Bankers Automated Clearing Services
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The Bankers Automated Clearing Service (BACS) was formed in 1971, mainly to provide a central clearing function for bulk automated payments. |
Here we learn about BACS and its associated companies...
BACS History
Throughout the 1960s, all transactions between banks were entirely paper based. However, in 1968 the Inter-Bank Computer Bureau set up a secure, streamlined method of handling payments, which reduced processing time and human errors. In 1971 the company name was changed to the Bankers Automated Clearing Services.
The early days of BACS used advanced technology for the time, but were a far cry from the electronic processing of today. 1975 saw the introduction powerful transaction processors, CEFT to make this process even faster and secure. Data for CEFT was being read by large magnetic tapes at this point, delivered to BACS' Edgware location by an endless stream of motorcycle couriers.
The function of the BACS company was primarily to provide a central clearing function for bulk automated payments. In 1985 it shortened its name to BACS Limited and expanded its membership to include building societies.
During the 1990s, the following services were rolled out to major users of BACS:
Automated Direct Debit Amendment and cancellation Service (ADDACS)
Advice of Wrong Account for Automated Credits Service (AWACS)
Industry Sort Code Directory (ISCD)
Transfer of Direct Debit and Standing Orders (TODDASO) often referred to as the Switching bank account service in the press.
Automated Direct Debit Instruction Service (AUDDIS)
Paperless Direct Debit
Euro payment transaction services.
On 1st December 2003, following a review, BACS split into two companies BACS Ltd and BACS Payment Schemes Limited (BPSL). Each company could then focus on its specialist area...
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BACS (BPSL) administered the schemes. |
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VOCA processed the payments. |
BACS cycle
The three day cycle (minimum three English bank working days) taken for a payment instruction to be submitted to BACS for processing and the time it reaches the destination account. The processing cycle has the following stages: arrival, input, processing and entry.
Direct Debit
"Conceived back in the 1960s, Direct Debit has become a household name with over 70% of the population using the service."
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"A Direct Debit is an instruction from a customer to their bank or building society authorising an organisation to collect varying amounts from their account, as long as the customer has been given advance notice of the collection amounts and dates." |
"Direct Credit - A simple secure and reliable service, which enables large and small organisations to make payments by electronic transfer directly into bank or building society accounts."
"Over 90% of people are currently paid using the BACS Direct Credit salary service."
Note: In the 21st century, many pensions and benefits are paid via Direct Credit.
"On 1 April 2003, the official start of the direct payment programme, the only full current account banking service available through post offices was for Alliance and Leicester customers. Alliance and Leicester current account holders could, using their bank card, withdraw cash, deposit cash and make balance enquiries."
"Since April 2003, the way your State Pension is paid has changed. Instead of using pension books, giro cheques or payable orders, your money is paid straight into an account of your choice. You receive the same amount at the usual time."
LINK
The LINK ATM (Automatic Teller Machine) Network of cash machines was established in 1985. Currently, in 2015, it connects more than 70,000 machines. LINK adminster the scheme while VocaLink now runs the network.
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The LINK ATM Scheme determines the rules for all participants in the cash machine network and sets standards for signage, encryption, messaging, and security. 1985 |
"We are the driving force in payment processing innovation and are the chosen provider of three principal UK transaction services: Bacs, Faster Payments Service and the LINK ATM Service."
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VocaLink was formed in July 2007 from the merger of Voca and LINK. VocaLink's Real-Time Platform facilitates the UK's Faster Payments Service, which was launched on 27th May 2008. VocaLink provides the physical switch(es) for transactions while the LINK ATM Scheme sets the rules, practices and procedures. |
"Clearing House Automated Payments System. A system providing same day settlement between financial institutions for low volume, high value transactions."
Faster Payments
For high volume, lower value transactions.
In October 2005, Immediate Payments Ltd was formed as a joint venture between Voca and LINK to establish the UK's 'Faster Payment Service' to supplement BACS transfers.
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Launched in 2008, 'Faster Payments' for selected banks allowed quicker transfer of customer transactions. |
Barclays Bank
Citibank NA
Clydesdale Bank Plc
The Co-operative Bank
Northern Bank Ltd t/a Danske Bank
HSBC Bank Plc
Lloyds Bank
Nationwide Building Society
Royal Bank of Scotland Group
Santander
SWIFT
At the beginning of the 1970s instructions and messages between banks was still sent via Telex, which was based on semi-automated electric typewriters (teleprinters). This was a comparatively slow service and not suited to handling the volume of transactions which a busy bank could generate.
Working from an office in Brussels, a co-operative representing 239 banks across 15 countries created a vision of a shared worldwide processing link with a common language for international financial transactions. Thus the Society for the Worldwide Interbank Financial Telecommunication or SWIFT was established in 1973.
On 1st July 1992 an important new service the Interbank File Transfer (IFT) went live to handle a range of bulk data transfers including mass payments, cheque truncation and internal reporting.
In 2015 the SWIFT networking extends across 200 countries.
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SWIFT is the industry-owned cooperative supplying secure messaging services and interface software to over 10,800 financial institutions in 200 countries. SWIFT provides messaging services to banks, broker/dealers and investment managers, as well as to market infrastructures in payments, treasury, securities and trade. These services help customers reduce costs, improve automation and manage risk. |
In June 1993 a Task Force reported to the Governor of the Bank of England recommending a new cost effective service for UK equity settlements. On 15th July 1996 CREST was inaugarated by the Chancellor of the Exchequer, the Rt. Hn. Kenneth Clark QC, MP. And on 19th August 1996 CREST settled the first transactions.
CREST is the Central Securities Depository (CSD) for Irish equities and all UK securities. CREST is not an acronym.
CREST is the computerised system that transfers gilts, shares and corporate bonds electronically, without using certificates.
In 2002 CRESTCo became part of the Euroclear group. It was later renamed Euroclear UK & Ireland.
Euroclear was established in 1968 to settle eurobond transactions. Euroclear Bank, based in Brussels, Belgium, offers a single access point to securities services in the worldwide equities and bonds market.
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Euroclear is the world's premier settlement system for domestic and international securities transactions. |
Is a membership based (not for profit) business dedicated to enhancing the integrity of the payment schemes.
"BACS Payment Schemes Limited is a membership-based industry body whose role is to develop, enhance and promote the use and integrity of automated payment and payment-related services. It promotes best practice amongst those companies who offer payment services and is responsible for the associated payment clearing and settlement services."
In 2015 the BPSL members were as follows:
[Source www.bacs.co.uk/Bacs/Corporate/CorporateOverview/Pages/OurMembers.aspx]
Allied Irish Bank
Bank of England
Bank of Scotland plc
Barclays Bank
Citibank NA
Clydesdale Bank Plc
Coutts & Co
HSBC Bank plc
Lloyds Bank plc
Nationwide Building Society
NatWest
Northern Bank [Danske Bank]
Santander
The Co-operative Bank
The Royal Bank of Scotland
Virgin Money
CASS
Although most banks had access to TODDASO (Transfer of Direct Debit and Standing Orders) to facilitate customers to easily change bank accounts, this process wasn't guaranteed.
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In September 2013, an industry standard for switching bank accounts was created, with the whole process managed by BACS, allowing the Current Account Switching Service (CASS) to be guaranteed. |
Other References
www.bacs.co.uk
www.fasterpayments.org.uk/
www.paymentsuk.org.uk/
www.link.co.uk
www.vocalink.com/
www.swift.com
www.euroclear.com/
www.nfsp.org.uk/
www.firstdata.com
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