Money Transfer Methods – which is right for your business?

Published on: January 7, 2020
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Understanding how money moves into and out of a business is one of the most fundamental areas any leader must get to grips with. 

Whilst other functions like sales and marketing might sometimes feel more pressing – good money management will boost your bottom line in good times, and look after your cashflow in the bad.

So what types of money transfers are out there, and what are the key differences?

Here we’ve defined the UK’s main players, so you can figure out what types of transfer are going to work best for your business. 

BACS 

BACS stands for Banker’s Automated Clearing Services and is perhaps the oldest and best known payments system in the country.

It’s been around in one form or another since 1968 – and is the system behind Direct Debit, which is essentially an ongoing, recurring series of BACS payments.

Most salary payments are done via BACS too. The system is used for bank transfers within the UK – and usually it takes one to two days to receive.

It’s cost effective, as a typical BACS transaction costs just 23p.  

CHAPS 

CHAPS – or, Clearing House Automated Payment System – is a payment method typically used for high value transactions, which was established in 1984.

It is, according to the Bank of England, one of the largest high-value payment systems in the world. 

CHAPS is typically used by big businesses and financial providers to settle money market and forex transactions – as well as by conveyancers to complete housing and other property transactions. 

The system is reliable and quick – as payments are same-day – and there are no minimum or maximum payment limits. 

However, it is expensive when compared to other methods. Costs vary, but banks will typically charge between £20 to £30 per transaction.  

Faster Payments 

Faster Payments is, as the name suggests, a much faster way to transfer money.

So whilst BACS transfers can take up to three working days and CHAPS is at the end of that same working day – a Faster Payments transfer usually takes just a few seconds. 

Faster Payments transactions are typically limited to £250,000 or less but only cost around 50p per transaction.

SWIFT 

SWIFT – or, Society of Worldwide Interbank Financial Telecommunication – is an international financial messaging system which allows all of the financial institutions in its network to securely send transaction information.

Whilst SWIFT does not actually send any money – the information sent and received on the network finds other intermediaries to complete the transaction.

It’s a laborious system when compared with the more straightforward BACS and CHAPS transfers – BUT it is perfect for businesses that need to send money to distant or obscure places. 

This is because the two banks taking part in the transfer don’t need to have a direct relationship – the SWIFT network allows transactions to take place between any two institutions in its network.

Card Networks (accessed via a Merchant Acquirer)

Private companies like Visa, MasterCard, and American Express own and operate distinct payments networks for credit, debit and prepaid cards. 

They are, of course, household names, and the main two – Visa and MasterCard – are accepted almost anywhere in the world. 

The fees levied on card transactions can be expensive for merchants – but the acceptability and adaptability of these two networks makes them a great bet if you’re looking for a reliable, global payments system. 

Fees on card transactions are varied, but typically break down close to the following:

  • Minimum monthly service fees – around £10 (if applicable)
  • Card transaction charges – Usually between 1% and 3% – which consist of:
    • Interchange Fees – 0.2% for debit cards and 0.3% for credit cards – capped by EU regulation
    • Scheme fees – typically between 0.02% and 0.15%
    • Acquirer fees – vary per provider

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