Clearing House Automated Payments System (CHAPS) Defined

What Is the Clearing House Automated Payments System (CHAPS)?

The Clearing House Automated Payments System (CHAPS) is a company that facilitates large money transfers denominated in British pounds (GBP). CHAPS is administered by the Bank of England (BoE) and is used by 30 participating financial institutions. Approximately 5,500 additional institutions also engage with the system by way of partnership agreements with the 30 primary members.

Understanding the Clearing House Automated Payments System (CHAPS)

CHAPS is used by large financial institutions that need to transfer billions of dollars worth of currency each day. To assist in these transfers, CHAPS enables real-time fund transfers and can accommodate frequent large transfers with virtually no delay. The speed of CHAPS also substantially eliminates the risk that senders will cancel their transfers before they are accepted by the recipient.

Because it is used by some of the world's largest financial institutions, CHAPS facilitates roughly $400 billion in currency transfers every business day.

For the most part, CHAPS members are large banks. However, other business entities also use the service through partnerships with primary members. For these entities, CHAPS can be useful for unusually large payments. Using CHAPS can minimize expensive delays or the risk of funds being lost or stolen by intermediaries.

CHAPS is used by large financial institutions for foreign and money market transactions. Companies may used CHAPs for large or time-sensitive payments to suppliers or for tax payments. CHAPS is often used to complete property transactions or for high-value transactions, such as buying a car.

For most everyday transactions, CHAPS is unlikely to be economically viable because the associated costs are relatively expensive compared to alternative mechanisms such as wire transfers or electronic funds transfers (EFTs). A typical transfer might cost as much as $50 over the CHAPS system. Although this fee is large from the perspective of retail users, it is small considering the size of transactions typically made by CHAPS users.

In the United Kingdom, a similar service called "Faster Payments" is also available that focuses on smaller transaction sizes. Like CHAPS, the Faster Payments service allows for nearly instantaneous money transfers. However, it is intended for much smaller transactions, typically of five figures or less.

£468 billion

The amount settled by CHAPS in British pounds sterling on its all-time peak value day Dec. 20, 2017.

Real World Example of CHAPS

The primary members of CHAPS are large financial firms with business interests worldwide. Examples of current CHAPS members include American firms such as Bank of America (BAC), Citibank (C), and JPMorgan Chase (JPM); British firms such as Barclays (BARC), Lloyds Bank (LLOY), and Standard Chartered (STAN); and European firms such as Deutsche Bank (DBK), UBS (UBSG), and BNP Paribas (BNP).

The only primary CHAPS member that is not a large bank is ipagoo LLP, a financial technology company that offers online money transfers in multiple currencies. In Aug. 2019, ipagoo was ordered to cease operations by the U.K.'s Financial Conduct Authority (FCA).