BACS
BACS is a scheme for the automated electronic processing of financial transactions within the UK. BACS previously stood for Bankers' Automated Clearing Services, but now 'BACS' is the name of the system in its own right. All direct debits from customers to merchants and direct deposits are made using the BACS system. BACS payments typically take three working days to clear. Payments are entered into the system on the first day, are processed on the second day, and then are cleared on the third day. The BACS system is jointly owned and controlled by several UK banks, and is operated by the company BACS Payment Schemes Limited.
BACS history
The BACS system was devised by Dennis Gladwell in 1968, as the "Inter-Bank Computer Bureau". Previous to the BACS systems, bank payments and transfers were made using a paper-based system, meaning the payment times were slow, and the system was prone to human error. With the new system transactions were logged into a computer, and transactions processed and then stored on magnetic tape. The company set up to run BACS adopted the name "Bankers' Automated Clearing Services Limited" in 1971, and the BACS acronym was born. More and more banks and building societies joined the scheme over time. The systems at each separate institution were connected by telephone cables to the BACS central processing system.
In 1984 a rival to BACS was set up, known as CHAPS (Clearing House Automated Payment System). The CHAPS system was faster than BACS (payments were often processed in one day), but using CHAPS was more expensive than BACS.
In 2003, BACS underwent a major upheaval when it moved from the existing telephone dial-up system BACSTEL to a new, internet-based service called BACSTEL-IP, with the aim of speeding up BACS payments. All institutions who were part of the BACS system were forced to move to the BACSTEL-IP system by the beginning of 2006.
By the end of 2005, complaints were levelled at BACS over the fact that BACS transfers took so long to complete (still up to three working days), in comparison to other BACS-type systems such as the Elle system used in Scandinavian countries. Between 2006 and 2008 a major overhaul was made to the BACS system, enabling some transactions to be enacted in as little as three minutes. This system was known as "Faster Payments" and ran alongside the traditional BACS system.
BACS today
The current members of BACS are Santander UK, Barclays, Citi, HSBC, National Australian Group, the Co-operative Bank, HBOS, Lloyds Bank, TSB, the Nationwide Building Society, Dankse Bank, Virgin Money and the Royal Bank of Scotland. These banks are responsible for 95 percent of payments that are made in the UK.
Most regular payments from businesses to customers (such as wages, salaries, pensions, state benefits and tax credits) and from customers to businesses (direct debits, utility bill payments, subscriptions) are made using the BACS system.
Only businesses that have been approved by BACS Payment Schemes Limited are able to accept BACS payments.
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