During the most recent years, embedded finance has enabled non-financial entities to offer financial services, such as embedded insurance, cards, and payments, and it continues to transform the distribution of financial services. Indeed, according to an EY survey, 70% of respondents believe more than half of financial services will be offered via non-financial platforms in the near future. However, delivering embedded financial services can be a costly and time-consuming process for businesses. Partnering with a regulated institution can offer a simpler route to market with access to all the capabilities organisations need via API-driven platforms.
As a regulated e-money institution, we can support organisations to send and receive payments on behalf of their customers and/or embed this offering within their proposition. We have scheme participation to both UK and EU payment schemes, and in this blog we will take a closer look at how we facilitate access to common UK schemes for organisations. Look out for future blogs exploring how we help businesses use EU payment schemes.
What is a payment scheme?
A payment scheme, also known as a payment system, is a structured framework designed for processing payments. It encompasses the essential technical infrastructure and a comprehensive set of rules that all users must adhere to. By facilitating the movement of money between parties, a payment scheme ensures that transactions are executed efficiently and securely. The scheme also serves as the guardian of its operational standards, overseeing aspects like currency, usage, transaction timelines, and data formats. All payment schemes comply with the relevant regulatory requirements, critical for their governance, while providing a clear application process and standard criteria for new participants seeking to join.
What are the common UK domestic payment schemes?
In the UK, there are three main payment schemes:
- Faster Payments System (FPS) and UK BACS - Operated by Pay.UK
- UK CHAPS - Operated by the Bank of England
What is a UK Faster Payment?
Faster Payments System (FPS) is a payment system designed for fast consumer-to-consumer transactions, accessible through online, mobile banking, or in-branch services. Offering near real-time payments, FPS guarantees that funds reach the recipient within two hours. The scheme allows for transactions up to £1 million and supports immediate, future-dated payments, and Standing Orders—regular payments of a fixed amount on a specified date, set up by individuals. Available 24/7, 365 days a year, FPS is widely used for everyday payment needs such as customers paying service providers, businesses paying their suppliers, or simply to transfer funds between multiple bank accounts.
With the growing prevalence of smartphones and the demand for instant services, FPS has seen significant growth, processing 444.0 million payments in April 2024, an increase of 30% on the amount processed in April 2023. However, the speed of Faster Payments has also led to a rise in fraud, with criminals exploiting the system to trick victims into transferring money to a different account for fraudulent purposes.
What is a UK BACS payment?
BACS, formerly known as Bankers’ Automated Clearing System and now BACS Payment Schemes Limited, is a payment system primarily used by organisations for processing various types of payments. Available Monday to Friday, BACS transactions take three working days to clear – meaning that money paid into an account on Monday will be available on Wednesday.
While the transaction limit is higher at £20 million, BACS is also more cost-effective than Faster Payments, making it ideal for corporates. Indeed, most businesses utilise BACS payments for Direct Credits for paying salaries, pensions, and benefits, as well as Direct Debits for recurring supplier and utility bill payments.
What is a UK CHAPS payment?
CHAPS, or the Clearing House Automated Payment System, is a high-value, bank-to-bank payment system, managed by the Bank of England, that runs the SWIFT messaging network. Known for its efficiency and irrevocability, CHAPS is designed for time-sensitive, high-value transactions. It guarantees same-day payment if instructions are received before 3:30 PM, or online before 5 PM. There is no limit to the amount that can be transferred via CHAPS, making it ideal for bulk payments such as foreign exchange (FX) transactions, business-to-business payments, and high-value purchases like house deposits or cars. While CHAPS is an expensive option, with banks charging up to £35 per transaction, its reliability and speed are crucial for time-critical payments .
What are the challenges of accessing UK payment schemes?
Businesses aiming to embed account-to-account payments within their offering encounter several challenges. Firstly, to get a certification and authorisation by a UK payment scheme, which is in itself a complex and time-consuming process, a business must hold either a banking license or a Payment Institution (PI)/Electronic Money Institution (EMI) license.
Additionally, businesses must develop and maintain a sophisticated technical infrastructure, capable of processing and settling payments, in strict adherence to regulatory standards and specific scheme mandates. Last, but not least, substantial capital reserves are required as a safeguard to ensure that if a customer fails to meet their financial obligations, the participating business can settle on their behalf.
Due to these extensive requirements, many unregulated companies opt to partner with Payment Service Providers (PSPs) like us. By acting as "agents" of a Payment Service Provider, these companies can utilise the PSP’s license to access and use UK payment schemes within their offering, thereby avoiding the intricate and costly process of scheme participation. This strategic partnership streamlines their operations, reduces complexity, and provides an efficient and compliant route to market.
How we help businesses get access to UK payment schemes
At Edenred Payment Solutions, we offer businesses a seamless pathway to access UK payment schemes, including FPS, BACS, CHAPS and European payment schemes, such as SEPA, on a pay-as-you-go basis, eliminating the need for substantial capital investment on payments infrastructure. Additionally, we can provide UK accounts and EU IBANs, along with card issuing, offering an ecosystem of financial products from a single provider.
We understand that companies strive to design a unique experience for their users, hence why we provide a flexible and modular product offering, which gives organisations the freedom to build products that align with their needs and those of their customers.
For unregulated entities, we support account provisioning with access to payment schemes, allowing these firms to benefit from our licences. Regulated financial institutions, on the other hand, can utilise our payment processing technology infrastructure, while retaining control of the ledgers. Regardless of set up, our API-based interface allows businesses to integrate accounts and payment services seamlessly into their offerings. With detailed documentation to support developers, integration with any backend environment is straightforward and efficient.
Regulatory compliance is at the core of the financial services industry. That’s why our in-house processing capabilities ensure compliance with the latest rules and guidelines of each payment scheme, and we provide guidance to our Agents on managing fraud risk.
According to UK Finance, in 2022, there were over 200,000 reported cases of Authorised Push Payment (APP) fraud on personal accounts, with losses costing consumers over £485m.
To support our Agents to keep fraud at bay, our platform supports the Confirmation of Payee (CoP) feature for UK payments. As the Payment Systems Regulator (PSR) takes steps to crack down on APP fraud, this service enhances security by reducing misdirected payments, and ensuring that funds are transferred to the intended account holder.
By partnering with us, businesses can access a robust, compliant, and efficient payment infrastructure, enabling them to offer comprehensive financial services without the complexities and capital requirements traditionally associated with scheme participation.
Payments in action
Thinking of partnering with us? See how we enabled access to FPS for an innovative fintech focused on improving financial well-being.
Meet our client
Sprive is a mortgage overpayment app designed to help homeowners save on interest and become mortgage-free faster. Sprive’s platform, which links directly to a customer’s bank account, analyses spending behaviours and automatically sets spare cash aside in a Sprive e-money account powered by Edenred Payment Solutions.
What we did
Through our technical expertise and infrastructure, we enabled Sprive to access Faster Payments, and process all the transactions. As the regulated entity, we ensure that the Sprive team follows the latest guidelines and operates in compliance with regulations. This allows the team to focus on product development and user acquisition, knowing that the payments technology and regulatory requirements are taken care of.
The outcome
Through the connection to the Faster Payments scheme, Sprive’s customers can make payments to their mortgage lender, reducing their debt, or withdraw the cash set aside in their e-money account to their bank account. With the integration of FPS, customers experience a seamless and convenient user journey that provides them the flexibility to make extra payments towards their mortgage, while still having immediate access to their funds, fostering true financial flexibility and freedom.
Read more about our work with Sprive.
In conclusion
Understanding how to efficiently access payment schemes is crucial for businesses looking to embed or use payment services. However, the challenges of obtaining the necessary licenses, meeting regulatory requirements, and establishing a robust technical infrastructure can be daunting. Working with Payment Service Providers, like Edenred Payment Solutions, offers a streamlined, cost-effective solution. By leveraging our technical infrastructure and extensive experience, fintechs can conveniently access common UK payment schemes, such as FPS, BACS, and CHAPS, without the complexities and capital investment generally required. Ultimately, partnering with us allows businesses to focus on innovating and elevating the customer experience, while we handle the intricacies of payment processing and compliance.
Get connected to payment schemes easily
If you want to provide financial experiences and need access to UK payment schemes, you're in the right place. Our simple, real-time, flexible, and compliant APIs enable money transfers across a range of UK and EU payment schemes. Our experts are on hand to help you get started and provide guidance every step of the way.
