Faster Isn’t Always Better: Why Bacs Keeps Growing
Published: September 18, 2025
The push for real-time does not sit well with every treasury transaction. Jim Conning, Banking & Alliances Director, AccessPay, considers the pros and cons of competing payments models.
The rise of real-time payment (RTP) systems over the past decade has been accompanied by a narrative that ‘faster is better’. Instant payments undoubtedly have a key role in the payments ecosystem, but the notion that everything must be instant is questionable, and calls for a revolution of existing systems are misplaced.
Bacs (Bankers' Automated Clearing System) – the UK’s low-value, high-volume electronic transfer system with a three-day processing cycle operated by Pay.UK – continues to thrive in this real-time world. Trusted by businesses and consumers alike, it processed a record 6.8 billion transactions valued at £5.8tr. in 2024 and, while improvements can be made, it is not set to be displaced any time soon.
Bacs in context
A mainstay of the UK payments landscape since 1968, Bacs is responsible for processing the nation’s Direct Debits and Direct Credits. However, since the successful launch of Faster Payments in 2014 and the rise of real-time systems internationally, this industry stalwart has been somewhat overshadowed, with greater emphasis placed on speed over trust, reliability, and cost.
Interest in RTPs is understandable: the latest innovations always attract attention. Faster Payments, also operated by Pay.UK, processed 5.09 billion transactions in 2024 alone. But this success does not make bulk systems such as Bacs obsolete. Quite the opposite – bulk and RTPs meet different needs.
Speed and security
Over the years, Bacs has established itself as the UK’s leading bulk collection and payment service. Businesses rely on it for collecting customer payments and making bulk disbursements such as payroll. The public trusts it for utility bills and subscriptions, with the Direct Debit guarantee providing an additional layer of reassurance.
For non-finance professionals, Bacs’ three-day processing window may seem a downside. In practice, businesses treat Bacs payments as real-time by working three days ahead. The time frame also has benefits, such as the ability to check payments and recall them if necessary. With real-time transactions, once funds are sent, there is no recall option.
Faster Payments offers a strong retail proposition, particularly for individuals transferring funds or paying one-off bills. In most cases, the payments are received immediately, but it can take up to two hours or, in rare instances, the next working day. Transaction limits also apply: while Pay.UK allows individual payments of up to £1m, many banks and PSPs set lower thresholds, and some cap daily totals. Nonetheless, real-time shines for emergency transactions, such as rectifying failed payments, where speed is critical.
Cost considerations
Cost is another factor, particularly for businesses. Bacs transactions are far cheaper than Faster Payments. Fees vary depending on whether a company has direct access or uses a bank or bureau, as well as transaction volumes. Based on Bacs’ fee schedule for bureaux, costs range from around 5p to 50p per transaction, while corporate banking tariffs show Faster Payments at around £2.50. For planned bulk payments, Bacs remains the most cost-effective option; most businesses are reluctant to pay a premium for instant transfers when volumes are high.
Variable Recurring Payments
There is the question of whether non-sweeping Variable Recurring Payments (VRPs), which use open banking APIs, could replace Direct Debits and threaten Bacs. This new instruction gives consumers more control over amounts and processes transactions over the Faster Payments network. Yet provision is limited, and VRPs lack the payee protection offered by the Direct Debit scheme.
As things stand, non-sweeping VRPs are unlikely to replace Direct Debits, but they could form part of the Direct Debit journey. For example, a combined VRP and Direct Debit could improve collections for monthly insurance or loan repayments, with the first payment collected by VRP on sign-up instead of a double Direct Debit later.
With Direct Debit failure rates trending upward, combined instructions could also help reduce the costs of representing failed collections. By enabling providers to identify when customers have funds available, VRPs enable requests to be presented at better times, helping consumers avoid overdraft charges.
Future developments
Looking to the future, there is no reason to anticipate Bacs losing its dominant position soon. For businesses, it will remain the trusted bulk service, with VRPs fulfilling fringe use cases. Meanwhile, Faster Payments covers immediate needs, and CHAPS serves high-value payments requiring guaranteed delivery.
Longer term, the work underway on the National Payments Vision could shift the landscape, but any material impact is unlikely within five years. The bigger question is whether the industry should dictate how customers use payment systems or provide best-in-class infrastructure for businesses to use as they see fit.
A cornerstone of the system
The 6.8 billion transactions processed by Bacs in 2024 highlight its enduring value. In a landscape increasingly focused on RTPs, Bacs proves that cost efficiency, reliability, and trust remain as critical as speed. For organisations managing bulk disbursements and collections, it continues to offer a trusted, low-cost solution, with Faster Payments and VRPs serving to complement it rather than replace it.
As the ecosystem evolves, Bacs’ ability to deliver predictable, secure, and economical processing will ensure it remains a cornerstone of business operations for years to come.