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Bacs, formerly known as Bankers' Automated Clearing Services is a scheme for the electronic processing of financial transactions within the United Kingdom. Direct debits and direct deposits are made using the Bacs system. The payments take three working days to clear: they are entered into the system on the first day, processed on the second day, and cleared on the third day.
The system is owned and controlled by a group of UK banks, and operated by Bacs Payment Schemes Limited.
The system was created by Dennis Gladwell, then chairman of the joint stock banks clearing committee. It started in 1968 as the "Inter-Bank Computer Bureau," intended to improve the existing clearing system by using electronic transfer of funds between banks, avoiding the need for paper documents. The company operating the service adopted the name "Bankers Automated Clearing Services Limited" in 1971. A telephone service, BACSTEL, was introduced in 1983, reducing the need for magnetic tapes. More banks and building societies joined in 1985, and the company shortened its name to "BACS Limited".
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 automated payment schemes and setting the rules of the BACS scheme; BACS Limited owning the infrastructure to run the BACS scheme. BACS Limited was permitted to continue to use the BACS 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. It is based at Rickmansworth in Hertfordshire.
Since 2003, BACS has been moving from the telephone dial-up BACSTEL service to an internet-based service, BACSTEL-IP, which is claimed to be 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 BACS approval. It is now only possible to make a connection with software from the list of BACS Approved Solution Suppliers (BASS).
The BACS system, and in particular the time taken for money to move between accounts, had been widely criticised by consumer groups as inefficient and archaic, especially as it was the system used for money transfers made by telephone or internet banking. This compared unfavourably with other developed countries, particularly in Scandinavia, where the "Elle" system ("Early Late/Late Early") allowed money transferred before lunchtime to reach a payee's account on the same working day, or money transferred after lunchtime to reach the payee's account the following morning. In March 2005, the Office of Fair Trading proposed that such a system be introduced in the UK. In December of that year, plans were announced for its introduction in the period from the end of 2006 to 2008, with estimates of the time taken for such payments being between 15 minutes and 3 hours depending on the banks/building societies at each end of the transaction.
Article 69 of Directive 2007/64/EC (the "Payment Services Directive") requires funds to reach the payee no later than the end of the next business day. This European legislation was enacted in the UK under Article 70 of the Payment Services Regulations 2009 with effect from 1st January 2012. Consequently the use of BACS for bank transfers breaches the legislation and the banks' default method for sending bank transfers is now Faster Payments Service.
On 27 May 2008, the new Faster Payments Service (FPS) went live. This new system has improved money transfer speeds between different banks in the UK enabling account holders with one bank to make virtually instant payments to those with another bank. The original founding members of the new service were: Abbey (now Santander UK), Alliance and Leicester (now part of Santander UK), Barclays, Citi, Clydesdale(now HSBC) and Yorkshire Banks (National Australia Group), Co-operative Bank, HBOS, Lloyds TSB (now Lloyds Bank and TSB), Midland Bank (now HSBC), Nationwide Building Society, Northern Bank (Danske Bank), Northern Rock (now Virgin Money), and Royal Bank of Scotland Group (including NatWest and Ulster Bank). Between them, they represent 95% of the payments made in the UK.
Information from the UK Payments Administration on the current availability of Faster Payments is maintained at their webpage. This information remains indicative, however, and occasional interruptions to users of the service have occurred.
Following the initial launch of the central infrastructure, work was planned to provide a Direct Corporate Access Channel and the first such payment was made in July 2009. This will ultimately enable businesses to submit large numbers of payments directly into the Faster Payments Service.
From 6 September 2010, the value limit for all payment-types was raised to £100,000. However, "individual banks and building societies will continue to set their own value limits for their corporate and consumer customers."