Bacs payments and the problem of transaction reversibility

Bacs, or Bankers Automated Clearing Software, has been around a long time. Essentially, though, bacs payments simply mean transferring money directly from one bank account into another. FPS or Faster Payments Service is essentially the same, but it generally happens almost immediately, whereas Bacs takes up to three working days. Bacs software is therefore different to credit or debit card payments, and has advantages and disadvantages in comparison.

Since bacs payments are made directly from one bank account into another, they are effectively irreversible. With credit cards, the transaction can be cancelled and the money returned to you if there is good reason (such as fraud, or the goods you ordered turned out not to be as advertised, or never turned up at all). With bacs, this is far harder. That is a good thing for merchants, since you won’t have to worry about customers making unjustified chargebacks if they change their minds. For buyers, though, it means transactions cannot be undone. In most cases, this will not be a problem because bacs tends to be used for paying suppliers and for employees’ wages, and so on. These are generally predictable and are paid in arrears. However, if a mistake (such as a typo) occurs, it is not a simple matter to reclaim the money. Without the goodwill of the recipient, it can be extremely time-consuming. If you are making monthly payments, it might simply be easier to adjust the next one rather than rectify the last one.

Bacs software can be integrated into your accounting package to ensure that mistakes don’t routinely happen due to human error, but it’s impossible to eliminate them altogether. That bacs payments are made in their millions every day proves that this need not be a fatal flaw for bacs, and that there’s no reason your organisation should not use it too. Indeed, the advantages far outweigh any minor problems that might arise from its use. Bacs is more secure, faster and easier than paying by cash or cheque. It’s also the standard, now – or, at least, FPS is – which means that if you’re still paying by more traditional methods then you will naturally find yourself at a competitive disadvantage. There is really no good reason to hold large amounts of cash on the premises or to use time-consuming and inefficient cheques when instant and straightforward transfers are possible at minimal cost.

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