Evolution Of The Transaction: How Humans Have Paid For Things Over The Millennia
- Business transactions for early humans were rare because they used what is known as the "gift economy". During this time, humans generally settled in smaller communities where they had to rely on each other to survive by hunting
and gathering. Within a group there was no bartering. Instead everything was shared and nothing was expected in return.
- During this time, trade existed strictly as a way to exchange goods between strangers, two separate groups of people, or to settle a dispute.
Why didn't early humans barter with those in their community?
- Bartering is inherently competitive, as both parties are seeking to get the best deal. This type of competition would essentially undermine trust, which was needed in order to survive as a community.
Timeline: Evolution of the Transaction
- 9000-6000 BC: Cattle. The earliest forms of bartering were done peer-to-peer by exchanging cattle. Cattle included cows, camels, goats, and other animals. Because there were various types of cattle, traders were able set a standard
price, such as two goats for one cow.
- 1200 BC: Cowry shells. Cowry (or cowrie) shells are, to this day, considered the longest and most widely used form of currency in history. Cowrie shells come from mollusks found in the Pacific and Indian Oceans. They were used
as currency because they were both rare and impossible to counterfeit. The shells were traded for everything from clothing to food. Cowry shells were still in use up until the 20th century.
- 1000 BC: Metal cowries. Inspired by the cowry shell, China eventually began to distribute bronze and copper imitations of the cowry shell. These replicas are widely regarded as the earliest known metal currency. These shells were
eventually developed into coins with holes so they could be strung together like a chain.
- 1000 BC: Knives & tools. Tools were also considered bartering material and acted as a currency of sorts.
- 500 BC: Silver coins born. Silver coins were created in Sardis, an ancient city in modern day Turkey. The coins were made from electrum, a natural alloy of gold and silver. These coins, which contained rare, inherently valuable
metals, were used as general currency between two parties to purchase various products.
- 120 BC: Leather money. China pioneered the so-called "paper currency" by creating money out of pieces of white deerskin painted with colorful borders.
- 806: Paper currency. Paper currency first appeared in China as a by-product of Chinese block printing. The paper money came in form of certificates that represented actual cash so consumer didn't have to send a large and heavy
crate of cash to merchant. The certificates were exchanged by merchants and could be converted into actual cash. Ultimately, paper money caught on as it was easier to carry than metal money.
- 1535: Wampum beads. Made from clam shells, wampum beads were strung together and used by Native Americans to call a council or perform other tribal duties. The Europeans eventually adopted wampum as currency when they
reached America so they could trade with the natives.
- 1821: The gold standard. Following the introduction of the gold Sovereign coin in 1816, England officially adopted gold as its standard currency. All paper currency represented a certain amount of gold. When an item was paid for
with a piece of paper, the new holder of the paper had the option to trade it to the bank for its weight in gold or use it to pay for something else. Countries, such as Australia, Canada, France, Germany, and the US, were quick to
adopt the gold standard soon thereafter.
- 1891: American Express traveler's cheques. The traveler's cheque issued by American Express allowed travelers to pay for items without having any cash on their person. The merchant could then exchange the cheques for actual
- 1930: The gold standard ends. After the Great Depression the gold standard fell apart. The need to fund military operations around the world contributed to this change, so paper money was no longer convertible into gold. Backed by
nothing other than the good faith of the bank from which it was issued, paper money became what is known as a "fiat" currency.
- 1946: The first bank card introduced. Often considered the first credit card, "Charge-lt" was introduced in 1946 by Brooklyn banker John Biggins. A customer could use it for a purchase and the merchant would forward the bill to
Biggins' bank. The bank would then reimburse the merchant and proceed to obtain payment from the purchaser. There were stipulations, however. Cardholders needed an account at Biggins' bank, and they could only make purchases
- 1950: Diners club. The Diners Club card was the first widely used credit card. It was used to pay for things generally related to travel and entertainment. By 1951 there were roughly 20.000 people using it.
- 1966: Modern credit card. The credit card as we know it today was introduced in 1966 when Bank of America established the BankAmericard brand, which was later known as Visa. As the card became more popular, third party
companies began to sell processing services to card members to reduce the cost for merchants, consumers, and banks.
- 1972: Automated teller machine. Technically, the ATM was the first example of an electronic transaction where bankers could withdraw money from their bank account without visiting their bank.
- 1983: RFID. The patent for Radio Frequency Identification (RFID) was granted to Charles Walton. RFID was later used in devices such as the nifty "FastTrak" payment system for vehicles driving on toll roads. It was also the
predecessor for Near Field Communication (NFC) technology.
- 1994: Pizza Hut & online banking. Following the creation of the Internet in 1990 by Tim Berners-Lee, Pizza Hut sold its goods online. Online banking was also established. Transactions are made by credit card.
- 1995: Amazon & eBay. E-commerce giants Amazon and eBay were both launched in 1995. Online transactions become normal.
- 1997: Mobile payment. Mobile commerce was first integrated with Coca-Cola vending machines in Finland. Thirsty consumers could purchase a soda via SMS text message.
- 1998: Billpoint established. Acquired by eBay in 1999, Billpoint was used exclusively by eBay as their person-to-person payment platform.
- 1999: PayPal established: 1) By February 2000 there was an average of 200.000 daily auctions advertising tje PayPal service while Billpoint had only around 4.000 auctions; 2) By April 2000 there were over 1 million auctions
promoting the PayPal service each day; 3) October 2012 - PayPal was acquired by eBay for $1.5 billion, and eBay went on to completely phase out its use of Billpoint.
* The rise of PayPal put an increasing amount of power into the middle men's hands, as they received a substantial cut of the payment.
- 2004: The Near Field Communication Forum established. The NFC Forum was established to develop the use of touch-based interactions in mobile devices for payment purposes, among other applications. The revolutionary
technology allowed a consumer to make a payment by waving their phone or "smartcard" device near the reader.
- 2007: Mobile payment developed. With the release of the iPhone, mobile payment extended well beyond SMS text message and integrated into actual applications.
- 2010: Square. Seeing a need for on-the-spot credit card payment, Twitter's founder, jack Dorsey, launched Square - the latest advancement in mobile payment technology. Square's product: a simple square-shaped device that
attaches directly to a mobile phone, through which you can receive payment by swiping a customer's credit card. Square charges 2.75 percent for each transaction.
- Present: Various technologies in research. As more people recognize the power of the transaction and the rise in mobile phone use, more technologies continue to be explored.
- Future: Implants. For decades it has been theorized that one day we would pay for items by swiping our computer chip-implanted hand over a scanner that is directly tied to our bank or credit card. Will this ever be a reality? We'll
have to wait to find out.
Flowtown | Sources: Postcarbon; Host Merchant Services; NBB Museum; Creditcards.com; Shvoong PayPal; NFC-Forum; Square.