UK payment methods have changed quickly over the past several years, and businesses there operate in an environment that blends longstanding systems with fast, digital-first options. In 2024, UK consumers and businesses made 48.8 billion payments.

Although UK payments systems are easy for end users to manage, the payment infrastructures that support them are complex. They all work differently, cost different amounts, and can shape cash flow in unexpected ways.

Below, we explain how the major UK payment methods work and how businesses can choose the right mix.

What’s in this article?

• What are the major UK payment methods?
  
• How do UK payment methods shape consumer and business transactions?
  
• What technologies enable UK payment methods to function reliably at scale?
  
• What challenges influence UK payment method use?
  
• How should businesses decide which UK payment methods to use?
  
• How Stripe Payments can help
  

What are the major UK payment methods?

There are several UK payment money movement methods. These options are fast, reliable, and increasingly digital.

Here are the options.

Debit and credit cards

Debit and credit card payments run over globally distributed networks, which authorize transactions in seconds and settle them in bulk a day or two later. EMV chips, contactless tech, and strong authentication protocols keep card payments secure at scale.

Digital wallets

Digital wallets such as Apple Pay and Google Pay are increasingly popular (57% of UK adults used them as of 2024). These use existing card networks and offer faster, more secure checkout experiences.

Buy Now, Pay Later (BNPL)

With buy now, pay later (BNPL), businesses receive funds up-front while consumers pay in installments. About 25% of UK adults used it in 2024. Upcoming Financial Conduct Authority (FCA) regulation, expected in 2026, will introduce affordability checks and formal oversight.

Real-time bank transfers

Faster Payments Service (FPS) is the UK’s instant bank-to-bank system, which processed about 5.09 billion payments in 2024. It’s the foundation of instant payouts, online banking transfers, and modern “pay by bank” checkouts, where it works in tandem with open banking to let third-party providers activate account-to-account payments.

FPS moves money in seconds, around the clock. It settles between banks multiple times a day and supports transfers up to £1 million, although many banks have lower limits.

Bacs Direct Debits and Credits

Bacs handles direct debits and direct credits on a strict three-day cycle (business days only). Payments are submitted on day 1, processed overnight on day 2, and land in accounts on the morning of day 3.

Bacs handles large volumes at low cost, which makes it ideal for payroll, supplier payouts, and recurring billing. It trades speed for predictability because everything clears on a fixed weekday schedule.

CHAPS transfers

CHAPS is the UK’s high-value, same-day settlement system. It runs through the Bank of England’s real-time gross settlement platform, so payments are settled one by one in central bank money. Funds clear in hours and are final once sent.

CHAPS has no upper transaction limit. Banks charge a premium fee (often £20–£30), so it’s used for payments where timing and certainty outweigh cost, such as property transactions and large corporate transfers.

How do UK payment methods shape consumer and business transactions?

People and businesses in the UK choose different payment methods for different situations. They’re driven by habit, convenience, and the realities of how money moves.

Here’s how real transactions match up with particular methods:

• Recurring consumer bills: Bacs handles many recurring bill payments each year, for everything from utilities to subscriptions. Although it’s a slower option, the predictability is convenient for consumers, and businesses rely on the automation and low cost.

• Peer payments and single transfers: FPS transfers have become customers’ go-to method for sending money to friends, paying small contractors, or settling invoices directly.

• Outgoing business payments: FPS transfers have flexibility and speed that make them useful for B2B payments. When it comes to payroll and other predictable pay runs, businesses often choose Bacs Direct Debits for its low cost and stable timetable.

• Pocket change purchases: Cash is commonly used for small purchases and represented less than 10% of customer payments in 2024. Around 1.2 million people still depend on it for everyday spending, but it’s a backup rather than a primary method for many.

• Paying in installments: BNPL plays a major role in online checkouts and continues to influence customer choice.

• High-value business transactions: Businesses use CHAPS transfers for large, time-sensitive payments such as property closings or corporate treasury moves. It guarantees same-day arrival and final settlement, which justifies the higher fixed fee.

What technologies enable UK payment methods to function reliably at scale?

The UK’s payment systems are effective at a national scale. They work because the underlying technology is engineered for consistency, resilience, and speed.

Here’s how it works:

• Centralized clearing technology: The core processing for Faster Payments, Bacs, and check imaging is run by Vocalink. Their platforms handle over 90% of UK salaries, 70% of household bills, and 98% of state benefits. This shared structure guarantees the country’s main payment systems have high uptime and predictable performance.

• Real-time settlement engines: The Bank of England’s upgraded Real-Time Gross Settlement (RTGS) system handles CHAPS and interbank settlements. It uses ISO 20022 messaging and multiple daily settlement cycles to support high-value payments with immediate finality.

• Secure authentication layers: Technologies such as EMV chips, contactless encryption, biometric wallet authentication, and 3D Secure for online cards help control fraud while preserving payment speed. These layers overlay card networks and give consumers confidence that a tap or online checkout is safe.

• Bank-grade connectivity and routing: Payments reach the right destination thanks to standardized account identifiers, Confirmation of Payee checks, and effective fraud screening tools. Banks exchange messages over encrypted, continuously monitored networks that are designed to remain online through traffic spikes.

• Modern API frameworks: Open banking application programming interfaces (APIs) provide standardized and regulated connectivity, which allows businesses and platforms to initiate secure bank payments without custom integrations to dozens of banks. This connects legacy systems with modern, app-driven payment experiences.

What challenges influence UK payment method use?

Payment methods change over time. Their trajectories are shaped by other shifting factors, which include regulation, fraud, infrastructure, and customer behavior.

Here’s what to watch out for:

• Rising payment costs: An increase in card scheme fees recently prompted the Payment Systems Regulator to review pricing to ensure businesses aren’t overpaying. BNPL will also enter formal FCA oversight in 2026, which might change how providers price and offer these products at checkout.

• New security risks: Instant push payments have made Authorized Push Payment (APP) fraud a major concern, which has guided regulators toward rules that place more responsibility on banks. Card-not-present fraud has also driven stronger authentication requirements, which can slow checkout flows.

• Changing customer behaviour: Cash usage has fallen as customers increasingly default to cards, digital wallets, BNPL, and real-time transfers. But some groups still rely on cash or checks, which means businesses must decide how (and how much) to support these older methods.

• Market competition and new entrants: Fintechs and nonbank players are gaining direct access to Faster Payments and building account-to-account services that can add pressure to traditional providers. Businesses have more choices, but must also constantly evaluate emerging options.

How should businesses decide which UK payment methods to use?

Choosing the right payment methods means you’ll meet customers where they are. A well-designed mix will also help you move money efficiently.

Keep the following in mind:

• Start with customer expectations: If you sell directly to customers, you should be able to accept cards and digital wallets, and direct debit is a clean path for recurring billing. In B2B settings, customers often prefer bank transfers, especially for higher-value invoices.

• Compare cost structures: Each method brings its own approach to fees. Percentage-based card fees can add up quickly for large transactions, while bank-to-bank payments avoid much of that math. The low cost of Bacs is hard to beat for high-volume recurring payments, whereas CHAPS only makes sense when same-day certainty matters more than the high fee.

• Evaluate cash flow timing: Faster Payments and open banking offer immediate settlement, which strengthens working capital and reduces reconciliation delays. Bacs works well when you can plan ahead, while card settlement delays of one to two days should be factored into cash-flow models.

• Weigh administrative load: Some methods involve more setup or compliance than others. Direct submission for Bacs involves submitting files, while CHAPS comes with secure handling requirements. Providers such as Stripe bundle multiple methods into one API and dashboard, which simplifies implementation and day-to-day reconciliation.

• Plan for change: Consumer habits, regulations, and technologies shift quickly. Regular review of your payment mix will keep you open to better options as they become available.

How Stripe Payments can help

Stripe Payments provides a unified, global payments solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world.

Stripe Payments can help you:

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs, access to 125+ payment methods, and Link, a wallet built by Stripe.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.

• Improve payments performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorisation rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.