Global payments
Posted on Oct 6, 2025
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If you work with clients in the United Kingdom, chances are you’ve heard the term BACS payment being mentioned. In the UK, it’s one of the go-to methods for paying salaries, settling invoices with suppliers, and taking care of regular bills. But if you’re based outside the UK, say you’re a freelancer in India or running an export business, the idea of BACS can feel a little unfamiliar and even overwhelming at first.
That’s exactly what this blog is here to clear up. We’ll walk you through what BACS really means, how it works behind the scenes, the different types of payments it supports, and most importantly, how Indian businesses like yours can receive BACS transfers without any hassle. And because managing international payments shouldn’t slow you down, we’ll also show you how Infinity makes the entire process simple and stress-free.
About BACS Payments: Meaning and Full Form
BACS stands for Bankers’ Automated Clearing System. It is one of the most established electronic payment systems in the United Kingdom, allowing money to move directly from one bank account to another in a secure and reliable way.
Introduced in 1968, BACS was created to reduce the use of cheques, which were slow and required too much manual work. By handling payments electronically it made the process faster, safer, and easier for both businesses and individuals. Over the years, it has grown into the backbone of everyday financial transactions in the UK.
Today, BACS is managed by Pay.uk, the organisation that oversees many of the UK’s key payment systems. Every year, billions of BACS payments are made, including payroll deposits, supplier invoices, and routine household bills. For anyone working with UK-based clients, having a good understanding of BACS is important because it remains one of the most trusted and widely used methods of payment in the country.
How Do BACS Payments Work?
Unlike instant payment systems, BACS transactions follow a three-working-day processing cycle, designed to ensure secure and accurate transfers.
Day 1 – Submission: The payer's bank sends payment instructions to the BACS network. This initiates the transaction, whether for a single payment or bulk transfers.
Day 2 – Processing: BACS validates all transaction details, including account numbers, sort codes, and fund availability, while coordinating between banks.
Day 3 – Settlement: Funds are debited from the sender's account and credited to the recipient's account, making the money available for use.
BACS operates only on UK banking days, excluding weekends and public holidays. This affects when payments actually arrive.
For example, a payment submitted on Monday clears by Wednesday. However, a Friday submission won't be completed until the following Tuesday, as the weekend doesn't count toward the processing cycle.
Businesses should factor in this timeline when scheduling payroll, supplier payments, or direct debits. Submitting payments early in the week and ahead of public holidays helps avoid delays and maintain smooth cash flow.
Types of BACS Payments
BACS has two types of transactions, each serving different payment needs:
1. Direct Debit
Direct Debit allows organisations to pull funds directly from a customer's bank account. This method is ideal for recurring payments where amounts may vary or occur on regular schedules.
Common uses include:
Utility bills (electricity, gas, water)
Subscription services (streaming platforms, memberships, insurance)
Loan and mortgage repayments
Mobile phone contracts
Customers are protected by something called the Direct Debit Guarantee. It’s a safety net that promises them an immediate refund if money is ever taken from their account by mistake or without their permission. This extra layer of security gives people peace of mind and makes them feel comfortable setting up automated payments, knowing they are always in control of their money.
2. Direct Credit
Direct Credit works in the opposite direction—it enables businesses and organizations to push money into recipients' accounts. This is the mechanism behind most regular payments that employees and suppliers receive.
Typical applications:
Employee salaries and wages
Pension payments
Government benefits and tax refunds
Supplier and vendor invoice payments
In everyday language, Direct Credit is often called "BACS Credit" or simply a "bank transfer" in the UK. It provides a reliable, traceable way to distribute funds to multiple recipients efficiently, making it the preferred choice for payroll processing and bulk payment operations.
Advantages and Costs of BACS
Key Benefits of BACS
Affordable for Everyone
BACS is one of the cheapest payment options in the UK, which makes it perfect for businesses handling lots of transactions regularly.
Predictable Timing
The three-day processing cycle never changes, so businesses know exactly when money will arrive. This makes it simple to plan salary payments, schedule supplier invoices, and keep cash flow running smoothly.
Works Everywhere
Almost every UK bank and building society accepts BACS payments. You won't need to worry about whether the recipient's bank can handle the transfer.
Safe and Protected
BACS follows strict banking security standards to keep transactions safe. If you're using Direct Debit, there's extra protection through the Direct Debit Guarantee—customers can get immediate refunds if money is taken by mistake or without permission.
Costs of BACS
Sending Money
Each BACS payment usually costs just a few pence, though the exact amount depends on your bank or payment provider. Many business accounts include BACS transactions in their monthly package.
Receiving Money
Getting paid through BACS is free. Recipients don't pay anything when funds land in their account.
Perfect for Bulk Payments
These low costs make BACS ideal when you're sending lots of payments at once—like paying staff salaries each month or settling bills with multiple suppliers. The cost per transaction stays tiny no matter how many payments you process.
How Indian Businesses Can Receive BACS Payments from UK Clients?
Here's the challenge: BACS only works within the UK banking system. It requires a UK sort code and account number, meaning your Indian bank account cannot directly receive BACS payments. This creates complications for Indian freelancers, exporters, and businesses working with UK clients.
Fortunately, there are two solutions:
Option 1: Open a UK Bank Account
You can open a traditional UK business bank account, but this requires:
A registered UK business entity
Extensive documentation and verification
Several weeks or months to complete
Often a physical UK presence or director
For most Indian SMEs, this option is too complex and time-consuming to be practical.
Option 2: Use a Payment Service Provider (Recommended)
This is the simpler, faster solution that most Indian businesses prefer.
How it works:
Payment service providers (PSPs) issue you virtual UK banking details—a real sort code and account number. Your UK clients pay you via BACS just like they would any local supplier. Once the payment arrives, the PSP converts the funds from GBP to INR and deposits them into your Indian bank account.
Why it's better:
This approach keeps things simple for both sides. Your UK clients use their familiar BACS system without extra steps, while you receive INR directly in India. You avoid UK business registration, lengthy compliance processes, and international banking complications—making cross-border payments smooth and hassle-free.
How Infinity Helps You Receive International Payments?
At Infinity, we make receiving international payments faster, cheaper, and compliant. Here's what you get when you sign up with Infinity:
Key Benefits
Lowest Transaction Fee
Infinity charges just 0.5% (inclusive of all charges) as a transaction fee—one of the most competitive rates in the market.
Fastest Settlement
Your payments settle within 24 hours. Traditional methods typically take 2-5 working days to process international transfers.
Automatic FIRC
Infinity generates your FIRC (Foreign Inward Remittance Certificate) instantly and free of charge after every successful transaction. This keeps you compliant with RBI's FEMA regulations effortlessly.
Multi-Currency Account
Get access to a multi-currency account that lets you receive payments in 50+ currencies from clients worldwide, not just the UK.
Why Choose Infinity?
Whether you're an exporter, freelancer, or startup founder, Infinity ensures every foreign inward remittance is fast, affordable, and compliance-friendly. Every international payment arrives with proper documentation—your FIRC—keeping you audit-ready and stress-free.
Conclusion
BACS is a reliable and cost-effective payment system that plays a huge role in the UK’s financial ecosystem. For UK businesses, it’s the backbone of payroll, supplier payments, and bill collections. For Indian businesses, it’s important to know that you can’t receive BACS directly — but with the right partner, like Infinity, you can still make the process smooth and professional.
By offering your UK clients the convenience of BACS payments through a virtual UK account, you remove friction, get paid faster, and save on fees.
FAQs
Q1. What does BACS stand for?
BACS stands for Bankers’ Automated Clearing System.
Q2. How long does a BACS payment take?
BACS follows a three-working-day cycle (submission, processing, settlement).
Q3. What’s the difference between BACS and Faster Payments?
BACS takes 3 days but is very cheap and ideal for bulk payments. Faster Payments are instant but often have lower limits.
Q4. Can Indian businesses receive BACS directly?
No. BACS is a UK-only system and requires a UK bank account. Indian businesses can use providers like Infinity to get paid through virtual UK accounts.
Q5. Is BACS safe?
Yes. It’s a highly secure and regulated payment system. Direct Debits also come with a Direct Debit Guarantee for extra customer protection.
