UK Payment & Banking Market
The UK has a robust payments infrastructure with several key systems, each with its own limitations.
- Faster Payments: A near-real-time electronic payment service. While the system can handle payments up to £1 million, most banks set their own limits, which can be significantly lower. Personal online banking limits are often around £25,000, with business limits and in-branch payments having higher ceilings.
- BACS (Bankers’ Automated Clearing Services): A system for electronic payments that clears over three working days. It’s primarily used for recurring payments like salaries (via Direct Credit) and bills (via Direct Debit). BACS payments have a maximum transaction value of £20 million, though banks may impose lower limits for their clients.
- CHAPS (Clearing House Automated Payment System): A same-day sterling payment system for high-value and time-critical payments. There is no upper limit on CHAPS payments, making it the go-to system for transactions like property purchases.
- Direct Debit: A payment method where a company is authorized to collect variable amounts from your bank account on a set schedule. There is no hard-and-fast limit set by the scheme itself; the limits are typically defined by the creditor or your bank.
- Standing Order: A fixed, recurring payment you set up with your bank. The maximum amount is typically subject to your bank’s Faster Payments limits, as most standing orders are processed via this system.
- Confirmation of Payee (CoP): A fraud prevention service that verifies if the name on a recipient’s account matches the one provided by the payer. This is not a payment method itself and therefore has no transaction limit.
Europe (EU) Payment & Banking Market
The EU operates under a harmonized payment framework called SEPA to facilitate cross-border transactions.
- SEPA Credit Transfer (SCT): The standard SEPA payment method for one-off euro transfers. There is no maximum transaction value set by the SEPA scheme, but individual banks may apply their own limits.
- SEPA Instant Credit Transfer (SCT Inst): An instant payment scheme for euro transactions. The European Payments Council (EPC) previously set a maximum limit of €100,000. However, the Instant Payments Regulation now removes this scheme-wide maximum, allowing Payment Service Providers (PSPs) to set their own limits. This flexibility enables higher-value instant transactions.
- Verification of Payee (VoP): A new scheme being implemented in the EU that mandates payment service providers to verify that the IBAN and the payee’s name match. As a fraud-prevention tool, it is not a payment method and has no transaction limit.
US Payment Market
For comparison, here are two key US payment systems.
- ACH (Automated Clearing House): The US network for electronic bank-to-bank payments. ACH payments are processed in batches and are not instant. Nacha, the organization that oversees the network, has raised the limit for Same-Day ACH to $1 million. However, individual banks often set their own, lower limits.
- Link: https://www.nacha.org/
- FedNow: A new instant payment infrastructure from the Federal Reserve. The transaction limit for FedNow has been increased from the default of $100,000 to $1 million. Financial institutions can choose to use this higher limit.
SWIFT - International Payments
What does SWIFT stand for?
Society for Worldwide Interbank Financial Telecommunications
🔗 Official website: https://www.swift.com
What is SWIFT?
SWIFT is a global messaging network used by banks and financial institutions to securely exchange information about cross-border payments, securities, and financial transactions. It does not move money itself, but instead provides the standardized communication layer that enables international transfers.
How Does SWIFT Work?
- A bank sends a payment instruction (e.g., from London to New York).
- SWIFT transmits the message in a standardized format to the receiving bank.
- The funds are settled through correspondent banks or central bank networks.
This process ensures accuracy, security, and interoperability across thousands of banks worldwide.
Key Features of SWIFT
- Global Reach: Used by more than 11,000 institutions in over 200 countries.
- Standardization: Every message follows ISO 20022 (gradually replacing MT formats).
- Security: Encrypted messaging and strict governance ensure reliability.
- Flexibility: Supports payments, securities trades, FX confirmations, and more.
SWIFT vs SEPA / Faster Payments
- SWIFT = International, cross-border, typically slower and more expensive.
- SEPA / Faster Payments = Domestic/regional schemes (EU or UK) offering faster, cheaper payments.
Limitations of SWIFT
- Costly: Fees often range between $10–50 per transfer.
- Slow: Transfers can take 1–5 business days.
- Reliance on Intermediaries: Multiple correspondent banks can delay settlement.
Why SWIFT Matters in the UK & EU
Despite new alternatives like SEPA Instant, Faster Payments, and even blockchain rails, SWIFT remains the backbone for global B2B and cross-border transactions.
For regulated entities (EMIs, PSPs, banks), SWIFT membership or access via a partner bank is essential for offering full international money transfer services.
