From Bartering to Digital Payments: A Brief History of Money

When you leave the house what is one of the first things you make sure to have with you?

Money.

Be it in your wallet, or phone, money has become a human necessity.

From buying a pack of gum, to renting a flat, to booking your summer holidays, the importance of money is not restricted to your weekly grocery shop. Rather, acting as a medium of exchange, money determines one’s purchasing power both in a local and global standing.

Together with the development of the world, money itself has seen both an evolution and revolution, including the introduction of different forms and currencies.

But where did it all begin?

From bartering, to coins, to paper notes, to digital payments, money has had a rich history all the while educating us on different cultural changes.

Let’s dive into a brief history of money and explore how it evolved throughout the ages.

From Cowrie Shells to Coins: The Birth of Money

Before currencies existed and money was a concept, people relied on the exchange of commodities.

The process: bartering.

Bartering systems allowed for connections to be formed amongst people locally and globally since goods one region possessed might not have been available in another.

Additionally, the bartering system asked people to be inventive since a year of bad crop might reduce the bartering power of a farmer, who then had to explore other avenues to have produce to exchange.

Cowry shells, chickens, cows, eggs. You name it, it was bartered.

However, while bartering allowed for the trade of commodities and formed the initial stages of establishing an economy, who determined the value of each item exchanged? How much was a kilo of potatoes worth? How many cows could be exchanged for a house?

To deal with such a “complex accounting and payment system[s]”, a structure of currencies emerged and the birth of the coin introduced ease of transactions.

When and where did the first coins appear?

Claimed to have been founded in Ancient Lydia in the 7th Century, the coin, together with being the first form of money as we know it today, brought with it a development in human trade.

According to the British Museum, these initial coins bore the head of a lion, were of equal “weight and purity,” and replaced the exchange of commodities, allowing for more efficient trade.

While before in order to get a kilo of apples you had to exchange your chicken for them, with the birth of coins you got to keep the chicken and the apples! Instead, you could purchase the apples by paying the amount of coins they were worth.

The Changing Faces of Money: From Gold to Paper

You know the good old saying that “money doesn’t disappear, it changes hands”?

Well, it’s not just hands that it changes, but also faces.

And I am not talking about plastic surgery.

Indeed, while one might expect the coin to be the predecessor of paper notes, historical accounts show that while in 7th century Ancient Lydia the coin was birthed, at the same time in 7th century China, paper notes emerged.

However, while China pioneered the use of paper notes, it took them roughly another 600 years before they attempted to replace coins with paper money. Hence, showing that while innovative, (and although flammable) it took a while for people to warm up to paper notes.

In the meantime, Europe took their time - quite literally - to implement the use of paper notes, taking them ten centuries since paper notes first emerged in China until they adopted them.

The first form of paper money in Europe, emerged in Sweden in 1661, at about the same time when the Bank of England started issuing cheques, otherwise known as “running money”. These cheques acted as promised money and could be exchanged at the bank.

With the rise of paper money spanning throughout the centuries - it was not until 1853 that the UK issued its first printed notes - we also see the emergence of different currencies amongst different countries.

From paper money to international currencies being traded

Countries have found it beneficial to retain their own currencies and, in what resembles a bartering system, different currencies hold different purchasing power over each other in what is known as an exchange rate.

An exchange rate is the rate at which one currency can be exchanged for another (it is always Wise to check the mid-market rate when you are exchanging currencies).

With each currency forming its own system, according to Investopedia, some of the most tradable currencies include but are not limited to, the US dollar - which acts as a benchmark against other major currencies; a benchmark being a reference of performance - the Euro, the Japanese yen, and the Swiss franc.

The Digital Revolution: How Technology is Transforming Money

With the technological advancement that we have in the 21st century, it is no question as to why and how there has been a surge in online payments, with most people using their mobile phones to process transactions.

Dating it back to 7th Centure Lydia, while it can be argued that originally coins were introduced to assign value, one common factor remains constant throughout the evolution and history of money: convenience.

With the digital revolution, money has become more accessible, easily transferable, and most importantly, convenient.

With the use of mobile phones and other electronic devices booming, people no longer need to commute to their local bank for the processing of transactions. It is within their fingertips.

Imagine this: it is a Monday morning, the tube is packed, you’re already late to work, but you need to go to the bank to exchange money for your upcoming trip. You keep patting your pockets, trying to look nonchalant while afraid that someone might rob you. And now you are sweating as well! Perfect. And there are still three more stops to go!

Now, imagine this: it is a Monday morning and you need to exchange money for your upcoming trip. You log into your Wise account and exchange British Pounds to Indonesian Rupiah. Done. Now you are scrolling through Pinterest pinning different recommended locations. And it’s still 7:45!

In a globalised world where people live international lives, where young students go to study abroad, away from home, some financial tech companies (did somebody say Wise?!) allow for fast and secure international online transfers.

With a simple click, people can exchange currencies at a mid-market rate, saving them money, time, and energy.

With the transformation of money we see the transformation of the world. With the globalisation of the world emerges the globalisation of monetary transactions.

Money 2.0: What Does the Future Hold?

Throughout history the evolution of money has been parallel to human development and advancement.

Currently money is becoming more and more digitalised with many retail stores no longer accepting cash payments, promoting an increase in digital transactions.

And now we’re starting to see e-money emerge…although they’re yet to be widely adopted. Could this mean that, in the future, physical money may be completely replaced?

With financial publications, like Forbes and Investopedia, naming digital currencies as “the money of the future,” it is worth paying attention to a new wave of monetary revolution that could completely change how money is processed and traded.

That being said, could bartering be back on the cards? While money is increasingly being cybernated, there’s also backlash. As some people within society are looking for more eco-friendly and sustainable ways of handling their money, many have returned to bartering.

During the Covid pandemic in 2020, the Guardian revealed that some people were swapping items, exchanging clothes for food, in order to help and support each other in an otherwise financially unstable time.

Hence, while money is increasingly digitalised, people still practice the exchange of “money” in its most primal form.

Each era in the history of money is made of myriads of moments that have led to the way we use and know of money today.

Money didn't just pop up out of nowhere. It has a long history and has evolved over time, reflecting how people, cultures, and trade have changed too.

But even though the way we use and exchange money has changed, the basic idea remains the same: it's a tool for communication, exploration, and living life to the fullest.

And with the world becoming more interconnected than ever, the change we want to see most is a world where money is without borders. That's why we built Wise, to help international people move their money as easy as a tap of a finger.

Written by Eleni Socratous