The BACS system

So far we have dealt with making or receiving payment with plastic cards and cheques. Many payments, however, are set up to run automatically by linking the banks computers to the Bankers’ Automated Clearing Service (BACS) computer centre in London - it was once the largest automated clearing house in the world. I'm not sure if it still is!

These automated payments fall into two types:

• credits - paying money into our accounts
• debits - paying money from our accounts.

Direct credits are made by business to individuals or other businesses. The majority of the payments made each year are from paying wages, salaries and pension contributions.

An example is where a business pays the monthly salaries of its staff. The process of paying direct credits takes three days. On the first day, the business electronically transmits a datafile containing a list of the staff, their bank account details and salary payments to BACS. During the second day, BACS processes this data and passes details of which accounts should be credited (receive their salary payments) over a secure network to the banks. On the third day, the staff receive their salaries and the business has the money removed from its account.

The process of paying salaries by BACS

• Business prepares data of wages to be paid,
• Day 1 employee names, wage totals, bank accounts

• Transmit data to BACS computer electronically

• Day 2 BACS processes data and passes to
  • employees’ banks
• Day 3 Bank: Business account
  • — debited: money removed
  • Employee 1
  • — credited: money added
  • Employee 2
  • — credited: money added
  • Employee 3

© LEV