Bank Automated Clearing System – Definition

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Bank Automated Clearing System (BACS) Defined

Bacs Payment Schemes Limited, formerly Bankers Automated Clearing Services, is an institution providing the clearing and settlements of UK automated methods Direct Debit and Bacs Direct Credit in addition to providing management services are based. Pay.UK, initially known as New Payment System Operator, acquired Bacs becoming its subsidiary on May 1st, 2018 – leading to the handing over of all Bacs’ responsibilities in Direct Debit, Direct Card, Current Account Switch Service, Cash ISA Transfer Service and Sort Code Directory to Pay.UK.

A Little More on What is the Bank Automated Clearing System

Since the 2017 when Bacs was established, there have been at least 130 billion debit and credit transaction to British banks accounts from Bacs. Also, at least 6.34 billion UK transactions were done by the same Bacs. Bacs transactions were at the peak at the end of August 2018, and the daily transaction numbers processed also reached its maximum at 114 million besides the 580 million of transactions throughout the month.

Recent Developments

The historic 5.8 billion Bacs processed transitions amounting 4.4 trillion Euros in 2014. I was made up of 3.6 billion Direct Debits. The important 2014 transactions fell sort of the 2015’s six billion transactions valued at 4.6 trillion Euros. With at least 239 million more Direct Debits than the 2014 representing the historic annual increase in payments.

2015 was marked with a significant record of 103 million transactions made in a single day in July for the first time the daily transaction went above the 100 million levels. Also, during the same year, the payment number handled by Bacs hit the 110 billion since 1968.

In 2016, there was a continued rise on the transaction records with the processing of 6.22 billion transactions with a worth 4.8 trillion whereas the number of Direct Debit payments was past 4 billion for the first time.2016 was also another historic as the daily transaction numbers peaked the bar twice with daily system transactions of April’s 109.3 million which was above the 2015 July’s 103 million. At August end, the number of daily processed transactions hit 114 million while April’s monthly transactions were 580 million.

There was an expansion of Bac’s scope covering third-party management service provision including Cash ISA Transfer Services, and the development, management, and high profile Current Account Switch Service’s proceeding ownership which was introduced in 2013. The service has shortened current accounts ‘switch time to seven working days besides guarantee support.

Products and services

Direct Debit is the written instruction from a customer to either the bank or building society approving an organization collection of the different amount from their account for frequent payments for all bills. At least 4.2 billion Direct Debits processing was done in 2017. Direct Debit Guarantee which is safeguard backed by money is the protection for Direct Debit.

Direct credit is a service enabling the institutions to pay into their bank or building society accounts directly. The statistics have more than 150,000 UK institutions using Bacs Direct Credit which has been broadly accepted for the payments of benefits, mages, salaries where about 90% of the UK entire labor are paid using this besides the over one billion benefits.  Bacs Direct Credit is also used for the payments of wide range services such as pension, employee’s expenses, insurance settlements, dividends, and funds.

Current Account Switch Service

The Current Account Switch Service provides a way of switching current accounts to small companies, trusts, and small charities. The service was intended for increased competition, support new banks entry into current accounts market place and provide huge switching options from one bank or building a society to consumers. Beginning 2013 when Current Account Switch Service was started, it switched at least 5 million UK current accounts with a seven-day switch success rate of 99.4%. The service is offered by 47 top street banks and building societies higher than 33 at the initiation.

Current Account Switch Service move all old account activities to the new one opened in another bank or building society. The activities include both inwards and outwards payments, account balance, and closing the old account. The main characteristic that ensures no loss of service to the customer is that the transfer happens on the seventh day which is the last for the service hence the customer uses the account up to when it is transferred, and he starts using the new one. Besides, there is a Current Account Switch guarantee which protects the customers by compensating for any fee and charges account holders suffer from during the transfer.

Other managed services

The Cash ISA Transfer Service started in 2012 deals with easier and quicker process for transferring, it reduces paper flow and improves biller efficiency and Biller Update Service started I 2013.

References for Banks Automated Clearing System

Academic Research on Bank Automated Clearing System

  • A historical appraisal of information technology in commercial banking, Bátiz-Lazo, B., & Wood, D. (2002). Electronic Markets, 12(3), 192-205. The author states the expectations expected from banking and finance companies as a result of technological changes. The study reassesses front-office or external differences in products and service innovation and back office changes that contain operational functions of banking institutions.  Technological changes based on IT are stratified into four groups namely: Early adoption, Specific application, Emergence, and diffusion. The possible effects of the latest innovation such as electronic pulses, digital cash and internet baking are discussed by the study. There was the provision of historical viewpoint on the significant factors ascertaining the adoption of technological changes in the market for trading banks.
  • What is in it for us? Network effects and bank payment innovation, Milne, A. (2006). Journal of Banking & Finance, 30(6), 1613-1630. The author highlights the big exhibition but worst understood variations in low-value payment services’ efficiency and quality the developed countries. The paper deals with the comparison of payment arrangements in the UK, Norway, Finland, and Sweden, and explains the results of network effects the incentives to new payment technology adoption. A Model, where special importance ofn investment has a weak shared inter-bank payments software and hardware. On the other hand, As a result of Account Externalities, intra-bank payment systems have big bonuses. The private benefits and strong bonuses explain the existing cross country payment methods.
  • Managing Money Transfer, or Paying Less on Paying Out, Rollason, R. (1989). Managerial Auditing Journal, 4(1). The paper is about the suggestion of auditors having a clear understanding of the available opportunities for electronic transfer in addition to fraud and error controls that are within. Comparison of Bacs activities with other computerized banking operations in the UK is made. Also, the provision of clients’ advice on the settlement management types that a customer should undertake using the Bacs.
  • The role of central banks in payment systems oversight, Haldane, A., & Latter, E. (2005). The paper deals with the Central bank responsibility in the supervision of payment systems which are significant to the monetary economies’ performance. Further, the paper gives the outline of the banks’ responsibility in supervising UK payment system to ascertain their strength comprising of the published bank’s roles, First Oversight Report. Besides, the paper outlines some plans for the payment system oversight in regards to International mergers and technological changes.
  • Automation and Management Accounting in British Manufacturing and Retail Financial Services, 1945-68, Bátiz-Lazo, B., & Boyns, T. (2003). Information Systems and Technology in Organisations and Society, Universitat Pompeu Fabra, Barcelona. Deep Impacts of office mechanization by the description of data processing innovations in main building societies during the early times of computer was studied. In regards to the similar clearing banks, industrial and computer organizations’ advancement, there is the provision of evidence for the common computerization of companies in the post-war years. This paper’s examination provides differences between widespread technological advancement and those specific to an organization service department. The paper also establishes the degree of computer-related innovation adoption by the financial services intended to provide financial satisfaction and not management accounting activities.
  • The technical environment of banks and their implications, Cowan, N. (1987). International Journal of Bank Marketing, 5(4), 15-31. The paper provides a summary of the information technology in banks since the era of the mainframe computers to the most recent development. Where the government encourages competition, technology allows new entrants into the financial sectors to compete with the banks while the banks increase their reliance on technology to be still competitive. It is impossible to separate the technological effects from competitions’. There is a need for emphasizing learning technological effects on employment, institution managerial and professional examination and the benefits of learning from experience from manufacturing companies of the interaction between people and machines in socio-technical systems.
  • Governance and Innovation in UK retail payments, Milne, A. (2007). The paper describes the previous governance and innovation development in UK retail payments. An interview examination with high-ranked payment management in eight UK banks was undertaken. The examination discovered governance and weak innovation incentives as a significant issue for retail payments systems operation in the UK. The reassessment of the subsequent experience in the UK is undertaken by the present paper which draws payment innovation and governance’ s lessons throughout the European Union.
  • Corporate Attitudes towards Electronic Banking in Norway, Lewis, B. R., & Hoel, K. E. (1987). International Journal of Bank Marketing, 5(4), 59-71. The author outlines the continued social, economic, technological and regulatory changes also of existing challenges including raised competition from both banks and non-bank companies rapid establishing technological innovation and varying customer needs. While focusing on technological advancements and the Nordic bank environment and findings resulting from examination of the Norwegian firms were exposed. Endorsements were made concerning Norwegian banks marketing activities with regards to electronic cash management services for institutional customers
  • Electronic Funds Transfer in Banking: Implications for Manufacturing Businesses, Lewis, C. (1985). Journal of General Management, 10(3), 58-64. The paper talk of a difficult period to come for business companies trying to migrate to Electronic Fund Transfer System. The paper, in summary, states that Good prospects are under the Electronic Fund Transfer System for the establishment of new competing products to replace the processing check and new competing companies.

FINANCIAL STABILITY IN THE EUROPEAN UNION FROM THE PERSPECTIVE OF PAYMENT SYSTEMS, Borcuch, A. (2009). New Economic Challenges, 9. The author talks about the need for the advancement of the global level of coordination regarding regulatory standards, supervisory models and procedures for risk-monitoring.

The Main National Travel And Tourism Distribution Systems in Britain And Germany, KÄrcher, K. (1997). Electronic Markets, 7(1), 25. The paper talks about the major national information, reservation, and booking system of traveling industry in the town world major travel and tourism markets in Britain and Germany. Travel and Tourism Electronic Market System in Britain are Istel and Fastrack while Germany uses START, Merli or Robin, and StiNET.

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