As technology continues to advance, the way that customers and banks conduct payments with third parties continues to advance and modernise. With new methods coming out constantly, it is important for new businesses to stay on top of these modern methods to successfully compete in a changing industry. One of the newest methods on the market is called BACS payments.
While many businesses have probably heard of BACS payments, there are several key points that need to be kept in mind when conducting business online.
BACS is a Direct Payment Method
BACS is becoming a popular payment system in the UK for making payments from savings account to another. The system is managed by one of the UK’s leading banking societies and represents a novel piece of technology that allows individuals, businesses, and banks to transfer money between accounts instead of having to wait for a middle-man to handle the clearance of funds. Many people who have used this software have already commented on its ease of use and its speed for the purpose of moving funds.
Multiple Types of Direct Payments
In 2016 alone, a record breaking amount of payments were processed through bacs in the UK that totalled over 4 trillion pounds in overall value. Within the BACS system, people can choose to make either a direct debit or a BACS direct credit payment.
The Direct Debit System
Anyone who is looking to take payments from another source should elect to go with the direct debit system. This is a great way for people to receive payments if they will be coming on a recurring basis or for single payments in general. If same-day payment isn’t required, this is also a cost-effective option for people everywhere. Payments are cheap and people can set up payments on a recurring basis.
A direct debit payment is a type of payment where a customer instructs their bank to take payments from their account. The bank will then provide notice to their customer of the date and amount of the payment that was taken. Because this requires customer authorisation, this is also a safe way for people to make payments in the UK. This authorisation helps to guard customers against the threat of fraud.
This direct debit system has seen numerous advances in recent years that have made this type of payment system available to the smallest of companies and the largest of corporations. Applying to use the direct debit system is easy because there isn’t a long application process.
Bacs Direct Credit System
The Bacs direct credit system is slightly different from the direct debit system because this system is used to make payments for services such as state benefits, tax credits, salaries, and pensions. In fact, about 90 percent of the UK’s workers are compensated using this direct credit system.
This is a secure service that gives organisations the ability to make payments directly into a building society or bank account. There are multiple advantages to using the Bacs direct credit system, including a cheap way of making recurring or regular payments, especially if the amount is the same for an extended period of time.
The one downside to the direct credit system is that it shouldn’t be used to make payments that are due on the same day because it takes around three business days for the payment to take place.
How to Make a BACS Payment
Making a Direct Debit
For customers looking to make a direct debit system, the customer must authorise the payment to be removed from their bank account. The collection of the payment will require the name of the bank, the bank account number, the name of the customer, and the sort code tied to the account.
Making a BACS Direct Credit
The bank will allow someone to credit another account using either a personal account or the account tied to a business bank account. To make this credit, the person will require the name of the person being credited, the bank account number, the name of the bank, and the sort code associated with the customer.
This only represents a brief overview of one of the fastest growing payment services on the market today. Businesses looking to remain competitive in the modern economic landscape should make sure that they’re well-versed in BACS payment methodology.