SWIFT, SEPA, BACS, CHAPS and Faster Payments: what’s the difference?

Unless you are a financial industry professional or a business owner with lots of international payments experience, the terms SWIFT, SEPA, BACS, CHAPS and Faster Payments are probably new to you. These abbreviations are only some of the dozens of electronic funds transfer systems used by banks for moving money from one account to another.

In fact, all of the banks and financial institutions are members of different domestic and international payment networks that allow them to exchange requests for the transmission of funds. These standardised measures were introduced to make payments quicker, more efficient and secure.

In this article, we take a closer look at the schemes used for GBP, EUR and international multicurrency transactions.

Bacs payments

Bacs (abbreviated from Bankers Automated Clearing Services) is a UK bank-to-bank payment method that has been in use since the late sixties. Back then it was an innovation, a much speedier solution to transfer money than cheques that were commonly used over that time period. This novelty was quickly adopted by local banks and building societies.

Although nowadays there are other quicker ways to wire payments between British banks, Bacs remains a very popular payment scheme and is still one of the cheapest.

Bacs payments are divided into two services – Direct Debit and Direct Credit. The former is used for regular payments (e.g. utility bills or subscriptions where the money is pulled from the bank account on a specific day) while the latter is mainly used for outgoing payments such as salary payouts, insurance settlements, pensions, etc.

CHAPS payments

CHAPS (abbreviated from Clearing House Automated Payment System) is another payment method used in the United Kingdom that was created for the quick movement of high-value payments in pounds sterling to businesses. There used to be a minimum limit of £10,000 per transaction, however, this rule does not apply anymore.

CHAPS system is mostly used for one-off urgent payments – these are often important business deals or payments to solicitors on behalf of individuals purchasing houses or cars. On the pros side, funds sent through CHAPS get immediately reviewed and land into the recipient's account on the same day. On the cons side, it is currently the most expensive of local payment methods in the UK.

Faster Payments

Launched just fifteen years ago, Faster Payments is currently the most progressive local payment method in the UK. These payments can be considered the best option in terms of cost and speed and are used ubiquitously both by individuals and businesses. Faster Payments are processed within seconds to two hours.

The Faster Payments limit is £1,000,000 per transaction, however, individual banks can set their own, lower limits for transactions. You can check direct Faster Payments scheme participants and their limits here.

The maximum single transaction amount that can be sent through MultiPass via Faster Payments is £1,000,000.

SEPA payments

Moving on to other countries now.

SEPA (abbreviated from Single Euro Payments Area) is a payment scheme used for cheap and quick local bank-to-bank transfers in euro across Europe. SEPA region extends beyond just European Union and also includes several other non-EU countries. Although the UK has officially left the European Union in 2020, it still remains a member of SEPA.

SEPA network is unique in a way as although technically it connects over 30 different nations, these payments can be perceived as domestic – there is no difference in terms of speed or cost. So whether you are a French business paying your local broadband provider or a Finnish company ordering business supplies from Germany, the payments will be treated identically.

Standard SEPA payment is usually delivered within a day while SEPA Instant, just as the name implies, is performed in seconds, 24/7. Instant euro payments are only available if both sender and recipient banks are members of the SEPA Instant network which has not been adopted by all European financial institutions yet.

TARGET2 payments

TARGET2 (abbreviated from Trans-European Automated Real-time Gross Settlement Express Transfer) is another payment scheme for transfers in euro. It is primarily used for large and high-volume settlements between the banks and, unlike SEPA, is available not only within Europe but worldwide as well. The payment processing time is quick, taking from just seconds to several minutes.

SWIFT payments

SWIFT (abbreviated from Society for Worldwide Interbank Financial Telecommunications) is the most popular payment network in the world. Unlike all previously mentioned payment methods, SWIFT is just a payment execution channel used by banks to communicate. For example, all CHAPS and TARGET2 payments are sent through the SWIFT messaging network. It is also the go-to network for transmitting cross-border payments in multiple currencies for both business and private needs.

Due to its international nature, SWIFT processing is the lengthiest and often can take up to 7 days to get to the recipient, passing several intermediary banks on their way. It can also be quite expensive. We've made a separate article on SWIFT where you can learn about it in more detail.

We know how quick and reliable payment delivery is important for international business, so we strive to do our best for our customers – 98% of payments sent via SWIFT at MultiPass are performed in under 48 hours.

What is the difference between these payment methods?

Let's take a closer look at the payment methods used in Great Britain. How does one compare to another? They all have their unique benefits, so it's good to understand which is best suited for your payment needs.

CHAPS vs Faster Payments

With both of these payment methods, your money will be delivered on the same day. You can use Faster Payments for all your personal and business needs for free or a low fee as long as the transfer amount is under £1m. CHAPS payments are more expensive and are suitable for high-value time-sensitive payments.

CHAPS vs Bacs

These payment methods differ not only in terms of cost and speed but also intended use. Bacs are cheap but slow; CHAPS are much more expensive but guarantee same-day delivery. Bacs payments are predominantly used for payroll while CHAPS is used for one-off business deals that involve transferring significant amounts of funds.

Bacs vs Faster Payments

Both payment methods are inexpensive, however, Faster Payments offers a much faster round-the-clock transaction service and broader applicability, and is universally used in both personal and corporate banking.

How much do these payments cost?

The payment fees can differ significantly depending on your bank's pricing strategy, payment size, urgency, whether this payment is personal or corporate, local or international. In case you are sending a payment in a foreign currency, you will be additionally charged for currency conversion – it will appear as a fixed fee or will be included as a markup on the FX rate.

We've made a simple cost comparison table to give you an idea of the price range you could expect:

*The table only provides an approximate guideline of the costs based on publicly available pricing data of several UK and EU-based banks and payment institutions. Real pricing will vary depending on the payment provider and may include additional charges.

How long do these payments take?

SWIFT international payments are usually the lengthiest while local payment methods are much quicker, often being completed instantly or within a day. To compare SWIFT, Bacs, CHAPS, Faster Payments and other payment processing times, follow the link to this article.

MultiPass for simpler cross-border payments

Having a choice of different settlement methods is imperative for any company with international business relations. Transacting overseas using domestic payment methods just like local companies allows businesses to cut operational costs and avoid excessive FX charges applied by the banks for foreign currency settlements.

At MultiPass we empower our business customers to transact worldwide via global and local payment rails in over 70 currencies. Explore our homepage for more information or contact us for a free consultation.