Faster Payments Service
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The Faster Payments Service (FPS) is a United Kingdom
banking A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...
initiative to reduce payment times between different banks' customer accounts to typically a few seconds, from the three working days that transfers usually take using the long-established BACS system. CHAPS, which was introduced in 1984, provides a limited faster-than-BACS service (by close of business that day) for "high value" transactions, while FPS is focused on the much larger number of smaller payments, subject to limits set by the individual banks, with some allowing Faster Payments of up to £1million. Transfer time, while expected to be short, is not guaranteed, nor is it guaranteed that the receiving institution will immediately credit the payee's account.Barclays Bank, Faster Payments FAQ
/ref> Nine banks and one
building society A building society is a financial institution owned by its members as a mutual organization. Building societies offer banking and related financial services, especially savings and mortgage lending. Building societies exist in the United Kingd ...
, accounting for about 95% of payments traffic, initially committed to use the service; there were 21 direct participants.Faster Payments: Directly Connected Participants
/ref> For smaller organisations such as building societies and savings institutions, the service is available through agency arrangements with a direct participant. Initially, there were few announcements regarding charges for Faster Payments; it had been expected to be around £1–£5 for immediate payments by business users. No retail bank currently charges personal customers for this service (with non-guaranteed transfer time), nor, , was there any sign that this would change. FPS was officially launched on 27 May 2008 (though testing during the previous week allowed users to process very small-value (1p) transactions as "faster payments") for non-scheduled, "immediate" payments (about 5% of traffic) only, with access for future-dated payments and standing orders from 6 June. In practice, the service was severely limited by the approach of individual member banks to its adoption (see
Implementation Implementation is the realization of an application, or execution of a plan, idea, model, design, specification, standard, algorithm, or policy. Industry-specific definitions Computer science In computer science, an implementation is a real ...
). A general online sort code checker was made available through
APACS The UK Payments Administration Ltd (UKPA) is a United Kingdom service company that provides people, facilities and expertise to the UK payments industry. UKPA was created on 6 July 2009, as a successor of the Association for Payment Clearing Se ...
shortly ahead of launch, which shows whether a specific
sort code Sort codes are the domestic bank codes used to route money transfers between financial institutions in the United Kingdom, and in the Republic of Ireland. They are six-digit hierarchical numerical addresses that specify clearing banks, clearing s ...
is able to ''receive'' Faster Payments. On 1 May 2018 the
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government of ...
announced that the New Payment System Operator (NPSO) had taken over responsibility for the operation of the Bacs and Faster Payments systems and Faster Payments announced that it had become a subsidiary company of the NPSO.


Background

In November 1998 the
UK Treasury His Majesty's Treasury (HM Treasury), occasionally referred to as the Exchequer, or more informally the Treasury, is a department of His Majesty's Government responsible for developing and executing the government's public finance policy and ec ...
commissioned the Cruickshank Report, a review of competition within the UK banking sector, which reported in March 2000. Among its recommendations was primary legislation to establish an independent payment systems commission (PayCom) in place of existing, privately controlled interbank arrangements. The following day,
Chancellor Chancellor ( la, cancellarius) is a title of various official positions in the governments of many nations. The original chancellors were the of Roman courts of justice—ushers, who sat at the or lattice work screens of a basilica or law cou ...
Gordon Brown James Gordon Brown (born 20 February 1951) is a British former politician who served as Prime Minister of the United Kingdom and Leader of the Labour Party (UK), Leader of the Labour Party from 2007 to 2010. He previously served as Chance ...
announced that legislation would be introduced, if necessary, to open payment systems to increased competition. Initially the banking industry was consulted by the government on further steps and progress in payments services monitored by the
Competition Commission The Competition Commission was a non-departmental public body responsible for investigating mergers, markets and other enquiries related to regulated industries under competition law in the United Kingdom. It was a competition regulator under t ...
and the
Office of Fair Trading The Office of Fair Trading (OFT) was a non-ministerial government department of the United Kingdom, established by the Fair Trading Act 1973, which enforced both consumer protection and competition law, acting as the United Kingdom's economic ...
(OFT). By May 2003, while the OFT was able to report modest improvements, such as changes to BACS and the governance of APACS, some competition concerns remained and, in December 2003, the Treasury announced the OFT would take on an enhanced role in relation to payment systems, for a period of four years to resolve outstanding competition problems in advance of any legislation – essentially self-regulation. In March 2004 the OFT announced the formation of a joint government-industry body, the Payments Systems Task Force, under its chairmanship.


Agreement

In May 2005 the task force announced that agreement had been reached to reduce clearing times for phone, Internet and standing order payments. This committed the payments services industry to develop a system able to clear automated payments in no more than half a day – the so-called ELLE model – resulting in payment being received the ''same day'' if made sufficiently early. Implementation groups were given six months to bring forward detailed proposals. In October 2005 the contract to provide the central infrastructure for this new service was awarded by APACS to Immediate Payments Limited, a joint venture company set up by
Voca Voca may refer to: * Voca Limited, a former provider of payment services for banks and corporates, that merged with LINK to form VocaLink *Voice Output Communication Aid, a device to speak for someone who cannot speak * Victims of Crime Act of 198 ...
and LINK who have since merged to form Vocalink. In December 2005 the Payment Systems Task Force accepted an APACS recommendation for a still more ambitious target on payment times to ensure access to funds within a ''couple of hours'' of any payment being made, and allowing payments to be sent 24 hours a day, 7 days a week, to be available by November 2007. This stage also marked formal dissolution of the Task Force and reformation as a permanent body, the Payments Industry Association (later Payments Council), responsible for governance of all payments systems, including Faster Payments.


Organisation

APACS The UK Payments Administration Ltd (UKPA) is a United Kingdom service company that provides people, facilities and expertise to the UK payments industry. UKPA was created on 6 July 2009, as a successor of the Association for Payment Clearing Se ...
was responsible for the development and delivery of Faster Payments, but after May 2008 transferred day-to-day operations and management of the service to the CHAPS Clearing Company (a member-based organisation responsible for the CHAPS sterling high-value same-day payment system.) Towards the end of 2011, Faster Payments Scheme Limited (a member-based organisation) was set up to separate out the day-to-day operations and management of the service from CHAPS. VocaLink continues to provide and operate the infrastructure for the service.


Participating members

The original founding members of the new service were
Abbey An abbey is a type of monastery used by members of a religious order under the governance of an abbot or abbess. Abbeys provide a complex of buildings and land for religious activities, work, and housing of Christian monks and nuns. The conce ...
(now
Santander UK Santander UK plc (, ) is a British bank, wholly owned by the Spanish Santander Group. Santander UK plc manages its affairs autonomously, with its own local management team, responsible solely for its performance. Santander UK is one of the l ...
),
Alliance & Leicester Alliance & Leicester plc was a British bank and former building society, formed by the merger in 1985 of the Alliance Building Society and the Leicester Building Society. The business demutualised in the middle of 1997, when it was floated o ...
(now part of Santander UK), Barclays,
Citi Citigroup Inc. or Citi (stylized as citi) is an American multinational investment bank and financial services corporation headquartered in New York City. The company was formed by the merger of banking giant #Citicorp, Citicorp and financial ...
,
Clydesdale Bank Clydesdale Bank ( gd, Banca Dhail Chluaidh) is a trading name used by Clydesdale Bank plc for its retail banking operations in Scotland. In June 2018, it was announced that Clydesdale Bank's holding company CYBG would acquire Virgin Money for ...
(including Yorkshire Bank),
The Co-operative Bank The Co-operative Bank plc is a retail and commercial bank in the United Kingdom, with its headquarters in Balloon Street, Manchester. The Co-operative Bank is the only UK high street bank with a customer-led Ethical Policy which is incorporat ...
,
HSBC HSBC Holdings plc is a British multinational universal bank and financial services holding company. It is the largest bank in Europe by total assets ahead of BNP Paribas, with US$2.953 trillion as of December 2021. In 2021, HSBC had $10.8 tri ...
,
Lloyds TSB Lloyds Bank plc is a British retail and commercial bank with branches across England and Wales. It has traditionally been considered one of the " Big Four" clearing banks. Lloyds Bank is the largest retail bank in Britain, and has an exte ...
(now
Lloyds Bank Lloyds Bank plc is a British retail and commercial bank with branches across England and Wales. It has traditionally been considered one of the " Big Four" clearing banks. Lloyds Bank is the largest retail bank in Britain, and has an exte ...
and
TSB Banking A trustee savings bank is a type of financial institution. * In the United Kingdom: ** Trustee Savings Bank, a bank in the United Kingdom that merged with Lloyds Bank in 1995 to form Lloyds TSB until 2013 ** Lloyds TSB, the name used by ...
),
Nationwide Building Society Nationwide Building Society is a British mutual organisation, mutual financial institution, the seventh largest co-operative banking, cooperative financial institution and the largest building society in the world with over 16 million members. ...
, NatWest, Northern Bank (now
Danske Bank Danske Bank A/S is a Danish multinational banking and financial services corporation. Headquartered in Copenhagen, it is the largest bank in Denmark and a major retail bank in the northern European region with over 5 million retail customers. ...
),
Northern Rock Northern Rock, formerly the Northern Rock Building Society, was a British bank. Based at Regent Centre in Newcastle upon Tyne, United Kingdom, Northern Rock was originally a building society. It demutualised and became Northern Rock bank i ...
,
Bank of Scotland The Bank of Scotland plc (Scottish Gaelic: ''Banca na h-Alba'') is a commercial and clearing bank based in Scotland and is part of the Lloyds Banking Group, following the Bank of Scotland's implosion in 2008. The bank was established by th ...
(including Halifax),
RBS RBS may refer to: Organisations Banking * The Royal Bank of Scotland, a retail banking subsidiary of NatWest Group ** RBS International, the offshore banking arm of NatWest Group Education * Regent's Business School * Rotterdam Business School ...
and
Ulster Bank Ulster Bank ( ga, Banc Uladh) is a large retail bank, and one of the traditional Big Four (banking)#Ireland, Big Four Irish clearing banks. The Ulster Bank Group is subdivided into two separate legal entities: NatWest, National Westminster Ban ...
). Abbey and Alliance & Leicester merged their membership under Santander UK in February 2011; Bank of Scotland merged their membership into Lloyds Banking Group in September 2011 and Northern Rock resigned from membership in October 2011. The remaining ten members became the initial shareholders of Faster Payments Scheme Limited in November 2011. In December 2016, Metro Bank joined the system, the first High Street bank to do so since its inception. Later, in January 2017,
Starling Bank Starling Bank () is a British digital challenger bank which provides current and business accounts. Starling Bank is a licensed and regulated bank, founded by former Allied Irish Banks COO, Anne Boden, in January 2014. Since its founding, it ...
joined the service as a direct partner, the first digital-only bank in the system's history. In February 2018, Ebury became the first to join as a directly connected non settling participant, DCNSp. In April 2018,
TransferWise Wise (formerly TransferWise) is a London-based financial technology company founded by Estonian businessmen Kristo Käärmann and Taavet Hinrikus in January 2011. History Wise was founded by Taavet Hinrikus (Skype's first employee) and fi ...
joined Faster Payments as the first non-bank
payment service provider A payment service provider (PSP) is a third-party company that assists businesses to accept electronic payments, such as credit cards and debit cards payments. PSPs act as intermediaries between those who make payments, i.e. consumers, and thos ...
to be a directly connected settling participant, after being the first of its kind to gain access to
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government of ...
's
Real-Time Gross Settlement Real-time gross settlement (RTGS) systems are specialist Electronic funds transfer, funds transfer systems where the transfer of money or securities takes place from one bank to any other bank on a "real-time" and on a "gross (economics), gross" ba ...
(RTGS) system. In February 2019
Equals Money
joined Faster Payments as the fourth non-bank to be directly connected. There are now 40 bank and non-bank members.


Implementation

Following the initial launch of the central infrastructure, work was planned to provide a direct corporate access channel, and the first such payment was made in July 2009. This will ultimately enable businesses to submit large numbers of payments directly into the Faster Payments Service. From 6 September 2010, the value limit for all payment types was raised to £100,000. However, "individual banks and building societies will continue to set their own value limits for their corporate and consumer customers." On 1 January 2012, Regulation 70 in the
Payment Services Regulations 2009 A payment is the voluntary tender of money or its equivalent or of things of value by one party (such as a person or company) to another in exchange for goods, or services provided by them, or to fulfill a legal obligation. The party making the ...
went into effect, requiring that all standing orders be settled within a day of submission. This shifted about five million payments from the BACS system to FPS, putting monthly volumes above 20 million. FPS handled 967.6 million transactions in 2013, up 19% from the prior year. The total value of transactions in 2013 was £771.4 billion, up 25% over 2012.


References


External links

*{{official, https://www.fasterpayments.org.uk 2008 establishments in the United Kingdom Banking in the United Kingdom Banking technology Financial services companies established in 2008 Payment clearing systems