BACS

Bacs

Founded	1968 (1968)
Website	www.bacs.co.uk
Formerly called	Bankers' Automated Clearing Services

Bacs Payment Schemes Limited (Bacs), formerly known as Bankers' Automated Clearing Services, is the organisation with responsibility 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.^[1] These include the Cash ISA Transfer Service,^[2] Biller Update Service^[3] and the development, management and subsequent ownership of the Current Account Switch Service.^[4]

More than 120 billion transactions have been debited or credited to British bank accounts via Bacs since its inception; in 2016, 6.22 billion UK payments were made this way, while a new record was also set in September 2016 with the number of transactions processed by Bacs in a single day reaching 109.3 million.^[5]

History

In 1968, the electronic transfer of funds between banks was introduced by the Inter Bank Computer Bureau intended to improve the existing clearing system by avoiding the need for paper documents. In 1971 this organisation was renamed Bankers Automated Clearing Services and, in 1986, the company shortened its name to Bacs Limited.^[1]

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^[6] 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),^[7] or by using an approved bureau.^[8]

This was followed in 2008 by the mandatory requirement for all new service users to use AUDDIS – a more efficient system for organisations 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.^[9]

Recent developments

A record-breaking 2014 saw Bacs process 5.8 billion transactions, totalling £4.4 trillion and included 3.6 billion Direct Debits.^[10] 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.^[11]

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.^[12]

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.^[13] 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.^[14]

A well as having responsibility for the Direct Debit and Bacs Direct Credit schemes in the UK, in recent years the scope of Bacs has grown 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 high-profile 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 3.5 million switches.^[15]

Products and services

Direct Debit

A Direct Debit is an instruction from a customer to their bank or building society authorising an organisation to collect varying amounts from their account, normally for regular payments for everything from household bills to charitable donations. Over 4 billion Direct Debits were processed for the first time in 2016, 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 organisations of all sizes to make payments direct into a bank or building society account. There are more than 150,000 organisations 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.^[16]

Current Account Switch Service

Since its launch in September 2013 more than three-and-a-half million UK current account customers have successfully moved between banking providers using the Current Account Switch Service, which is owned and managed by Bacs.^[17]

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 47 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 though 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 switch over.^[18]

Other managed services

Bacs also manages the Cash ISA Transfer Service, which was launched in October 2012 to offer a quicker and easier transfer process while reducing paper flow and increasing efficiency, and the Biller Update Service, launched in June 2013. The latter is operated on behalf of Payments UK and provides a central facility for the updating and sharing of biller information.^[19]

See also

• Current Account Switch Service
• CHAPS
• EFTPOS
• Payments UK
• SWIFT
• ToDDaSO
• Bankers' clearing house - historical origins

References

External links

• Official website
• VocaLink
• "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 Daily Telegraph article
• Clearing times in BBC News article
• "Banking hitch delays workers' pay" BBC News (29 March 2007)