How the Payment Mechanism Has Changed Over the Years?


No one has a clear idea of who invented money and when exactly. Talking about evolution and history might seem a strange concept as it is believed money has been around for most of human history. By most accounts however, some of the historians say it predated the wheel in the early 5000 B.C, which means it is one of the earliest inventions and is as old as human civilization itself.

The fact that material form of money has changed considerably from cattle to today’s electronic currencies let us try to find out how did we get from there to here.

The History of Money and Payment Methods

People have been engaged in trade and commerce for exchanging goods and services throughout the history. The financial transactions were not always in the form of monetary payments. There was a time when there was no clue of standard money and people had to use other types of payment methods.

To find out about these payment methods, here is a sneak peek of the history of money:

Payment with Barter:

The concept of barter dates back to 6000 BC, introduced by Mesopotamia tribes and adopted by Phoenicians when money was not invented. Barter is the exchange of services or resources for mutual advantage between two parties or groups. Goods back then were exchanged for food, weapons, tea and spices. At times, human skulls were also used for barter. Salt was another popular item for barter and was considered so valuable and expensive than the earnings of Roman soldiers were paid with it.

Since there were no standard criteria for determining the value of goods and services, the system resulted in clashes and disputes.

Payment with Cattle:

Cattle was another form of money in the prehistoric times that included not only cows, but also camels, sheep, and other livestock. It was considered wealth that people could amass.  If someone owned more cows or sheep, he was considered wealthier and stronger.

Soon after cows and other livestock became units of exchange and thus, the concept of money came into being: they became cash on legs. There are parts of Africa where commodities are priced in cows and camels. This payment method had its own charm, though there were niggling doubts about who sets the standard for cows and camels, and hence the payment method shifted to cowrie shells in 1200 B.C.

Payment with Cowrie Shells:

The first use of cowries was in China in 1200 B.C. These were shells of a mollusk available in abundance in the shallow waters of the Indian and Pacific Ocean. Many societies back then used cowries as a form of money and is still used in some parts of Africa today. It is known as the longest and most widely used currency in the history of mankind.

Payment with Precious Metal Coins:

China first manufactured copper and Bronze cowrie imitations in 1000 B.C. Since these Copper and Bronze cowries were made by the end of the Stone Age, they are considered some of the most primitive forms of metal coins. The metal tool money was also used in China first and it included spade monies and knives. These ancient monies were then converted into the first versions of round coins that we have today.

The Chinese coins at that time were made out of base metals that often consisted of holes so that they could be arranged in a chain-like presentation.

 

The Modern Coinage for Payment:

The first modern coins were manufactured out of lumps of liver outside China. They were then shaped into the round coins we have today. The early coins to mark authenticity had stamps of emperors and rulers on them. They appeared for the first time in Lydia, which we call Turkey today, however, the techniques were instantly copied and refined by the Greeks, Macedonian, Persia and Roman empires. Unlike the Chinese coins, their modern coins were manufactured from expensive metals such as gold, bronze and silver.

Payment with Leather Money:

Leather was used as an important material for currency in China in 118 B.C. The ancient Chinese made this leather money out of white deerskin and were as large as on-foot squares of deerskin with colorful borders. This is considered as the first documented kind of banknote.

The Paper Currency:

The first paper banknotes also were made by the Chinese. China has experienced almost five hundred years of ancient paper money from the ninth to the fifteenth century. During this period, these paper notes grew to the point that inflation soared and their value depreciated swiftly. At the beginning of the 1400s, the paper notes disappeared in China for more than six hundred years.

Payment with Gold:

In 1816, Gold was made a standard of value in England and guidelines were made to allow the production of banknotes representing a certain amount of gold. Although banknotes were used in England for many years before this time, their value was not directly tied to gold. In 1900, the Gold Standard Act was enacted at official terms in America that resulted in a need for a central bank.

A few years later by 1913, the United States made the Federal Reserve system that served the financial matters of the country for many years until the advent of credit cards.

Payment with Credit Cards:

The first credit card was made by Frank McNamara in 1950 when he realized he has no money to pay for his meal at a restaurant. That is why the first credit card is called the Diner’s Club and was only accepted in hotels and restaurants in New York.

By the year 1958, American Express entered the marketplace and brought these Diner’s Clubs to the mainstream.

 The Concept of Online Payment:

With the rise of technology and the advent of the Internet during the 1990s, the concept of an online payment made its way to the market. Historical data suggests that one of the first retailers having used online payment is Pizza Hut, which later on allowed people to order pizza from their website by the end of 1994.

Today, people are paying on the go more than ever before with their smartphones without being tied down to a cash register at all. It would be interesting to see where the currency will head in the next few years.

Well, what do you think so? Let us know in the comments section!

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