Faster Payments Service (FPS) is a banking initiative in the United Kingdom to reduce the time taken for 'low value' payments made person-to-person and business-to-business - which normally take three working days using BACS - to near real time, essentially as if the two accounts were in the same bank. The CHAPS service already exists to provide faster payments for high value transactions (by close of business that day) but FPS is focused on lower value transactions for consumers and small businesses.
Thirteen banks and building societies, accounting for 97% of UK payments traffic, are committed to use the new service. Other financial institutions will be able to join later, either as full members or to access the system through agency arrangements with a member – just as they do with other payment systems.
The new infrastructure for Faster Payments was launched on the 27 May 2008 as banks began to roll out the service to customers, although some users reported they were able to process very small value (1p) transactions as faster payments during the previous week as banks tested the system in a live environment. Initially only non-scheduled payments (representing about 5% of the final number) were to be allowed to go through the new service. Thereafter, from 6 June 2008, full functionality was to be established for future-dated and standing order payments. In practice, the new service continues to be restricted by individual member banks to their customers and will run alongside the existing payments system for a number of months. A Sort Code Checker tool was released by APACS, shortly ahead of the launch, which shows whether a specific sort code has been activated to receive Faster Payments.
There have been no official announcements regarding the cost per transaction of FPS. However, it is expected to be around £1 – though this is likely to apply only to businesses seeking to migrate from BACS and seems unlikely any charge will apply to individual customers.
In November 1998 the UK Treasury commissioned a review (The Cruickshank Report) of competition within the UK banking industry, which reported on 20 March 2000. Among its recommendations was primary legislation to establish an independent payment systems commission (PayCom) in place of existing interbank arrangements. The following day, the Chancellor, Gordon Brown, announced that legislation would be introduced to open payment systems to increased competition. In the wake of the Report, the banking industry was consulted by government and its progress monitored both by the Competition Commission and the Office of Fair Trading (OFT).
By May 2003, whilst the OFT was able to report some improvements in the area of payments systems (such as changes to BACS - since rebranded as 'Bacs'- and governance of APACS), a number of competition concerns remained . In December 2003, in place of the Report's proposed legislative approach, the Treasury announced instead that 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.
By May 2005 the Task Force announced an agreement had been reached to reduce clearing times on phone, internet and standing order payments. This committed the payments services industry to develop a system that would clear electronic payments in no more than half a day - the so-called 'ELLE' model - resulting in payments being received the same day if made sufficiently early. Implementation groups where then 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 and LINK who have since merged to form VocaLink.
In December 2005, the Task Force accepted a recommendation of APACS to go for a still more ambitious target on payment times; one that would ensure access to funds within a couple of hours of any payment being made and also permit payments to be initiated by bank customers 24 hours a day, 7 days a week - to be introduced by the end of (November) 2007. This stage also marked the formal dissolution of the Payments System Taskforce. Thereafter a permanent body was established, the Payments Industry Association, responsible for governance of all payments systems - including Faster Payments, which took over the outstanding work of the Taskforce.
The design of Faster Payments has been a joint project between Immediate Payments Ltd. (IPL), APACS and the thirteen founder member banks, based on a commitment made to the OFT Payment Systems Task Force in 2005. IPL, a VocaLink company, is supplying the central network for the Faster Payments Service.
The founding members signed up to introducing this new service from May 2008 are:
|Abbey||No firm date to begin service|
|Alliance & Leicester||Receiving service now active. No sending service yet.|
|Barclays|| Immediate payments fully operational. Future dated payments and standing orders began 26th August - currently up to £60. |
FPS to Barclaycard enabled in September 2008.
|Citibank||Egg brand can receive payments only|
|Co-operative Bank|| Service being introduced on a branch-by-branch/sort-code basis. |
Local branches will be enabled first, followed by centrally-managed/online accounts. Roll-out complete by 2009.
|HBOS (including Halifax and Bank of Scotland)||Sending service advised to begin 'During October' No receiving service for Intelligent Finance|
|HSBC (including First Direct)||Single payments operational. Standing order payments to begin "late 2008 or early 2009|
|Lloyds TSB||Sending via phone transfers only. No service via online banking since 8th August.|
|National Australia Group (including Clydesdale Bank and Yorkshire Bank)||Phased roll-out of sending service by "autumn 2008"|
|Nationwide Building Society||Single sort-code enabled: 07-02-46 (most FlexAccount customers have sort code 07-01-16).|
|Danske Bank (Northern Bank)|
|Royal Bank of Scotland Group (including NatWest)||Fully operational|
Payments through standing order and to credit cards also have different roll-out plans for each provider. Following the initial launch of the central infrastructure, work is planned to provide a Direct Corporate Access Channel. This will ultimately enable businesses to submit large numbers of payments directly into the Faster Payments Service.