If you’ve ever had to choose between using CHAPS and using Bacs for a business payment, you know it’s a major call. One prioritizes speed and certainty, while the other is built for scale and efficiency. If you choose the wrong one, you might overpay or delay an important transfer.

Below, we’ll explain how each system works, where they diverge, and how to decide which one to use for different types of transactions.

What’s in this article?

• What is CHAPS?
  
• What is Bacs?
  
• How do CHAPS and Bacs differ?
  

What is CHAPS?

CHAPS, short for Clearing House Automated Payment System, is the UK’s real-time, high-value payment network. Funds move from bank to bank through the Bank of England’s Real-Time Gross Settlement (RTGS) system, and each transfer is processed individually, with no batching or netting. The payment is cleared and settled as a single, complete instruction.

More than 35 financial institutions connect directly to the CHAPS system, and others access it through those primary participants. Businesses don’t interact with CHAPS directly. Instead, they tell their banks to initiate CHAPS transfers, usually via online banking or a corporate treasury interface. Despite handling just 0.4% of the UK’s total payment volume as of May 2025, CHAPS processes 91.0% of the country’s total payment value (excluding internalized flows within payments service providers). In 2024, CHAPS processed £87.5 trillion in payments—an average of £344.4 billion every day.

CHAPS is the settlement engine for the UK’s most high-value, time-sensitive transactions. Once a CHAPS payment goes through, the recipient sees the money the same day and the transfer cannot be reversed.

Businesses typically use CHAPS to:

• Settle large corporate payments

• Move treasury funds at the end of a quarter or year

• Close a property transaction

• Pay large supplier invoices that are due immediately

While there is no lower limit for CHAPS, it rarely makes sense to use this service for small sums.

Core characteristics of CHAPS

• Speed: Payments clear on the same business day if initiated before your bank’s cutoff time. Most banks set this somewhere between 3:00 p.m. and 5:00 p.m., UK time.

• Cost: Banks usually charge a high fee per CHAPS payment. That fee is one reason why CHAPS is used sparingly and strategically.

• Value limits: The CHAPS system doesn’t cap the size of a payment, but individual banks can impose their own thresholds.

What is Bacs?

Bacs is the UK’s long-standing system for moving routine payments in bulk. Bacs payments underpin much of the UK’s business payment activity: they’re cost-efficient, dependable, and integrate well with enterprise systems and modern platforms. If a payment is predictable (e.g., payroll, a utility bill), there’s a good chance Bacs is handling it.

Unlike CHAPS, which handles transfers one at a time, Bacs is built to handle volume. Businesses can upload files that contain hundreds or thousands of payments. Bacs has processed more than 160 billion payments since it launched in 1968. In 2024, it cleared 6.81 billion transactions for a total value of £5.80 trillion.

The system supports two main types of transfers:

• Direct credit: Money is pushed into an account (e.g., salary payments, supplier payouts).

• Direct debit: Money is pulled from a customer’s account (e.g., subscription fees, insurance premiums).

Bacs powers the UK’s direct debit system, which is used for recurring payments such as monthly subscriptions, loan repayments, and charity donations. To use direct debit, a business needs a mandate (i.e., permission from the customer). Once direct debit is set up, funds can be pulled automatically on an agreed schedule.

Direct debit automates receivables, can minimize late payments, and enables flexible recurring billing. It also comes with strong consumer protections. The Direct Debit Guarantee gives customers the right to an immediate refund if something goes wrong (e.g., the amount is incorrect, the debit was unauthorized). Businesses must follow the Bacs rules carefully. For example, customers must be given advance notice of any new or changed debit amount.

Obtaining access to submit Bacs files or collect direct debits under your own Service User Number takes time, approvals, and technical overhead. Many businesses use a payment provider to handle it for them. For example, Stripe offers Bacs Direct Debit as a payment method. Businesses that use Stripe don’t need to manage their own Bacs integrations. Stripe handles the mandate process, payment submission, and reconciliation, making it easier for businesses to access Bacs.

Businesses typically use Bacs for:

• Payroll

• Bulk supplier payments

• Tax reimbursements

• Dividend disbursements

• Subscription payments

Core characteristics of Bacs

• Speed: Bacs works on a fixed three-day cycle. On Day 1, payment requests are submitted. On Day 2, the system processes them in batch form. On Day 3, the funds are moved. If a company submits payroll on Monday, employees get paid on Wednesday.

• Cost: Bacs payments have low fees. Some banks bundle them into business account packages at no additional charge.

• Value limits: There’s no formal maximum, but most banks impose their own caps. While you could send a larger amount, Bacs is not the best tool for large one-off transfers.

How do CHAPS and Bacs differ?

CHAPS and Bacs both move money electronically between UK bank accounts, but they’re built for different use cases. CHAPS is used for speed and scale, while Bacs is used for volume and predictability.

Here’s a closer look at their differences.

Speed

CHAPS clears payments the same day—often within hours, as long as you meet the bank’s afternoon cutoff.

Bacs takes three business days to clear payments. It’s reliable, but not fast.

If speed matters, CHAPS is your best option.

Transaction value and volume

CHAPS is ideal for high-value, low-volume transfers. There’s no official upper limit, and businesses routinely use it to send six- or seven-figure amounts.

Bacs handles smaller payments at a much larger scale. Bacs transactions are generally a few hundred or a few thousand pounds (e.g., salaries, supplier invoices, utility bills).

Bacs processes far more transactions, but CHAPS moves more total money.

Cost

CHAPS is expensive. Bacs is cheap, and the per-payment cost for bulk payments can be negligible.

Because of this pricing difference, CHAPS is reserved for high-value or time-sensitive transfers. Bacs is ideal for everyday operational payments where cost efficiency matters.

Processing

CHAPS processes each payment one by one, in real time, through the Bank of England’s RTGS system. A payment is settled almost immediately after it’s approved.

Bacs batches payments. You upload a file, the system processes it the next day, and payments are settled on the third day. It’s deferred, not instant.

CHAPS payments are more manual, while Bacs payments are set up in bulk.

Availability and cutoff times

CHAPS operates only during working hours, Monday to Friday. Each bank sets its own cutoff time, and if you miss it, the payment won’t clear until the next day.

Bacs also only clears on business days. As long as you submit by your provider’s daily deadline, the funds typically settle on the morning of Day 3.

Reversibility and risk

CHAPS payments are final. Once sent, the money is gone. This gives the sender little room for error.

Bacs payments are also hard to reverse after settlement, but the three-day delay provides a small window to catch and amend mistakes. The Direct Debit Guarantee means a customer can get an instant refund from their bank if they dispute a debit, even after the fact.

CHAPS prioritizes certainty for the recipient, while Bacs Direct Debit protects the payer.

Who uses them and how

CHAPS is used for one-off, high-value transfers. Each transfer is manually initiated. Any business with a standard UK bank account can send CHAPS payments via online banking.

Bacs handles regular payment runs. It’s often embedded in systems and runs in the background with minimal human involvement. To send payments or collect direct debits with Bacs, a business needs approval, onboarding, and system access. Many companies work with intermediaries, such as Stripe, to handle Bacs processing for them. This simplifies setup and compliance while still giving businesses access to direct debit capabilities.