Evolution of Money as Payment Instruments from Time to Time

Throughout history, humans have witnessed significant changes in the way money is transacted and used. From the primitive barter system to utilizing modern digital technology with the internet, each stage of evolution reflects human adaptation to changing times.

What is a means of payment?

A means of payment or medium of exchange is an intermediary used in the process of buying and selling goods and services involving two or more parties. To fulfill its function as a medium of exchange, a system or instrument must have a representation of value that is recognized by all parties involved in the transaction.

Today, the currency is a legal tender that is recognized globally. Every country has a currency that plays a role in the economy. But before we get to the age where money is used as a medium of exchange, let's take a look at the evolution of transactions over the ages.

Barter System and Exchange of Goods

Before the advent of the concept of money, the barter system dominated how humans transacted. This system involved the direct exchange of goods or services without involving a generally recognized means of payment. Exchanges such as wood for rice, corn, and clothes, and animal skins for water, were common in the day. While this system had its effective side, there were limitations in terms of value agreement and impracticality in some transactions.

Coinage and the Shift to Gold and Silver

As human awareness of the need for an adequate medium of exchange grew, the development of civilization led to the emergence of coinage, which was often made of precious metals such as gold and silver. Gold and silver were chosen as a medium of exchange because of their durability. This facilitated trade by giving the objects a fixed value. Coinage played a key role in the economic development of the ancient world, creating the foundation for a more structured exchange of value.

Paper Money and Giro Certificates

The following centuries saw a shift towards the use of paper money as a more practical and efficient means of payment than metallic currency. The increasingly scarce availability of gold meant that humans had to find a way to facilitate this. This led to the creation of paper money, originally a certificate of ownership of gold that could be exchanged for its value. This facilitated daily transactions and allowed a larger amount of money to circulate. Current certificates were also an important innovation, allowing individuals to deposit money in a bank and get a certificate that could be redeemed as a means of payment.

Credit Cards and Electronic Payments

A major revolution occurred in the 20th century with the introduction of credit cards. This gave consumers flexibility and sped up the payment process without having to have physical money first. Subsequently, technological developments brought us to the era of electronic payments, enabling online transactions and the use of digital devices as a means of payment.

Digital Wallets and Touchless Payments

In the digital age, the use of digital wallets has increased, especially amidst the global pandemic. Apps such as Apple Pay, Google Pay, and various other digital wallets allow for touchless payments, reducing reliance on physical cash or cards.

Also Read: Cash VS Digital Money, Which One You Choose?

Cryptocurrency and Blockchain

With the advancement of technology, the world entered the era of cryptocurrencies like Bitcoin. Blockchain technology became the cornerstone, offering unprecedented security and anonymity in the financial world. Cryptocurrencies are a significant step towards a future of payments that may be completely decentralized.

Future Evolution of Money Payment Tools

As technology continues to evolve, we can anticipate more innovations in the future. The concept of decentralized finance, developments in digital payments, and the potential use of new technologies are some of the trends that could shape the future of money payments.

Conclusion

From barter systems to advanced cryptocurrencies, the evolution of money payments reflects humanity's adaptation to changing times and technology. Financial history will continue to evolve. With so many possibilities ahead, our job is to adapt to future changes and innovations in shaping how we transact.