A brief history of trade and money transfers
The exchange of goods and services is older than civilization itself. Back before modern humans even invented agriculture, they were trading goods. Certainly, the methods have changed, but the goals have remained constant. Individuals and businesses want to create an atmosphere of trust and get a fair deal as a result. That’s why we wanted to take a moment in today’s blog post to have a look at the brief history of money transfers through the years. We’ll also take a look into the crystal ball and try to predict what the future has in store for financial settlements between individuals and businesses.
In the Beginning, There was Bartering
In the beginning, before wire transfers were even a thought; when banks didn’t exist, people bartered and traded. Mesopotamian tribes and communities began trading livestock as early as 6000 BCE, adding grains and vegetables as agriculture developed. Humans placed value on important items, whether animals, food, or otherwise, and traded with each other.
During the early years of human existence, driving cattle and hauling heavy sacks of grain was difficult and time-consuming. It wasn’t until around 1200 BCE that Chinese merchants began using cowrie shells and metal knives and spades as substitutes for goods they delivered later. The metal implements were rounded off, possibly to prevent accidents. These rounded metal implements would evolve into coins, the very first money ever used by humanity.
Seven hundred years later, coins were circulating in Turkey, Greece, Persia and Macedonia. Eventually, they would make their way into the Roman empire, where they were widely used. Still, ancient Roman soldiers may have been paid at least partially in salt, a practice that, to this day, explains the word “salary.” Over time, however, individuals and businesses became more used to using money as the primary method of trade and settlement. Then, came paper.
Paper Changes the Trading Game
It would be China again who would introduce the next evolution in money. Somewhere between 600 and 900 AD, China created the first light, foldable paper money. But this change was not without problems. The first-ever inflationary event likely happened sometime during those early years. Why? Because, in a foreshadowing of modern problems, too many bills were created, causing bouts of massive inflation. As you can see, humanity still struggles with many of the same money-related issues we did more than a thousand years ago.
Meanwhile, in medieval Europe, merchants were using short-term bills to exchange goods and services with foreigners. They would often settle their accounts at trade fairs. Then came bank bills, which were based on gold or silver. In 1816, it was the country of England that designated gold as the official standard of value. And although we’re not on the gold standard anymore, the element still carries great value around the world.
By the 15th century, bills and coins were widely in use around the world. Still, they were susceptible to theft and loss. It was for this reason that checks were created. It was around the 16th century that checks began to appear. Eventually, checks would become the dominant means of value transfer for both businesses and individuals. Consider that today hardly anyone uses paper checks anymore!
The Wire Transfer is Born
It would be the invention of the telegraph that enabled merchants to use Western Union for money transfers from 1851 on. This represented the birth of the money transfer. Today, wire and money transfers remain a dominant form of transferring money back and forth between individuals and entities. Banks across the world, no matter their size or location, support wire transfers as a primary method of settling financial transactions.
As a premier business bank, we’re proud to offer fast wire transfer options for Salt Lake City-area businesses. And yet, even though the humble wire transfer has been around for a long time, it has gone through several iterations and may change even more as we move deeper into the 21st century. The wire transfer system, which is otherwise referred to as CHIPS, is operated by The Clearing House, and Fedwire, which are both a part of the Federal Reserve Bank.
Today, wires are used to handle monetary settlement transfers between banks and large-value payments by businesses. In 2018, 64 percent of wires were business payments and 25 percent were financial institution settlements or other businesses. Only 11 percent were initiated by consumers. This makes it clear that wire transfers are primarily used by businesses to send money around the world. Today, businesses are still the primary users of wire transfers.
Are you a Salt Lake City-based business looking for a community bank to help you with business checking, saving, lending, treasury management and wire transfer services? If so, it’s time to pay us a visit in one of our Salt Lake City or Lehi branches! Visit our website to learn more: https://www.firstutahbank.com/