The story of payment methods and currency in general dates back as far as 5,000 BC to the Lydians, a tribe of people that lived in what today is Turkey, and defended Troy during the Trojan War. According to ancient Greek historian Herodotus, the Lydians were the first to mint their own coins using silver and gold. It was only much later in history that the Chinese began regularly using paper money around 960 AD. Flash forward a millennia and the world’s first cryptocurrency was launched in the shape of Bitcoin, created by the mystery lone figure or collective known as Satoshi Nakamoto.
Companies, as varied as Apple (who have a 19% share of the mobile phone market) to PokerStars (whose website garners 1.49 million visits a day) to Nike (brand value of $28 billion), have been forced to join the digital payment revolution, offering a variety of payment methods, including credit cards, e-wallets and bank transfers, but that wasn’t always the case. With so many payment options now available, we look back at how payment mediums have evolved as well as where technology will take them next.
The End of the Gold Standard Norm – Fiat and Representative Money
Until 1970 the world economy, by and large, adhered to the so-called Gold Standard, or Representative Money, whereby any citizen could exchange their currency for gold. Then in 1971, Richard Nixon abandoned the Gold Standard, introducing what today we call Fiat Money. Rather than being backed by the value of a raw material, Fiat Money’s value is backed by governments. Some argue that the change has led to increased economic volatility, with countries that face economic difficulties often being forced by rising inflation to abandon their own currencies in favor of the dollar. However, Representative Money still exists today, with such examples being checks and credit cards, where money owed is paid at a later date.
Electronic Banking – ERMA
The Bank of America, in conjunction with the nonprofit SRI International, were the pioneers of electronic banking as we know it today. In 1950 they began a project called ERMA (Electronic Recording Method of Accounting) and by 1954 the first computer system designed specifically for banking was launched. The computer was able to read banking codes on the bottom of checks, meaning that transactions could be electronically tracked and logged for the first time. Since this breakthrough in payment methods, the sector hasn’t looked back, paving the way for more complex digital payment methods.
Bitcoin and E-wallets Break Loose
The arrival of Bitcoin in 2009 was a watershed moment in the world of payments, as its price rose to a mammoth $20,000 just before Christmas 2017, sending panic waves through financial and political institutions that feared they may lose control of how capital was moved and organized. However, now that its price has leveled, and due to its ingenious use of blockchain technology, Bitcoin continues to thrive and has spawned many other cryptocurrencies, such as Ethereum, Ripple and Litecoin. Along with Bitcoin, many of these are now traded by traditional banking institutions. What began as a currency craze designed only for the technically minded turned quickly into a mainstream movement, thanks in part to e-wallets, which make cryptocurrency transactions as easy as pie to enact. Twelve of the very best e-wallets can be found here.
What Does the Future Hold?
The future for cryptocurrencies and payment methods, in general, is hard to predict, and it still remains to be seen whether cryptocurrencies will one day dominate the sector. Current trends point towards the technology behind Bitcoin, blockchain, perhaps being more influential in the long term than cryptocurrencies themselves. This is evidenced by banks and other financial institutions cooling their interest in cryptocurrencies but exploring further the potential that blockchain technology provides such as decentralization, security and transparency, all of which can help greatly with issues businesses face as far ranging as the drafting of contracts to identity verification to payment registration.