The evolution of the payment methods

The new reality arising from Covid-19 has impacted the whole society. In many countries, the new normal involves wearing a mask in public places and keeping social distance.

The way we pay for products or services has also been affected by the pandemic: many establishments began to recommend payment through electronic means, whether by card, digital applications or using contactless payment systems, such as Google Pay or Samsung Pay.

There are many alternatives available today, but this wasn’t always the case. Payment methods have evolved over the centuries to give us the many options we have in the present day.

How have payment methods evolved and how did the first transactions take place?

Buying things and paying for them is something that is part of our everyday lives nowadays, and we do it several times a week. But how did we get to the situation we know today? Here’s a review of the main milestones:

1. Barter: Evidence of the existence of a barter system goes back to the Neolithic, starting with the emergence of the agricultural/livestock society (probably before 7000 BC). Barter is exchange of material goods or services for other goods or services.

2. Coins: Their first appearance dates from approximately 680 to 560 BC, in what it is now Turkey. The use of coins escalated because barter sometimes posed difficulties for transactions, and certain forms of payment were perishable, so they could not be accumulated. The result was the emergence of coins made of precious metals. A circular shape was adopted as being the most practical.

3. Paper money and banknotes: Their function was to replace coins, because it was uncomfortable to carry coins in large quantities. Banknotes were first used in China in the 7th century, but it was not until 812 that their use became official. It is important to remember that until the 1970s, each issue of banknotes by a country’s authorities had to be backed by a certain amount of gold.

4. Bills of exchange and checks: Bills of exchange date back to 12th-century Italy. This document guaranteed that the debtor would pay the creditor or another person authorised to receive the money in the commercial document. The origin of cheques, on the other hand, dates back to around the 18th century, and is linked to the English Crown.

5. Cards: The first credit cards arrived in 1914, when the Western Union company created a loyalty card for its most exclusive customers, giving them access to a line of credit without surcharges. However, only from 1958 that banks started to offer cards as a payment solution. The first card later came to be known as Visa.

6. Digital payments: With the arrival of the Internet and the World Wide Web system in 1990, goods and services began to be sold through this new communication channel. One of the pioneers was the company Peapod, which offered the possibility of buying groceries from home via a computer. After the disrupted digital revolution of recent years, and with the introduction of new technologies, it is now possible to pay by mobile phone or digital watch.

7. Cryptocurrencies: in 1998, Wei Dai proposed the idea of creating a decentralised type of currency, which would be based on cryptography as a means of control. This gave rise to the concept of cryptocurrency. The first attempts to create a currency were made by David Chaum, using DigiCash and eCash. However, it was not until 2009 when, Satoshi Nakamoto (pseudonym), created the first cryptocurrency, called bitcoin.

At BBVA in Switzerland, we work to offer the best opportunities in private banking and the latest payment methods for our clients.

The bank’s clients can make their payments through Google Pay and Samsung Pay at any establishment that accepts contactless payments, anywhere in the world. This is all done digitally, so your payments are more secure and convenient.

Do you have any questions about this article? Write to us.

For more information, please contact your Investment Advisor.