BACS All Folks: A History of the Bankers Automated Clearing Service

With the recent news that BACS payments had reached an important milestone, many people may be unaware of the importance of BACS and the role it plays in finances worldwide.

BACS originated in the United Kingdom in 1968. It was created by Dennis Gladwell as the Inter-Bank Computer Bureau. It was set up to take advantage of electronic advances and allowed transfer of fund between banking institutions without the need for any paper documentation.

The name was altered in 1971 to be known as the Bankers’ Automated Clearing Services. There was expansion during this time, with an additional service available via telephone (BACSTEL) in the early 1980s.

As more banks and building societies joined in the service during the mid-80s, the name was shortened to ‘BACS Ltd’.

Moving forward

For many years, BACS continued successfully, being utilised by businesses, banking and corporations. From 2003, BACS sought to take advantage of the digital advancements made by moving from BACSTEL to an internet-based version of the system.  This was known as BACSTEL-IP and offered a faster, more secure method of monetary payments.

BACS payments were much faster than cheques, which could take up to a week to clear. With BACS, transactions were as follows:

Day 1: Transaction entered into system

Day 2: Transaction processed

Day 3: Transaction cleared

Recently, it became clear that these transactions needed to be much faster. The Faster Payments Service initiative was implemented in 2008. FPS aimed to reduce the original three days duration to a matter of hours. Encouragingly, nine banks and one building society committed to the initiative. These institutions comprised 95% of all payments traffic.

BACS is an effective and trusted method of payment. Since inception, over 100 billion transactions have been completed. Almost every part of the UK workforce is now paid via BACS. It continues to be an adaptable and prevalent tool in finance.

First Capital Cashflow is a leading BACS approved bureau and are available now to discuss any payment-related issues your business may have. We can give expert advice on how to get the best systems in place to maximise efficiency and minimise hassle. Call us on 0808 163 4357.

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