BACS Full Form: What is BACS and How Indian Businesses and Freelancers Can Use It
BACS full form is Bankers’ Automated Clearing System. It is a 54-year-old payment system that’s been the backbone of UK (United Kingdom) banking. Operated by Pay.UK, which is the organization responsible for overseeing the UK’s major payment systems, BACS is trusted by nearly all major UK banks for moving money electronically.
In this blog, we will help you understand what BACS is, how it works, and how you, as an Indian freelancer or business owner, can use BACS to receive payments in India from your UK clients.
What is BACS?
BACS, or Bankers' Automated Clearing System, is the electronic payment system that manages everyday money transfers across the UK. It's trusted by individuals and businesses alike to send and receive funds securely between UK bank accounts. To give you a sense of scale, BACS processed 1.7 billion payments with a total value of £1,473 billion in only the third quarter of 2024.
BACS handles two main types of payments:
- Direct Debits: These are “pull” payments. Users permit businesses to deduct money from their accounts automatically. Think of paying utility bills, a Netflix subscription, or a gym membership. With Direct Debit, users don't have to keep track of these payments, but ensure that they maintain a sufficient bank balance. BACS Direct Debit contributed 73% to the transaction volume mentioned above.
- Direct Credits: These are “push” payments. Here, money is automatically sent into the user's account. Direct Credit payments are widely used for things like payroll and supplier payments. According to BACS, Direct Credit processes 90% of the British workforce's salaries.
How BACS Payments Work (Timing and Process)
BACS payments follow a simple but structured process, so you always know when to expect your money.
Three-Day Cycle:
A typical BACS transfer takes three working days from start to finish. Here’s how it works:
- Day 1: The payment is submitted to the BACS system (as long as it’s before the daily cut-off, which is usually around 10:30 pm UK time)
- Day 2: The payment is processed by the banks involved
- Day 3: Funds are credited to the recipient’s account
So, if a BACS payment is made on Monday, it will be credited to a user's account by Wednesday.
Business Days Only:
According to this timeline, BACS operates only on UK banking days (Monday to Friday). Payments submitted near weekends or public holidays will take longer. The BACS payment system advises users to download the processing calendar so that they can plan their payments accordingly.
Required Details
To receive a BACS Direct Credit, a user will need:
- UK bank account number
- Sort code (refer to Pay.UK sort code checker)
- Account name
- Name of their bank
No IBAN or SWIFT code is required for BACS transfers, just these basic UK bank details.
If a company is dealing with BACS Direct Debit payments or setting up payroll, they also need a BACS Service User Number (SUN). The SUN is a unique six-digit number assigned to an organization, allowing it to collect payments through direct debits. But as a freelancer or exporter, you’ll mostly be working with Direct Credits.
BACS Payment Fees and Limits
Wondering about the costs and limits when using BACS? Here are a few aspects about BACS that you will find interesting:
Low Cost:
BACS transfers are one of the cheapest ways to move money in the UK. Sending a payment usually costs between 5p and 50p per transaction as bank charges, depending on your bank or payment provider. That’s cheaper than other systems like CHAPS payments, which mostly cost £20–£30 per transfer. And SWIFT international transfers that cost anywhere from £5 to £25. BACS is designed for everyday business payments, so you keep more of the sender's earnings.
Free to Receive:
When someone receives a BACS payment, they don’t pay any fees. The sender covers all the costs, meaning if your client sends £1,000, you get the full amount in your account
High Limits:
BACS can handle payments of up to £1 million per transfer. This is much higher compared to Faster Payment Services (FPS), a popular system for near-instant UK transfers. This means if you’re invoicing your client for big projects, they can easily send that amount through the BACS payment method.
Easily Accept BACS Transfers from UK Clients with Skydo
Your UK client would be more comfortable paying you through BACS. But as an Indian resident, opening a UK bank account will be a long and arduous process. In that case, you’re only left with the option to receive payments through SWIFT, which is an expensive route.
There is an alternative to SWIFT transfers. It’s called Virtual accounts.
With Skydo, you can create these virtual accounts to accept BACS payments and offer peace of mind to your clients. All you have to do is follow this step-by-step process:
- Get a UK Virtual Account: Sign up on Skydo. It’s quick, easy, and fully RBI-compliant. You’ll instantly receive your UK bank details with sort code and account number to start receiving payments in GBP.
- Share Details with Your Client: Send these account details to your UK client. They can pay you via BACS Direct Credit payments, just as they would any UK supplier. No extra codes or special setup is required.
- Receive GBP Locally: After the standard BACS cycle (about 3 working days), funds will show up in your Skydo GBP account.
- Convert and Remit to INR: Skydo converts your GBP to INR based on the live forex rate within 18–24 hours and transfers it directly to your Indian bank account. No manual follow-ups needed.
- Fast Process: From the time your funds reach Skydo, the whole conversion and transfer process usually takes just 1–2 business days.
- Transparent, Flat Fees: Skydo charges a simple flat fee. USD 19 per transfer for transfer amounts under $2,000, $29 if it is over $2,000, and 0.3% of the amount if it is $10,000+. There are no hidden forex margins. You always get the mid-market rate, which means you keep more of your earnings compared to high SWIFT charges.
If you ever get stuck, Skydo’s India-based support team is ready to help you with onboarding or any questions along the way.
Sign up with Skydo today and make it easy for your UK-based client to pay you through the BACS payment scheme.
