How much do you know about money? A brief history of payments

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We work for it, think about it and want it but how much do we know about how money came to be? 

A land before money

Money as we know it today is the product of a trade network that has been evolving for thousands of years.

So what did we do before money? We bartered. Bartering dates back to 6000 BC and wasn’t just a simple case of: “I’ll trade you some animal pelts for an axe”. It relies on a trader being interested in what you have to offer. If I want an axe but no one is interested in my animal pelts then I have one of two options: I either find something else to trade or I keep searching for someone who wants an animal pelt. Money was invented to speed up business and allow trade with anyone.

The most commonly exchanged items were cattle, food, tea, spices and weapons. People still exchanged whatever they could – sometimes even human skulls. Salt was also popular. The Romans valued salt so much that their soldiers were paid in it.

In the Middle Ages, bartered items became more diverse as people travelled further and more frequently. Furs, crafted objects, silks and perfumes were popular items, traded around the globe.

China and the start of coins

In 1000 BC China, trading with small replicas of items became common. Weapons were highly valued trading objects and replicas were far easier, and lighter, to carry than the weapons themselves. Sword and spade replicas, cast in bronze and referred to as ‘cowries’, evolved to become the coins we know today.

It was only in 600 BC that the first official currency was minted by King Alyattes of Lydia (present-day Turkey). King Alyattes’s coins were made of a naturally occurring alloy of gold and silver and were decorated on one side with the symbol of an animal. The concept spread quickly from Turkey to Greece and across the Roman Empire. Standardised coinage allowed trade to flourish across the Mediterranean, with each country trading in their own currency. It wasn’t until 1250 AD that the predecessor to the Euro came about, a gold coin named a ‘florin’, widely accepted across Europe allowing people to trade coins internationally.

‘Flying cash’

The world’s first bank note was created by the Tang dynasty in China in 800 AD. Just as sword replicas were easier to carry than actual swords, paper currency was easier to carry than a bag of copper coins. Invented as a by-product of block printing, paper currency was nicknamed ‘flying cash’ due to its tendency to fly away.

Never meant to be legal tender, this currency was predominantly traded between merchants who could exchange their paper for hard currency in the capital. A promissory note, provided as a promise to pay the bearer an agreed number of coins, grew in popularity because it could be mass produced without needing raw materials such as gold, silver or copper and was a more secure way to transport large sums of money over long distances.

Electronic money

In 1871 American financial services and communications company Western Union created a money transfer service by telegram, allowing money to be exchanged without notes or coins for the first time. With the decline of the telegram, electronic transfer of money evolved. In 1972 the Automated Clearing House was established by the US Federal Reserve to provide the US Treasury and commercial banks an alternative to cheque processing which was labor intensive and costly. This electronic system allowed an instant transfer of funds with detailed tracking information removing the need for paper cheques. These benefits lead to similar systems spreading across Europe, increasing the use of electronic currency. It continues to be the system we use today for most of our transactions.

Plastic payments

Just as paper currency was born out of a need for convenience, so too were plastic payments. The credit card was the first plastic currency, invented in 1946 by John Biggins of the Flatbush National Bank as the ‘Charge-It’ program, allowing bank customers to buy with credit at local stores. The bank would pay the stores and collect the debt from customers. Debit cards are popular for providing a safe transfer of money, requiring a pin or signature with audited times, amounts and locations of transactions, making it easier to detect theft or fraud. The first debit card made its appearance in the mid 1970s in America, and was only offered to those with large savings accounts and a long and good standing with the bank as funds were not directly debited from the account. In the late 1980s the UK launched its first debit card which steadily increased in popularity when in 2010 debit card spending in the UK overtook cash.

Contactless payments

Now with contactless payments, money can be transferred by a range of devices which use an antenna to transmit purchase information when touched to a contactless terminal. In 2014 Apple introduced ‘Apple pay’ to allow payments with mobile devices. Barclays are also trialling the use of currency loaded wristbands called ‘bPay’.

However we see money, be it coins in our hands or digits in our bank accounts the basic principles that give it value remain the same. Money needs to be something which is a medium of exchange, has qualities of measurement and most of all must be something that we trust to be of value.

Ida Fanous is AAT's Email Communications Executive..

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