CHAPS (CHAPS)
CHAPS is the United Kingdom's high-value sterling payment system, operated by the Bank of England. It settles each payment individually and irrevocably in real time across the Bank's RTGS infrastructure, which is what makes it the rail for house purchases and wholesale settlement.
Also called: Clearing House Automated Payment System
Responsibility for operating CHAPS transferred to the Bank of England in November 2017; the Bank sets its rules and technical standards and acts as end-to-end risk manager. Each payment settles individually, in real time, in the Bank’s real-time gross settlement system — the Bank describes the model as risk-free at the cost of an increased need for liquidity, because a bank must have the funds in its settlement account at the moment the payment is made rather than netting them off later.
That trade-off is the reason CHAPS exists alongside Faster Payments. For a conveyancing completion, a corporate treasury movement or an interbank position, certainty of settlement matters more than the liquidity it consumes, and the payment is irrevocable once made. The Bank reports CHAPS carrying hundreds of billions of pounds on an average day across a few hundred thousand payments — large values, modest volumes.
Access is through direct participation in the system or, far more commonly, indirectly through a direct participant that provides sterling clearing. For a payment institution or EMI, “CHAPS access” in practice usually means a sponsoring bank’s access, with everything that implies about the relationship.
In practice
CHAPS is sterling only and operates on banking days within defined hours, unlike Faster Payments, which runs continuously. It is also irrevocable: a payment sent in error cannot be pulled back, only requested back from the recipient's bank, which is why it is the rail most often exploited in authorised push payment fraud.
Example
A property completion at 13:40 on a Friday goes by CHAPS because both solicitors need certainty that the money has settled before keys change hands. The same client's £200 utility bill goes by Faster Payments, and neither would choose the other's rail.
Commonly confused with
| Term | How it differs |
|---|---|
| Faster Payments | Faster Payments is the UK's 24/7 retail instant rail, settling on a deferred net basis. CHAPS is high-value, real-time gross, and open on banking days only. |
| BACS | The UK's three-day batch system for direct debits and salary credits. Cheap, slow and pull-capable — the opposite design choice to CHAPS. |
| Fedwire | The US equivalent in role: a central-bank-operated real-time gross settlement system for high-value domestic payments. |
See also
- RTGSRTGS stands for real-time gross settlement: a system that settles each payment individually and finally in central bank money, rather than offsetting many payments against each other and settling only the difference at the end of a cycle.
- Faster PaymentsFaster Payments is the United Kingdom's 24/7 instant sterling payment service, operated by Pay.UK. Central infrastructure supports payments of up to £1 million, but each participating institution sets its own, usually much lower, limits.
- FedwireFedwire is the Federal Reserve’s real-time gross settlement system for US dollar wires. Each payment is settled on its own, for its full amount, across the banks’ accounts at the Federal Reserve, and it is final the moment it settles.
- SettlementSettlement is the point at which value actually moves between parties and the obligation between them is discharged. It is a separate step from clearing, which only works out who owes what, and from finality, which is the moment the transfer can no longer be reversed.
- Payment RailA payment rail is the underlying network a payment travels over: ACH or Fedwire in the United States, SEPA in the euro area, a card scheme, a domestic instant scheme, or a blockchain. The rail chosen decides what the payment can and cannot do.
- Real-Time PaymentsReal-time payments are bank transfers that clear and settle within seconds, at any hour, and are irrevocable once the receiving bank accepts them. RTP is also the proper name of one of the two US instant networks, which is a common source of confusion.