Faster payments: a simple guide to instant money transfers in the UK
Faster payments are fast becoming an industry standard in the banking world. Enjoyed for their convenience and security, most banks in the UK can now send and receive faster payments. But not all banks offer them in the same way.
What are faster payments?
Faster payments are a type of bank transfer from one UK bank to another that completes within seconds instead of the usual three business days. Available year-round, 24/7, faster payments are gaining traction with UK banks and other financial institutions.
According to Pay.uk, which administers the Faster Payment System (FPS), the year-on-year increase in transaction numbers was 17% in 2020, with an 8% jump in total value. Simply put, we’re doing more fast payments in the UK than ever before, and for lower value payments such as paying a small bill.
With the rise in challenger banks, online-only neobanks and e-money accounts, faster payments as a service are cheaper and more widely available than when they launched in 2008.
What do you need to make a bank transfer?
Whether a faster payment or a regular bank transfer, there is a standardised list of requirements for these banking services in the UK (aside from having the funds in your account):
The desired payment date
The name of the payee or their business entity
The six-digit sort code
The eight-digit account number
A free-text payment reference to identify what the payment is for
As faster payments are usually used as a same-day payment, the chosen payment date is most frequently “today”. But this doesn't guarantee that the payment will go through before the end of the day. If you need to make sure your payment goes through on a specific date or time, say for a legal purchase of a property or a large financial institution making a specific payment, the CHAPS system is more appropriate.
How do faster payments work?
There are two sides to faster payments: the front-end, which we use as consumers to initiate a faster payment, and the back-end behind the scenes magic that the banks handle without us seeing a thing.
How to transfer money instantly between banks
Depending on the bank, challenger bank or e-money account you use, sending a fast bank transfer through the UK Faster Payments System can be done via different methods.
Online banking as a self-service option: this is a convenient way to manage faster payments, especially to recurring payees, as you can save payee information for further fast payments.
Using an app on your smart device: most banks, and definitely all neobanks and e-money accounts, offer a mobile app that allows you to at least manage the most frequent banking operations such as bank transfers and faster payments.
For those still using high-street banks and working regularly with a bank manager, or without access to the internet or a smartphone, a bank transfer can be initiated in person at the branch or over the phone.
It may not be worthwhile sending a faster payment in some cases. Use the handy sort code checker provided by pay.uk to verify that the receiving bank can handle faster payments, otherwise send a regular payment and save on potential fees.
What happens behind the scenes of the fast transaction system?
There are a lot of moving parts for payments through the FPS, which is why same-day payment is not guaranteed. Although fully automated, there are a number of checks in place to make sure that the faster payment goes through securely, and to the right payee.
Once your bank has verified your identity and that you have sufficient funds in your account, they send the request to the receiving bank (the payee’s account)
The receiving bank will check the account number, making sure it is valid before informing the Faster Payments service that the payment is accepted
Once the FPS receives approval from the receiving bank, they credit the payee’s account with the funds and inform your bank that the faster payment has been executed
It’s up to your bank to provide you with updated payment information such as faster payment completion
So what can stop a UK faster payment going through as a same-day payment? Trying to transfer funds without having them available on your account, or entering the wrong account number and sort code combination. The latter mistake can also result in the wrong person or business receiving your payment.
As faster payments follow a specific automated process, the security measures in place are stricter. It is important that the sort code, account number and payee name match what is on the records of the receiving bank, otherwise faster payments can be declined.
How long do faster payments take?
Ideally a fast bank transfer should result in a same-day payment, as long as both accounts are located in the UK. To improve the odds of a payment going through as a same-day payment, you need the following:
Initiating the faster payment during working hours
Making sure your account has enough funds
Sending money to accounts that are on the FPS participant list
When all of the above criteria are met, payments can be immediate - although they can take up to two hours.
The good news is that a faster payment cannot arrive later than by the end of the following business day. This target is set out by the Payment Services Directive of UK Finance, but does mean that a faster payment initiated on a Friday evening can arrive as late as Monday late afternoon.
The potentially unreliable nature of faster payments doesn’t justify the cost that some banks and challenger banks put on this service. At SumUp, we believe that faster payments should be standard, and like all UK payments, they should be free.Open a free account
Faster payment limits
FPS payments are subject to two limits: the sending and receiving accounts have to be in the UK, and the transaction amount has to be under £1 million.
Everything over that amount has to go through CHAPS, which is managed directly by the Bank of England.
It’s also important to bear in mind that banks, neobanks and e-money accounts can set their own upper limits on FPS payments in the UK.
Types of payments through the Faster Payments System
The FPS allows for different types of payment with each having some specific limits in place.
Single immediate payments are the most common type of payment. When you send money to your payee via an FPS payment, you are executing a single immediate payment. This is the only payment type that has a £1 million limit.
Forward-dated payments, standing orders and direct corporate access payments can all be made via FPS, however they have a limit of £250,000 per transaction.
A forward-dated payment is a one-off payment on a pre-arranged date scheduled in advance.
A standing order is a regular payment for a fixed amount sent on regular dates. This is not a Direct Debit, as the money is sent to the payee, rather than taken from the account by the payee.
Direct corporate access payments are used by larger businesses and financial institutions to use bulk files, allowing them to send multiple requests through FPS at the same time.
Faster payments cost
Faster payments are not free for banks using FPS who have to pay a fee structure which appears to be as complicated as the small print that comes with a business account from a high-street bank (if you’re curious, the fee structure is on page 24 of this document from pay.uk).
But this doesn’t mean that banks should be charging their customers extra for faster payments in the UK, as they are becoming an industry standard and the days of waiting 3 business days for a payment are over.
Whether through your initial signup fees, monthly account fees, or separate transaction fees, your bank is potentially charging you for faster payments.
How to check if you’re paying for faster payments
If you're directly being charged for faster payments, then the charges will appear on your bank statements. Have you noticed the mention of FPO on a bank statement or are you trying to find out what FPI is on your bank statement? You’ve been charged.
FPO: Faster Payment Outwards
FPI: Faster Payment Inwards
Not only is it possible to be charged for faster payments that you make, you can also be charged for receiving faster payments from third parties.
If these charges do not appear on your statements, you may still be paying for your faster payments in the UK as part of your monthly account costs. Some banks, especially high-street banks, have different packages available, including for business accounts - each one with more or less functionality at different price points. Sounds complicated? It is.
Free faster payments should be standard
The good news is that banking services are cheaper now than they were when the high-street banks were your only option. The bad news is that banks can do better, especially for business accounts and online business accounts.
A reality of fee-free online business accounts with all the functionality you’d expect to run your business is already here, just not with banks. E-money institutions are on the rise and gaining in popularity, because their focus is on functionality, innovation and convenience, rather than complicated fine print and fee structures.
Take the SumUp Business Account: a free to open, no minimum balance, no monthly fee business account, which only charges you for cash withdrawals over your free monthly allowance and foreign cash withdrawals. Your hard-earned money is yours to spend, and you shouldn’t have to pay for the convenience of fast payments and instant money transfers.
E-money accounts have other advantages too as they are usually part of a wider ecosystem. SumUp not only provides a free business account with a complementary contactless Mastercard, you can also pair it up with an industry leading payment terminal with all the bells and whistles. Each card payment received on the card reader appears in one day in your free business account, even on weekends and bank holidays, allowing you to use it for faster payments when it suits you.Get started