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|Bankers' Automated Clearing Services|
Bacs Payment Schemes Limited (Bacs), previously known as Bankers' Automated Clearing System, is the organization that is responsible for the schemes behind the clearing and settlement of UK automated payment methods Direct Debit and Bacs Direct Credit, as well as the provision of managed services for third parties. Bacs became a subsidiary of Pay.UK (formerly known as the New Payment System Operator (NPSO)) on 1 May 2018, and as a result of this, overall responsibility for the operations of Direct Debit, Bacs Direct Credit, the Current Account Switch Service, Cash ISA Transfer Service and the Industry Sort Code Directory was handed over to Pay.UK.
More than 140 billion transactions have been debited or credited to British bank accounts via Bacs since its inception; in 2019, 6.5 billion UK payments, worth £5 trillion, were made this way. At the end of November 2019, the number of transactions processed by Bacs in a single day reached a new high of 124,000,000 while a new monthly record was set in August 2018 when 580,000,000 payments were processed.
The Electronics Sub-Committee of the Committee of London Clearing Bankers was formed in the late 1950s to consider the automation of cheque clearing.
The committee set up a New Services Working Party in 1965 to look at the possibility of exchanging data between banks without using paper - specifically the automated exchange of standing order credits.
This led to the creation of the Inter-Bank Computer Bureau (IBCB) within the Bankers Clearing House, tasked with setting up a suitable computer facility. The electronic transfer of funds commenced in 1968 at BCH (Bankers Clearing House) - 10 Lombard Street, 4th floor, computer room facility. The search for new premises resulted in 1971 finding a converted warehouse in De Havilland Road, Edgware. (On a site used by Army Johnson and Jim Mollison on their solo flights to Australia.) Plans for a purpose-built computer centre were drawn up early in 1971 building completion was effected June 1972 with ICL computer equipment delivered in July. Full "computer services" were established following the relocation from Lombard Street in October 1972. IBCB was initially under the control of the Systems and Development Committee of the BCH, but then moved to be controlled by its own managing committee. The managing committee decided that a separate, limited company should be created, and Bankers Automated Clearing Services Limited was registered as a company on 10 September 1971. Bankers Automated Clearing Services adopted the acronym BACS as the name of the service and registered this as a trademark on 1 December 1971. Bankers Automated Clearing Services Limited was renamed BACS Limited on 20 March 1986.
On 1 December 2003, BACS Payment Schemes Limited (BPSL) was split from Bacs Limited: BPSL as a "not for profit" body with members from the banking industry promoting the use of, and setting the rules for automated payment schemes, with BACS Limited owning the infrastructure to run the schemes.
BACS Limited was permitted to continue to use this name for one year and became Voca Limited on 12 October 2004. Voca Limited has since been merged with the UK national switch provider LINK Interchange Network Limited on 2 July 2007, the new company being called VocaLink. VocaLink owns the infrastructure on which payment schemes operate and Bacs Payment Schemes Limited maintains the integrity of the current schemes.
From a technical perspective, in 2003, Bacs users began moving from the telephone dial-up BACSTEL service (introduced in 1983 to replace magnetic media) to an Internet-based service, BACSTEL-IP, which is quicker and more secure. All Bacs users, including businesses that make payments to their suppliers or operate their staff payroll electronically, were required to move to BACSTEL-IP by the end of December 2005 or return to using cheques. When the BACSTEL-IP service was introduced all software used to make a connection to Bacs required approval. It is now only possible to make a connection with software from the list of Bacs Approved Solution Suppliers (BASS), or by using an approved bureau.
This was followed in 2008 by the mandatory requirement for all new service users to use AUDDIS – a more efficient system for organizations to send new Direct Debit instructions to their customers' bank or building society electronically instead of in paper format. In the same year, annual Direct Debit volumes surpassed the three billion mark and, by 2013, this figure reached 3.5 billion with 100 billion payments processed since 1968.
A record-breaking 2014 saw Bacs process 5.8 billion transactions, totalling £4.4 trillion and included 3.6 billion Direct Debits. These highs were surpassed again in 2015, when the number of payments passing through the Bacs system topped six billion for the first time, at a value of £4.6 trillion. 239 million more Direct Debits were processed in 2015 than the previous 12 months, representing the highest ever year-on-year increase in payments made this way.
2015 was also notable for the setting of another new record, with 103 million transactions processed in a single day in July, the first time the daily total had surpassed the 100 million mark. In the same year it was announced that the number of payments handled by Bacs since 1968 had broken the 110 billion mark.
The records continued to fall in 2016 with 6.22 billion transactions processed at a value of £4.8 trillion, while the number of payments made by Direct Debit broke the 4 billion barrier for the first time. The daily processing record was also broken twice in the same year, with the 109.3 million payments passing through the system on a single day at the end of September surpassing the previous high of 103.7 million recorded in April. And, these figures were again surpassed in 2017, with over 6.34 billion payments processed at a total of £4.9 trillion.
At the end of November 2018, the number of transactions processed by Bacs in a single day reached a new high of 123 million, while a new monthly record was set in August of the same year when 580 million payments were processed. In January 2019 it was announced that the previous 12 months had broken overall records, with 6.4 billion UK payments, worth just shy of £5 trillion, processed by Bacs.
Bacs volumes continued to grow in 2019, with 6.5 billion UK payments processed at a value of £5 trillion, while a new record was set at the end of November, as Bacs processed 124 million transactions in a single day.
As well as having responsibility for the Direct Debit and Bacs Direct Credit schemes in the UK, in recent years the scope of Bacs expanded to include the provision of managed services for third parties, such as the Cash ISA Transfer Service, and the development, management and subsequent ownership of the Current Account Switch Service, which launched in September 2013. The service has reduced the time it takes for consumer, small businesses and small charities to switch current accounts to seven working days and is backed by a guarantee. To date, the service has facilitated over six million switches.
On 1 May 2018, Bacs became a wholly owned subsidiary of the new home for UK retail payments, Pay.UK (formerly known as the New Payment System Operator (NPSO)). As a result of this move, the responsibility for the operations of Direct Debit, Bacs Direct Credit, the Current Account Switch Service, Cash ISA Transfer Service and the Industry Sort Code Directory were handed over to Pay.UK.
Products and services
A direct debit is effected by an instruction from a customer to a bank or building society to authorize a third party to collect varying amounts from an account, often for regular payments. Over 4.5 billion Direct Debits were processed in 2019, and Direct Debit payments are protected by the Direct Debit Guarantee, a money-back consumer safeguard.
Bacs Direct Credit
Bacs Direct Credit is a service which enables organizations of all sizes to make payments direct into a bank or building society account. There are more than 150,000 organizations in the UK using Bacs Direct Credit and it has been widely adopted to pay benefits, wages and salaries – nearly 90 per cent of the country's workforce is paid this way and one billion benefit payments are made via Bacs Direct Credit – it is also the payment method used for a range of other applications such as pension payments, employee expenses, insurance settlements, dividends and refunds.
Current Account Switch Service
Since its launch in September 2013 more than six million UK current accounts have been switched, with the service reporting a seven-day switching success rate of 99.4 per cent.
The service, which offers consumers, small businesses, trusts and small charities a way of switching current accounts, was created to increase competition, support the entry of new banks in the current account market place and give consumers greater choice when switching from one bank or building society current account to another. It is now offered by 49 high street banks and building societies – up from 33 at launch - giving almost total coverage of the current account market.
Once a current account has been opened with a new bank or building society, the Current Account Switch Service will transfer all the activity relating to the old account to the new one. That includes moving incoming and outgoing payments, and transferring the account balance, as well as closing the old account. An important feature of the service is that although the process happens over seven working days, the transfer of account happens on the final day. This means that customers continue to use the old bank account until the agreed switch day and from then on use the new bank account. This means that there is no loss of service for any period for the customer.
The service is backed by the Current Account Switch Guarantee, which promises to reimburse account holders if they incur any fees or charges as a result of the switchover.
Other managed services
The Cash ISA Transfer Service, which was launched in October 2012, offers a quicker and easier transfer process while reducing paper flow and increasing efficiency and the Biller Update Service, launched in June 2013.
- Payments UK
- Society for Worldwide Interbank Financial Telecommunication
- Clearing (finance)
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- Official website
- "Bacs is the future as Direct Debit rules" The Times article (26 August 2013)
- "Bacs sets new payments record" FS Tech article (3 August 2015)
- OFT on money transfers in The Daily Telegraph article
- Clearing times in BBC News article
- "Banking hitch delays workers' pay" BBC News (29 March 2007)
- Official Pay.UK website