February 28, 2023
7 mins read
CHAPS Payments: a full guide
What is a CHAPS payment?
The abbreviation CHAPS is used to refer to the Clearing House Automated Payment System. CHAPS was established in 1984 by the Bankers Clearing House in London; however, over its history, the CHAPS system has been handled by a variety of organisations, and in 2017, the Bank of England took over the management of the CHAPS system.
A CHAPS payment is similar to a traditional bank transfer in that it involves the movement of money between two accounts. CHAPS, on the other hand, is often used for the conduct of high-value transactions. The CHAPS system manages a significant amount of money at any one time. According to the data provided by the Bank of England, the daily average value of CHAPS transactions in February 2021 was £341 billion.
CHAPS is under the supervision of the Bank of England, and it may only be used to settle pound transactions that take place inside the United Kingdom.
How does the CHAPS system work?
In terms of how payments are processed, CHAPS transactions are comparable to bank transfers in their functionality. Depending on the bank that you use, you may be able to initiate a CHAPS payment by coming into one of your branches or, in some circumstances, by doing so. Remember that you need to prepare all of the data about the payment and the payee.
If you are a client of Starling and would want to submit a CHAPS payment (a transfer of more than £500,000), you will need to get in contact with customer care.
Which banks use CHAPS?
Although the vast majority of financial institutions in the UK are equipped to transmit and receive CHAPS payments, only certain of these institutions are considered “direct participants” in the CHAPS system.
A bank doesn’t need to be a direct participant in the CHAPS system for the bank to transmit and receive CHAPS payments. A significant number of individuals rely on sponsors or intermediaries to manage their CHAPS payments. Starling is now placed in this predicament.
Through the use of our sort code verification tool, you will be able to determine whether or not your bank will accept CHAPS payments. To figure it out, simply input your bank’s sort code.
The Bank of England recognises the following financial institutions as direct participants in CHAPS:
|Banco Santander, S.A.||ClearBank Limited||ING Bank N.V.||State Street Bank and Trust Company|
|Bank of America N.A.||CLS Bank International||J.P. Morgan Chase Bank N.A.||The Co-operative Bank plc|
|Bank of China Limited||Clydesdale||LCH Limited||TSB Bank plc|
|Bank of England||Danske Bank||Lloyds Bank plc||UBS AG|
|Bank of New York Mellon||Deutsche Bank AG||National Westminster Bank plc||Virgin Money|
|Bank of Scotland plc||Elavon Financial Services DAC||Northern Trust Company|
|Barclays International||Euroclear Bank SA/NV||Royal Bank of Scotland plc|
|Barclays UK||Handelsbanken plc||Santander UK plc|
|BNP Paribas SA||HSBC Bank plc||Societe Generale|
|Citibank N.A.||HSBC UK Bank plc||Standard Chartered Bank plc|
What are CHAPS payments used for?
CHAPS is often used for the transmission of costly and sometimes “time-sensitive” payments.
Individuals might use CHAPS to make a down payment on a property or shift money between accounts, while businesses could use CHAPS to pay their suppliers or their taxes. CHAPS stands for the Clearing House Acceptance System.
How long does a CHAPS payment take?
CHAPS transactions often get payments on the same day. Specifically, whether the payment is made before the cut-off time for CHAPS transactions. The CHAPS payment mechanism may be used for bank-to-bank transactions on weekdays between the hours of 6 a.m. and 6 p.m. local time. However, the cutoff time for transactions at your bank may be different.
Same-day CHAPS payments may be requested by customers of Starling by phoning customer service between the hours of 9 a.m. and 3 p.m. (GMT) Monday through Friday.
What is the CHAPS payment limit?
There is no maximum or minimum amount that may be paid with CHAPS; however, Starling clients are obliged to use CHAPS for any transfer that is more than £500,000.
Requirements for direct access to CHAPS
To join CHAPS directly and continue to participate in the programme after doing so, an organisation must first satisfy specific conditions.
It is necessary for an organisation to:
- You should have a bank account that may be accessed to meet commitments and make payments. The terms and conditions for accessing accounts are outlined in the Settlement Account Policy of the bank.
- Adhere to the requirements outlined in the definition of a participant that may be found in the Financial Markets and Insolvency Regulations of 1999.
- If the company’s headquarters are located somewhere other than in England and Wales, you should offer legal advice on the company’s status and the conclusiveness of the settlement.
- At all times, ensure that you strictly abide by all of the operational and technical requirements, such as those described in the CHAPS Reference Manual.
The Bank operates based on the idea of “trust but verify.” Direct Participants are obligated to self-certify that they comply with all rules and responsibilities established by CHAPS, as well as to report any instances in which they fail to do so. In addition to that, the Bank could attempt to validate particular locations.
The usage of SWIFT FIN Copy, interfaces that can connect to and process messages sent over the SWIFT network, and connections to the SWIFT network via one or more BICs are all considered to be necessary technical conditions. Access to the Extended Industry Sort Code Database and the Enquiry Link function offered by the Bank are two additional components that are needed. VocaLink has provided a new window for this link to open should you want to click on it.
What are the benefits of using CHAPS payments?
Direct access to CHAPS allows payment service providers to make high-value same-day payments to their clients in a safe manner while reducing the amount of time it takes to complete the transaction. There is neither a minimum nor a maximum amount that can be paid.
The real-time gross settlement mechanism used by the Bank in conjunction with the SWIFT messaging network contributes significantly to the high degree of operational resilience that is present.
Because settlement risk is avoided among direct CHAPS participants at the expense of a larger demand for liquidity, this design is best suited for a high-value payment system with the biggest potential for systemic risk. This is because settlement risk is avoided among direct CHAPS participants.
What are the disadvantages of using CHAPS?
There are several difficulties associated with the CHAPS payment.
- The tight timelines may make your relocation more challenging.
- If you make a mistake, it is difficult to cancel a CHAPS payment after it has been made, which means it is possible that you to get your money back if you make a mistake.
- Why do banks charge an average of £25 to £30 for CHAPS, which makes it much more expensive for the end user in comparison to other payment methods
Are CHAPs payments safe?
The CHAPs system is regarded as having an extraordinarily high level of security as a result of the fact that it is an isolated network that is comprised only of authorised financial institutions. Since 2017, the Bank of England has been tasked with the responsibility of supervising CHAPs, which are subject to stringent regulations.