GBP bank transfers: An in-depth guide

Last updated January 25, 2024
  1. Introduction
  2. Types of GBP bank transfers
    1. Bankers Automated Clearing Services (Bacs) transfers
    2. Faster Payments Service (FPS)
    3. Clearing House Automated Payment System (CHAPS)
    4. Direct debit
    5. Internal bank transfers
    6. International GBP transfers
  3. Where are GBP bank transfers used?
    1. In the UK
    2. Beyond the UK
    3. Specific regions
    4. Regulatory considerations
    5. Key changes
    6. Regulatory changes and agreements post-Brexit:
    7. Overall impact and ongoing challenges:
    8. Future outlook:
  4. Who uses GBP bank transfers?
    1. B2B payments
    2. Ecommerce payments
    3. International trade
    4. Financial services
  5. How GBP bank transfers work
    1. The payment networks
    2. Regulation and oversight
    3. Businesses and consumers: interfacing with the network
    4. Payment process from initiation to settlement
    5. Commercial payment methods
  6. Benefits of accepting GBP bank transfers
    1. High adoption rate and familiarity
    2. Efficiency and speed
    3. Security and fraud prevention
    4. Cost-effectiveness and transparency
    5. Accessibility and reach
    6. Integration and scalability
  7. GBP bank transfer costs and fees
    1. Transfer type
    2. Account type and bank
    3. Additional services
  8. GBP bank transfer security measures
    1. FPS
    2. Bacs
    3. CHAPS
    4. SWIFT
    5. Direct debit
    6. Internal bank transfers
    7. International GBP transfers
  9. Accepting GBP bank transfers
    1. For UK-based businesses
    2. For non-UK based businesses
    3. Additional considerations

Sending British pounds sterling (GBP) electronically from one bank account to another is instrumental to the United Kingdom’s economy. These transfers serve many purposes for individuals and businesses, such as making payments, settling bills, sending money to family and friends, and conducting business transactions.

Below, we’ll share what businesses need to know about GBP bank transfers: how they work, what they cost, what you can use them for, and how to take a strategic approach to accepting GBP bank transfers as a payment method.

What’s in this article?

  • Types of GBP bank transfers
  • Where are GBP bank transfers used?
  • Who uses GBP bank transfers?
  • How GBP bank transfers work
  • Benefits of accepting GBP bank transfers
  • GBP bank transfer costs and fees
  • GBP bank transfer security measures
  • Accepting GBP bank transfers

Types of GBP bank transfers

There’s more than one way to send a bank transfer using GBP. Here’s a quick rundown of the main options:

Bankers Automated Clearing Services (Bacs) transfers

  • What it is: A standard electronic system used to make payments directly from one UK bank account to another.

  • How it’s used: Commonly used for regular payments like salaries, pensions, state benefits, and bill payments.

Key facts

  • Processing time: In most cases,up to three business days.

  • Cost: Generally low or no-fee for consumers.

  • Limit: No official upper limit, but policies may vary by bank.

  • Security: Regulated by the Financial Conduct Authority (FCA).

Faster Payments Service (FPS)

  • What it is: A quick electronic method for sending domestic payments.

  • How it’s used: Ideal for immediate or same-day transactions, including online and phone banking transfers.

Key facts

  • Processing time: Often within a few minutes, available 24/7.

  • Transfer limit: Up to £1 million per transaction, but can vary by bank.

  • Accessibility: Widely available across UK banks.

  • Cost: In most cases, free for personal banking customers.

Clearing House Automated Payment System (CHAPS)

  • What it is: A form of high-value, bank-to-bank payment.

  • How it’s used: For large transactions like buying property or large corporate payments.

Key facts:

  • Processing time: Same-day processing if instructions are received before the cutoff time.

  • Minimum payment: No minimum or maximum, but generally used for payments of more than £10,000.

  • Cost: Incurs a fee, typically, which varies by bank.

  • Security: Highly secure, often used for critical, high-value transactions.

Direct debit

Key facts

  • Flexibility: Amounts and dates can vary, as agreed upon by the customer and the business.

  • Consumer protection: Covered by the Direct Debit Guarantee, which offers refunds for errors.

  • Authorization: Requires setting up a direct debit mandate with the business.

  • Popularity: A common payment method for regular bills in the UK.

Internal bank transfers

  • What it is: Transfers between accounts within the same financial institution.

  • How it’s used: For personal money management or transferring funds between personal accounts.

Key facts

  • Processing time: In most cases, instant.

  • Cost: Free, typically.

  • Convenience: Easy to set up and manage through online or mobile banking.

  • Limitations: Only applicable within the same bank.

International GBP transfers

  • What it is: Transferring GBP from a UK bank to an overseas account.

  • How it’s used: For international purchases, sending money abroad, or paying for services outside the UK.

Key facts

  • Processing time: Varies, can take several days depending on the destination.

  • Cost: Fees can be higher due to currency conversion and intermediary banks.

  • Currency conversion: Involves exchange rates, which may affect the final amount received.

  • Regulations: Subject to international banking and currency regulations.

Where are GBP bank transfers used?

In the UK

  • Consumer behavior
    A UK Finance report found that UK consumers made 3.6 billion payments via FPS in 2021, an increase from 422 million in 2011. This increase highlights the UK’s heavy reliance on bank transfers for daily activities like paying bills, managing salaries, and online shopping. The same report shows that 86% of UK adults use some form of remote banking, contributing to the widespread adoption of digital transfer methods.

  • Business trends
    According to UK Finance, CHAPS processed 48 million transactions in 2021, largely for financial institutions and corporations, with a total value exceeding £86.3 trillion. This dominance over other payment methods demonstrates the trust businesses place in GBP transfers for their efficiency, security, and auditability. The Bacs payment system also handles a significant volume of B2B transactions, with 1.9 billion direct credit payments made in 2021 alone.

  • Regulatory environment
    The FCA’s Payment Systems Regulator (PSR) oversees the UK’s payment infrastructure, with the aim of sustaining a stable and secure environment for GBP transfers. Open banking initiatives are also driving innovation in the sector, with UK Finance predicting that further development will continue to lead to higher volumes of bank transfers.

Beyond the UK

Specific regions

  • Europe
    While European Union countries primarily use EUR transfers, GBP remains relevant for cross-border transactions with the UK.

  • North America
    US trade with the UK totaled about $295 billion in 2022, highlighting the demand for GBP transfers between the two countries.

  • Emerging markets
    GBP transfers play an important role in trade and financial flows with emerging markets in Africa, Latin America, and Asia. While regulations in some countries can restrict their use, the UK’s development finance institutions use GBP transfers for international aid and investment projects.

  • Asia and China
    The UK’s annual trade with China reached £108.7 billion in 2023, making GBP transfers a crucial tool for facilitating these transactions. The stability of GBP compared to some local currencies also incentivizes Chinese businesses to use GBP transfers for international settlements.

Regulatory considerations

  • International financial standards: GBP transfers comply with international regulations like anti-money laundering (AML) and Know Your Customer (KYC) requirements, fostering transparency and combating financial crime. The UK participates in international cooperation to maintain a strong and secure financial system.

  • Post-Brexit: The UK’s exit from the EU has led to adjustments in regulations for cross-border transfers with Europe. Here’s what Brexit has meant for GBP bank transfers:

Key changes

  • Loss of passporting: UK banks lost their “passporting rights” under the EU’s single market, meaning they can no longer directly access the Eurozone’s payment infrastructure, which has resulted in:

  • Increased reliance on correspondent banks: UK banks must now partner with European banks to facilitate cross-border transfers, potentially leading to additional fees and delays.

  • Reduced access to SEPA: UK businesses and individuals previously benefiting from SEPA’s fast and low-cost intra-EU transfers now face additional costs and complexities.

Regulatory changes and agreements post-Brexit:

  • Financial services agreement (FSA): The UK and EU reached an agreement to maintain financial market access, including provisions for cross-border payments. However, the agreement doesn’t fully replicate the ease pre-Brexit of transfers.

  • FCA-ECB memorandum of understanding (MOU): This agreement aims to guarantee continued cooperation and information exchange between the UK’s FCA and the European Central Bank (ECB) about payment systems and regulatory frameworks.

Overall impact and ongoing challenges:

  • Increased costs: The additional steps and potential intermediary banks involved can lead to higher transaction fees for cross-border transfers.

  • Transparency and predictability: Regulatory uncertainty and evolving agreements may continue to pose challenges for businesses and individuals planning cross-border transfers.

  • Reduced efficiency: The loss of direct access to SEPA and other European payment systems may lead to slower processing times for some transfers.

Future outlook:

  • UK government initiatives: The UK government is working to upgrade FPS to more easily connect to existing infrastructures.

  • Industry collaboration: Financial institutions and payment providers are seeking solutions to improve efficiency and reduce costs for cross-border transfers.

  • Ongoing negotiations: The UK and EU may continue negotiations to further streamline regulations and facilitate smoother cross-border financial flows in the future.

Overall, navigating cross-border GBP transfers with the rest of Europe is more complex after Brexit.

Who uses GBP bank transfers?

Individuals can use GBP transfers for many daily activities, such as paying bills, managing salaries, and shopping on mobile devices. Their convenience and security of these transfers, fueled by FPS and online banking, make them a trusted tool for everyday finance.

Businesses rely on GBP transfers for B2B payments, invoice settlements, and payroll processing. For ecommerce, GBP transfers offer a familiar and secure checkout option for customers, boosting conversion rates and driving online sales.

Outside the UK, GBP transfers bridge the gap for international trade, particularly with Commonwealth nations and other regions with longstanding ties to the UK. The transfers facilitate trade settlements and manage international transactions while offering a cost-effective option for cross-border business.

Here’s more information about where GBP bank transfers are used and how:

B2B payments

GBP transfers are popular for B2B payments in the UK, with 35% of all payments made by businesses in 2021 made via Bacs direct credit. Their efficiency, security, and auditability—via FPS and Bacs—make them ideal for:

  • Supplier payments: Businesses use GBP transfers for regular supplier payments, setting the stage for timely settlements and smooth cash flow.

  • Invoice settlements: Businesses rely on GBP transfers for invoice payments for their traceability and clear pathways in the event of audits.

  • Payroll processing: Large companies and SMEs use GBP transfers for efficient payroll disbursement.

Ecommerce payments

International trade

GBP remains a major currency for trade. This drives the use of GBP transfers for:

  • Trade settlements: UK businesses involved in international trade use GBP transfers for settlement purposes.

  • Cross-border transactions: UK businesses rely on GBP transfers for managing international payments, invoices, and expenses.

  • Cost-effectiveness: Compared to other currencies, GBP transfers often offer competitive exchange rates and lower transaction fees for cross-border trade.

Financial services

Banks, investment firms, and other financial institutions rely heavily on GBP transfers for:

  • Clearing and settlement: Clearing and settlement transactions within the UK’s financial system employ GBP transfers, with a report from the Bank of International Settlements showing that CHAPS is the main system for transferring high-value automated credits in the UK.

  • Client account management: Financial institutions use GBP transfers for managing client accounts, facilitating deposits, withdrawals, and inter-account transfers.

  • Large financial transactions: GBP transfers remain the preferred method for high-value transactions due to their security, reliability, and audit trails.

How GBP bank transfers work

Working with GBP bank transfers is typically easy and efficient for both businesses and consumers. Here’s how it works:

The payment networks

  • FPS: Operated by Pay.UK, FPS processes more than 3 billion transactions annually. It boasts near real-time settlement (typically within minutes) for B2B and B2C payments, making it ideal for everyday purchases, invoice settlements, and payroll.

  • Bacs: This network, which is managed by Pay.UK, handles bulk payments like salaries, direct debits, and standing orders. It offers a cost-effective solution for high-volume, low-value transactions, and processes more than 6 billion payments annually.

  • CHAPS: Operated by the Bank of England, this high-value, same-day settlement system caters to larger transactions. CHAPS guarantees immediate settlement, making it an important tool for high-stakes financial activities like securities trading and large cross-border transactions.

  • Society for Worldwide Interbank Financial Telecommunication (SWIFT): This global messaging network facilitates cross-border GBP transfers. Banks use SWIFT to securely send payment instructions to correspondent banks abroad, enabling international trade and remittances.

Regulation and oversight

The FCA plays a crucial role in regulating the UK’s payment systems and oversees:

  • Financial stability: The FCA monitors and regulates payment service providers (PSPs) to maintain a well-run system and protect consumers.

  • Transparency and competition: It promotes competition within the payment sector, encouraging innovation and keeping costs down for businesses and consumers.

  • Consumer protection: The FCA also enforces regulations to protect consumers from unauthorized transactions, fraudulent activities, and unfair practices.

Businesses and consumers: interfacing with the network

Businesses and individuals interact with the payment networks through a number of channels:

  • Online banking portals: Most banks offer their customers online banking platforms where users can initiate transfers, view transaction history, and manage their accounts.

  • Mobile banking apps: Convenient and accessible, mobile apps empower users to make payments, check balances, and manage finances on the go.

  • Payment gateways: Ecommerce platforms integrate payment gateways that connect them to payment networks, allowing customers to pay securely online.

  • Standing orders and direct debits: These pre-arranged payments automate recurring transactions, simplifying bill payments and subscriptions.

Payment process from initiation to settlement

Here’s a simplified breakdown of the GBP bank transfer process:

  • Initiation: The payer initiates the transfer through their bank’s online or mobile platform, providing recipient details and transfer amount.

  • Network routing: The bank identifies the recipient’s bank and routes the payment instruction through the appropriate network (FPS, Bacs, CHAPS, or SWIFT).

  • Clearing and settlement: The relevant payment network processes and verifies the payment instructions, guaranteeing sufficient funds and regulatory compliance.

  • Funds are transferred: The payer’s bank deducts the transfer amount and credits the recipient’s bank account.

  • Notification: Both the payer and recipient receive confirmation of the successful transaction.

Commercial payment methods

Businesses have access to a number of commercial payment options within the GBP transfer network, including:

  • Bulk payments: Bacs Direct Debit allows businesses to collect recurring payments from customers, while Bacs Direct Credit facilitates bulk salary payments or refunds.

  • FPS corporate account: Businesses can set up dedicated FPS accounts for high-volume transactions, achieving near real-time settlements.

  • CHAPS corporate account: For high-value transactions, CHAPS offers same-day settlement and guaranteed finality.

  • International payments: Businesses can use SWIFT to send cross-border GBP transfers, while services like CHAPS International Payments offer faster settlement options for high-value international transactions.

Benefits of accepting GBP bank transfers

High adoption rate and familiarity

  • Market penetration: GBP bank transfers dominate the UK’s payment sphere, with 86% of UK adults using remote or online banking services to facilitate easy adoption of bank transfers as a payment method.

  • Customer trust and familiarity: Bank transfers offer customers a familiar and trusted payment option. This translates to higher acceptance rates and reduced checkout abandonment compared to less familiar payment methods.

Efficiency and speed

  • FPS: This high-velocity network enables near real-time settlement for most transfers for faster access to funds and improved cash flow for businesses. FPS transactions are settled within minutes, significantly reducing waiting times compared to other payment methods.

  • Reduced administrative burden: Automated clearing houses like Bacs handle bulk payments efficiently, minimizing manual reconciliation and administrative tasks for businesses. This translates to cost savings and increased operational efficiency.

Security and fraud prevention

  • Strong security measures: Bank transfers benefit from multi-layered security protocols, including encryption, fraud detection algorithms, and strong authentication mechanisms. This lowers the risk of unauthorized transactions and chargebacks, protecting both businesses and customers.

  • Regulatory compliance: The FCA’s oversight enforces strict adherence to AML and KYC regulations, helping to mitigate financial risks for businesses accepting bank transfers.

Cost-effectiveness and transparency

  • Competitive transaction fees: Compared to credit card payments, which incur merchant fees for businesses, bank transfers offer lower transaction costs, potentially boosting profitability.

  • Clear and predictable pricing: Bank transfer fees are generally fixed and transparent, allowing businesses to accurately budget for payment processing costs. This eliminates the uncertainty and potential revenue fluctuations that can occur when other payment methods raise their fees.

Accessibility and reach

  • Universal acceptance: Bank transfers are widely accepted across the UK, offering businesses access to a broader customer base. This is particularly beneficial for ecommerce businesses looking to expand their reach beyond credit card users.

  • International reach: SWIFT facilitates cross-border GBP transfers, allowing businesses to tap into international markets and expand their customer base. A report from PYMNTS and Visa shows that international transactions account for about 25% of UK businesses’ sales.

Integration and scalability

  • Seamless integration: Most ecommerce platforms and accounting software integrate seamlessly with bank transfer systems, simplifying payment processing and streamlining workflows.

  • Scalability to accommodate growth: As businesses scale, bank transfers can easily handle increased transaction volume without requiring significant infrastructure changes. This adaptability ensures continued cost-effectiveness and operational efficiency.

GBP bank transfer costs and fees

This payment method involves various costs and fees, which can depend on several factors:

Transfer type

  • FPS: Offers the fastest settlement (within minutes) and is typically free for personal customers. Costs vary between banks for businesses.

  • Bacs: Ideal for bulk payments with lower transaction values. Fees are generally lower than FPS, typically ranging from £0.10 to £0.50 per transaction.

  • CHAPS: Since they are typically used for high-value transactions and guarantee same-day settlement, fees for CHAPS transfers are significantly higher, often exceeding £25 per transaction.

  • International transfers: SWIFT facilitates cross-border transfers, which typically incur a combination of fees from both the sending and receiving bank. Expect fees ranging from £5 to £30 per transfer, plus an additional 3%–5% for currency conversion if applicable.

Account type and bank

  • Business vs. personal: Business accounts typically involve higher fees than personal accounts for FPS and international transfers. Some banks offer dedicated business accounts with discounted or waived transfer fees.

  • Account packages: Many banks offer packages with bundled benefits, which often include free or discounted transfers. Consider researching these packages to find one that aligns with your specific transfer needs.

Additional services

  • Urgent transfers: Some banks charge additional fees for urgent transfers, which prioritize your transaction and guarantee faster processing.

  • Same-day processing: Certain banks may charge extra for same-day processing of international transfers, even if the transfer falls within their standard timeframe.

  • Currency conversion: Banks typically charge a markup on the exchange rate for currency conversion, adding an additional cost to international transfers.

GBP bank transfer security measures

FPS

  • Strong authentication: Uses multi-factor authentication (MFA), including SMS verification and mobile app authorization, significantly bolstering security against unauthorized access.

  • Data encryption: Employs end-to-end encryption to protect transaction data from interception and tampering throughout its journey.

  • Real-time fraud detection: Advanced algorithms constantly monitor transactions for unusual patterns to promptly flag and respond to potentially fraudulent activities.

  • Segregated network: Operates on a dedicated network and is isolated from other banking systems, mitigating the risk of cross-contamination and cyberattacks.

Bacs

  • Batch processing: Aggregates and processes transactions in batches, reducing vulnerability by minimizing the exposure for individual transactions.

  • Digital signatures: Electronic signatures authenticate the origins and integrity of transactions, preventing data manipulation.

  • Reconciliation and validation: Robust processes verify the accuracy of transaction data before settlement to reduce the likelihood of errors or fraud.

  • Cybersecurity measures: Includes vulnerability assessments, penetration testing, and stringent incident response protocols.

CHAPS

  • Guaranteed finality: Offers immediate and irreversible settlement, eliminating the risks associated with fund reversals or losses in transit.

  • High-value transaction security: Maintains a dedicated infrastructure with stringent access controls specifically for safeguarding high-value transactions.

  • Auditable trail: Provides a comprehensive audit trail for each transaction to promote transparency and help with incident investigations if they arise.

  • Continuous risk management: Actively assesses and updates security measures to counter evolving threats and leverage emerging technologies.

SWIFT

  • Secure messaging: SWIFT’s secure messaging framework uses significant encryption and authentication protocols to protect financial messages between banks.

  • Compliance standards: Adheres to stringent regulatory standards, including KYC and AML, to mitigate the risks associated with money laundering and financial crime.

  • Cybersecurity collaboration: Promotes global collaboration and information sharing among member banks to enhance threat detection and response protocols.

  • Standardized message formats: Uses standardized messaging to minimize misinterpretation and errors, promoting data integrity and reducing fraud.

Direct debit

  • Direct debit guarantee: Provides customer protection, including immediate refunds for any transaction errors.

  • Mandated verification: Employs a verification process to confirm the customer’s identity and authorization for transactions.

  • Compliance checks: Regular compliance checks ensure users adhere to operational guidelines and security standards.

Internal bank transfers

  • Intra-bank security protocols: Involves sophisticated internal security measures such as firewalls, intrusion detection systems, and multi-layered authentication.

  • Data encryption: Protects transfers with the bank’s comprehensive encryption protocols for security within the bank’s existing network.

International GBP transfers

  • SWIFT network security: International transfers use the SWIFT network’s multiple layers of security, including secure messaging, identity verification, and message encryption.

  • Global compliance: Subject to international financial security standards, including AML and KYC regulations.

Accepting GBP bank transfers

To begin accepting GBP bank transfers for payments, businesses must meet several requirements. These may vary depending on the type of payment and whether or not the business is located in the UK. Here’s a breakdown of how to accept GBP bank transfers:

For UK-based businesses

Bacs, FPS, and CHAPS (for domestic transactions):

  • Bank account requirements: The business bank account must be able to handle Bacs, FPS, and CHAPS transfers. Typically, this requires that businesses have a UK-based bank account.

  • Sort code and account number utilization: Use the UK standard sort code and account number system for all transactions, which is essential for accurate processing within the UK.

  • KYC documentation: Provide detailed documentation for KYC compliance, including business registration documents, proof of business address, and identification for business owners and key stakeholders.

  • Direct debit mandate management: For Bacs Direct Debit, you must obtain written permission from customers, including a mandate reference and customer’s bank details.

SWIFT transfers (for international transactions in GBP)

  • International banking relationships: Establish relationships with banks that are part of the SWIFT network.

  • Currency exchange contracts: If you’ll need currency conversion services, you should negotiate exchange rates and understand the fees involved in transactions.

  • Compliance with international payment regulations: Stay informed about international payment regulations, including AML and counter-terrorism financing laws.

For non-UK based businesses

GBP payments (for transactions within the UK)

  • GBP-denominated bank account setup: Set up a GBP-denominated account in the business’s home country or in the UK. This might involve finding a local bank with correspondent banking relationships in the UK.

  • Understanding the UK’s payment systems: Familiarize yourself with UK-specific payment systems like Bacs, FPS, and CHAPS for GBP transactions.

SWIFT transfers (for global transactions in GBP)

  • Understanding the SWIFT network: Learn how to use the SWIFT network for sending and receiving international GBP transfer instructions.

  • Know the fee structure: Understand the fee structure, including fees for sending and receiving funds, and currency conversion fees if applicable.

Common requirements for all businesses

  • Train staff for AML and compliance: Train staff on AML policies for compliance with international financial standards.

  • Conduct the technical setup: Integrate payment solutions that support GBP transactions, including setting up a reliable payment gateway for Bacs, FPS, or SWIFT transactions.

  • Establish data security protocols: Implement thoughtful cybersecurity measures to protect customers’ data and all transaction details that comply with data protection regulations like GDPR for UK or EU customers.

  • Conduct regular audits and compliance checks: Conduct periodic audits to ensure you’re adhering to local and international financial regulations.

  • Set clear policies: Develop concise policies for GBP transactions, including refund procedures, chargeback processes, and how to handle transaction disputes.

Additional considerations

  • Market research: Understand the market dynamics in the UK, including consumers’ payment preferences and local banking practices.

  • Tax implications: Consult with a tax advisor about how accepting GBP affects tax liabilities both at home and in the UK.

  • Customer support setup: Establish mechanisms to address customer service questions about GBP transactions, especially around exchange rates, transaction times, and fees.

Ready to get started? Get in touch or create an account.

Access a complete payments platform with simple, pay-as-you-go pricing, or contact us to design a custom package specifically for your business.