History of Payments

Coins
Bullion and unmarked metals

An ox-hide ingot from Crete. Late Bronze Age metal ingots were given standard shapes, such as the
shape of an "ox-hide", suggesting that they represented standardized values.

Metal ingots, silver bullion or unmarked bars were probably in use for exchange among many of the
civilizations that mastered metallurgy. The weight and purity of bullion would be the key determinant
of value. In the Achaemenid Empire in the early 6th century BCE, coinage was yet unknown, and barter
and to some extent silver bullion was used instead for trade. The practice of using silver bars for
currency also seems to have been current in Central Asia from the 6th century BCE. Coins were an
evolution of "currency" systems of the Late Bronze Age, where standard-sized ingots, and tokens such
as knife money, were used to store and transfer value.

Lydian and Ionian electrum coins (circa 600 BCE)

History of the rupee

Sher Shah Suri, during his five-year rule from 1540 to 1545, set up a new civic and military
administration and issued a coin of silver, weighing 178 grains, which was also termed Rupiya. The
Mughal ruler issued coins honouring the Hindu deities in 1604–1605. The coins depicting Ram and Sita
were issued in both silver and gold; minting ended right after Akbar's death in 1605. The silver coin
remained in use during the Mughal period, Maratha era as well as in British India. Among the earliest
issues of paper rupees include the Bank of Hindostan (1770–1832), the General Bank of Bengal and
Bihar (1773–75, established by Warren Hastings), and the Bengal Bank (1784–1791).

The historical roots of electronic card machines

Above all, the invention of the card terminal owes itself to the widespread use of credit cards as a
means of payment. The first payment card, Diners Club, appeared in the United States in 1950,
followed by American Express in 1958. These were both charge cards, where you pay the full amount
on credit at the end of each month, but they were called credit cards at the time. The main idea? To
give merchants a standardised way to settle transactions with their own and the customer’s bank,
without the use of cash.

In 1958, Bank of America released the first bank card, called BankAmericard (renamed as Visa in 1976).
This was the first to work on a revolving credit system where the monthly balance is carried over to
following months for a fee.
The first payment card in the UK was the charge card American Express, released in 1963. On 29th of
June 1966, Barclays followed BankAmericard’s footsteps and issued the first all-purpose credit card in
the UK. The original UK debit card was released two decades later in 1987, also by Barclays and called
Visa Delta by the Connect brand.

First card machine: the credit card imprinter

The first payment cards were in cardboard and thus required lots of manual recording at the point of
sale, but American Express revolutionised this with the first plastic credit card in 1959. The
cardholder’s name, address and unique identification number were marked in embossed lettering on
these cards. This enabled merchants to produce an imprint on carbon paper slips intended for the
bank, merchant and customer as proof of purchase. The imprint was done on the first non-electronic
card machine: the credit card imprinting machine – also called credit card imprinter, sometimes
referred to as a “click-clack” machine due to the sound it makes when you impress the carbon paper.

The device allowed merchants to record credit card transactions quickly, as opposed to manually
writing information written on a flat paper credit card. The carbon paper slips were signed by the
customer, one of which was sent to the bank to process the transaction, another for the merchant to
keep and the last as a receipt for the customer. The development of this device was a big leap from
time-consuming, manual handwriting to automatic printing of card information. Today, some shops
are still using a flatbed credit card imprinter as a backup method for manually recording a card when
the chip and PIN machine is down.

Arrival of the first electronic card machine

In 1970, a magnetic stripe was added to payment cards and the card payment system thus became
electronic. The magnetic stripe was invented by an IBM engineer and made feasible thanks to IBM
360, a system that allowed the independent configuration of external peripherals such as hardware
and printers. The magnetic stripe contained information needed to validate the payment: name of the
cardholder, card number, authorisation code and expiry date of the card. The first electronic payment
terminals were created to read these magstripe cards. The technology made it possible to conduct
increasingly secure transactions, control the account balance of the customer, and accept or refuse a
transaction on the spot. In 1973, the first electronic transaction authorisation system was created in
the United States, linking merchants to the Visa data centre in California. It was, however, necessary
to wait for the 1980s to see the spread of the electronic payment terminal connected to the Visa and
Mastercard networks. With the magnetic stripe system, the transaction was already electronic.
However, signing to authorise a receipt issued by the merchant was still a requirement at the end of
the transaction after the card was inserted in the terminal.

The chip, a French invention

In 1975, the French inventor Roland Moreno patented the chip card, also referred to as the smart
card. Used for the first time in calling cards, this revolutionary microprocessor became widely used on
bank cards in 1985. Its implementation on all debit cards first became mandatory in France from 1992.
In the UK, it wasn’t until 2004 that chip and PIN cards were introduced, and they were made
mandatory on all British payment cards from February 2006. The adoption of the four-digit PIN system
connected to the chip decreased fraud significantly. Pre-2004, customers had to authenticate
transactions with an easily-replicable signature. The chip card is capable of storing a large amount of
information and communicating in real time with the customer’s bank to validate or invalidate the
authorisation of the transaction.
It also offers much greater security than the magnetic stripe card system, which could easily be cloned.
However, it was necessary to wait until 2015 for this system to reach the United States.

The first electronic card terminals

It wasn’t until 1967 that the first automatic teller machine (ATM) was launched by Barclays in the UK
– the first electronic machine for cards in the world. To withdraw cash, customers had to enter a 4-
digit PIN connected to their card – the first card PINs in existence. At this point, shops were still using
manual credit card imprinters and verification by customer signature to process credit cards in shops,
which was a lengthy process. In 1973, National BankAmericard launched the first electronic
authorisation, clearing and settlement system, which laid the foundation for all electronic card
processing onward, but still required a 5-minute phone call per authorisation. The invention of swipe
cards in 1970 did not actually change the way shops accepted cards until the first bulky, electronic
card machine was launched by Visa in 1979. This was also the year when MasterCharge (competing
since 1966) became MasterCard, and credit cards were replaced to include a magnetic stripe. The
introduction of the electronic card machine greatly reduced card processing times, compared to
manual imprints and phone authorisations. In 1982, Hawaiian company Verifone released their first
POS terminal for cards, and their 1983 ZON model became the benchmark for modern card terminals.

Stationary terminals: connection options

The first solution implemented to transmit information between the electronic payment terminal and
customer bank was based on a landline connection, also called PSTN (public switched telephone
network). For this to work, the card machine had to be fixed and installed in one location, connected
by cable to the telephone socket.

The wireless terminal

Another technological shift that changed the nature of card transactions is the adoption of mobile
phones. With mobile phones, wireless networks became widespread, prompting the development of
wireless card machines.

The app-based card reader

Smaller, lighter and cheaper than traditional mobile card machines, mobile card readers have become
popular in the UK.

Development of contactless payments

In the grander scheme of payments, the emergence of contactless cards was a minor development
compared to that of the smart card.

Terminals are no longer just for card payments

In recent years, a new breed of card machines has entered the market: the smart POS terminals. These
are multi-functional devices with touchscreen and third-party apps with features usually offered
through POS software.
 History of Cross Border Payments
Cross-border payments is a term referring to transactions involving individuals, companies, banks or
settlement institutions operating in at least two different countries.

The history of cross-border payments goes hand-in-hand with the history of money, industrialization,
and globalization. These payments include remittances by migrants to people back home and
businesses that have expanded across the globe, necessitating fund transfers between entities and
suppliers.

Cross border transactions first took place during the era of barter system as there was no common
measure of value. People travelled long distances to exchange precious stones, metals, spices and
fabric. This exchange in value can be seen as the beginning of cross-border transfers as people moved
value physically across many borders. Eventually, precious metals were converted into rudimentary
coins which could be exchanged as value for goods and services. In the 8th century, the hawala system
took shape. In this system, money did not move physically but instead relied on a trust system of
money brokers in different countries. The exchange of currencies was an automatic result of different
coins/currencies made in cities and countries. As far back as biblical times, money changers existed in
markets to convert foreign currencies back to local currencies to enable the purchase of goods and
services in that particular market.

The need to transfer funds between places that were very far from each other arose with
industrialization. In the late 19th century, Western Union, formerly a telegraph company, began
facilitating money transfer through “wiring” to another location. A sender would pay money in one
office for the operator to send a message and “wire” the money to be collected by the recipient in
another office location. Shortly after this, banks adopted the wire method to telegraphically transfer
funds from one location to another, giving rise to EFT (Electronic Funds Transfer) Eventually banks
adopted the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network in which
international payments would be relayed securely. One noticeable characteristic of all these modes
of money transfer up to this point is the length of time it takes for the recipient to receive funds. It
can take days or even weeks.

In the 21st Century, the era where one had to wait for days for money to hit a recipient’s account is
long gone. Innovations have sprung up around the world to ease the speed and cost of making cross-
border payments. Mobile money has ensured that people around the world received instant payments
from family abroad through apps like PayPal, Instarem, Transfer wise, Flywire etc
References

• https://en.wikipedia.org/wiki/Coin
• https://en.wikipedia.org/wiki/History_of_the_rupee
• https://www.mobiletransaction.org/history-of-credit-card-machines/