Paying for Time: The Use of Payment Technology Throughout the Ages

Over 2,000 years ago, Aristotle puzzled. He deduced everything has two values: a primary use for which it is made and as an item to be sold or bartered. A monetary value then arises as we place trust in each other … and exchange.

Man has exchanged ‘X’ for ‘Y’ for millennia – be it stone, rice or rum. 5000 years ago, a certain weight of barley in Mesopotamia – a shekel – gave rise to its coin equivalent. In fact, that’s where the ‘pound’ originated: as a pound of silver.

Gold and silver coins became the choice but the issue of trust arose and national banks were required to change money into gold at an agreed rate.

Coins were fine for small purchases … and pirates, but as trade grew, bills of exchange were introduced – the forerunner of cheques and banknotes, one party promising to pay another.

A lack of trust in Charles I (after he helped himself to private gold stores) led to London goldsmith’s issuing promissory notes against reserves. The trusted goldsmiths laid the foundations of the British banking system.

The first European bank notes were issued in Sweden in 1664, followed by The Bank of England being granted sole rights to issue banknotes in England after 1694.

Banks realized that they could lend money, trusting that not everyone would want their money back at the same time. They then realized that they could loan more money than they had – trusting people to not only to pay them back, but also pay them back with interest. Credit was born.

Things jogged along until the 1950s – cheques slowly overtaking cash as customers’ preferred and most trusted form of payment. And then came the invention of mass-produced plastic. The charge card won the trust of customers as a neat way to charge purchases to an account to be paid when billed.

In 1966, the first Barclaycard credit card was launched in the UK. In ’69, the cheque guarantee card – again as a matter of trust – to demonstrate that customers would honour payment. Three years later, Access, a credit card (eventually swallowed by Mastercard in 1996) required the customer to sign for payments. A matter of trust.

The previous year (1995), a curious and new addition to retailing arrived with the UK’s first national secure online shopping service – the same year that Amazon launched. In 2000, PayPal launched as a money transfer service. In 2002, it was bought by eBay (itself, only 7 years old) as more than 50% of their customers were using the online money transfer service. They trusted it.

And now things speed up – a lot. Just a decade ago, Chip and PIN arrived – the banks assuming responsibility for fraud to quell customer’s fears. In 2005, liability shifted to retailers. Matters of trust ensued – between banks, businesses, customers and financial authorities.

In 2007, the global banking crisis struck and public trust for banks hemorrhaged. In 2009, regulations came into force requiring banks to reimburse cardholders for fraudulent use.

In the same year, only 0.2% of us used smartphones to access the internet. In the last four years, there has been an explosion in technology affecting the development and adoption of digital and social media channels. Today, more than 50% of the public use mobiles to buy stuff.

And now we enter a new monetary era as bank notes go plastic and all the smart money is on frictionless payment and fingerprint recognition – paying for something without using any tangible material. The race to be the most trusted player hots up.

The opportunity is for new players, new organisations to earn our trust – through whom we will pay at the touch or swipe of a smartphone or finger. Our preferred social media channel? Our mobile phone network? A yet-to-be discovered ‘payment trust’ that best reflects our lifestyle?

Frictionless is the buzzword. But whereas our ancestors bartered with what was handy, today the stakes are much higher.

Aristotle wasn’t far wrong. A product has more than one value: its usability and its worth in exchange. But now there’s a third value. You. Me. Our data. That is the new currency that will determine the success of our new, invisible, frictionless payments. Whom do I trust – both with my payment and my social soul?


This Blog was first published on Huffington Post

18/10/2013 07:19 BST | Updated 23/01/2014 18:58 GMT