clearing House Automated Payment System, is a same day bank-to-bank transfer system for high-value and/or time-critical transactions. Like BACS, it is used within the UK for transactions in sterling.

Where BACS is reputed primarily for the ease of regular transfers and for the low cost of its transactions, CHAPS is usually used for large, one-off payments. This is because transactions are relatively expensive, at a cost of £25-£35 each, depending on the bank.

Transactions through CHAPS should be of a sum larger than £10,000. However, there is no upper limit. So for large companies or financial institutions making one off payments, it is the system of choice. Individuals who are making payments that are time sensitive – such as buying a car or paying a deposit for a house – usually use CHAPS too.

Where BACS payments take 3 days to clear, CHAPS transactions take only a matter of hours (the payment should be received on the day it’s made). However, this depends on the transfer time meeting the deadline set by the individual bank, many often take requests for CHAPS payments no later than 3pm.

 

 

How about Faster Payments?

Faster Payments is an electronic payment system which aims to process the majority of domestic, low-value bank transfers in under two hours. Usually, however, these payments are processed instantly with the payment being almost immediately visible in the recipient’s account moments after sending (But it is worth noting that there is no sure guarantee that they will be cleared on the same day). In some instances, banks can hold onto funds that have been transferred for a couple of days. This is particularly true for abnormal or large transactions to reduce the possibility of fraud and to ensure that the transaction was intended by the payer.

Faster Payments was introduced to reduce the time it takes for transfers to clear as previously, all transactions were processed by BACS. Transfers made through personal banking apps like MasLife, or online banking are powered by this UK service. 

Unlike BACS, the Faster Payments system runs 24/7, 365 days a year, including public holidays. Some banks, however, do have a cut off time for Faster Payments, meaning anything sent after that time will only go through the following day.

 

Lets compare all three:

 

BACS

CHAPS

FASTER PAYMENTS 

What for?

UK payments to and from bank accounts. Eg: Direct Debits & Salaries

High-value and/or time-critical transactions

To make transfers of small amounts quickly 

How Much?

Very low cost — often free

Relatively expensive, at a cost of £25-£35 each, depending on the bank.

 

More expensive than BACS, but still low cost. (many banks waive the associated fee)

How Long?

3 working days.

A matter of hours (payment should be received on the day it’s made)

 

Within seconds (but can take up to 3 hours)

 

 

 

What about International Transfers?

 

International bank transfers are usually processed by SWIFT or SEPA. 

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is an international initiative that aimed to speed up the transfer time of international transactions. You can generally expect sums to appear in a recipient’s account in 1-3 days. However, in some circumstances, it can take as long as 10 – depending on which countries the transactions involve and the type of normal activity on your account.

Meanwhile, SEPA (Single Euro Payments Area) is a payment-integration initiative of the European Union that aims to simplify bank transfers denominated in euro. These international bank transfers usually take only a day to reach the account of the recipient.

 

 

Why can’t all transfers just be instant?

 

In a world in which everything seems to be so fast paced and instant, it can be a little perplexing that bank transfers are not. Rather, we can (frustratingly) end up waiting for days for an electronic transaction to be processed. Why is this?

Generally, there has been a massive international push to speed up transfer times, however, that drive has been met with two obstacles:

Firstly, to track and counter possible fraudulent transactions, payments need to be slowed down. The faster transactions move, the greater chance that fraudulent or other scam transactions can go unnoticed. Banks sometimes deliberately slow down the speed of transactions whilst they are checked.

Secondly, in the case of international transactions, further global integration is needed to smoothen delays. Whilst relatively recent tools such as BICs provide standardised codes, different banking systems have different rules and inevitably, this slows things down.

We hope that this overview of transfers has given some clarity on how transactions work. MasLife uses the Faster Payments service, aiming to provide the quickest possible transfer time for our users. Head back to the blog homepage to find out more on the financial side of MasLife. 

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