History

Once upon a time, someone somewhere wanted something his neighbor produced. The two agreed upon an exchange of goods like a bag of his neighbor's sheep's wool in exchange for some of the wheat he grew on his land. This exchange is called bartering. It benefitted those who had products to offer and those who had goods or services to trade. There were a few issues with this payment system. First, the creation of writing and records began to keep track of who owed who what. In some scenarios of bartering, goods exchanged were not ready at the same time. Maybe a neighbor needed to record the amount of wheat owed once it was harvested in a few months. Some of the earliest writings show such records. There also needed to be an agreed upon medium of exchange. Cowry shells were one thing used. How many cowry shells is my wheat worth versus your wool so we can make sure this is a fair trade? 

The first minted coins were introduced by King Alyattes of Lydia around 600 BC in what is now Turkey. They were made of a mix of gold and silver. This money allowed people to purchase goods or services outright instead of making a trade. That was a huge benefit of having a trusted source of payment. The downside was the weight of the coins to carry around. As minted coins changed over the years in different civilizations, milled or reeded edges were added like the stripes you see around the quarter. This prevented someone from filing or shaving off the edges to keep some for themself. 

Bank notes were created as a letter of credit. It allowed for large purchases to be made without the vast quantity of coins that would be required. The issuance from a trusted bank allowed trust between sellers and buyers.  The paper money we know today was introduced in China around 1200 AD. This solved that big problem of the weight of coins. There was an earlier version used around the 7th century, but they were simply bills of credit with a date of limitation. Paper money also has the benefit of an agreed upon value for buyers and sellers. Counterfeiting is another issue with paper money and even existed back around 1200 AD. Governments have evolved with paper money using different techniques to assist sellers in knowing if a bill is legitimate or not such as watermarks, color-changing ink, and microprinting. 

Checks are representative of money held in a bank. This form of payment again allows for a purchase to be made without the buyer carrying coins or bills with them. The seller is able to trust the seller on the value of the check. There is the con of bad or bounced checks when a buyer writes a check over the amount in their bank account. Current sellers often have notes near their registers on the fees added if a check bounces to prevent this from happening.

The telegraph was invented in 1837. In 1851 Western Union created a system where a sender could go to a clearing house with money, pay them, and then have them send a message to a receiving house. Once received the intended recipient would be able to pick up his or her money. This opened up the ability to made purchases outside one's local network and also for family and friends to send money to out of town relatives. While a form of money transfers still exist today, the popularity of this payment method was diminished with the invention of the telephone. 

The telephone allowed credit cards to be a new form of payment method in the 1960s. A seller would have to make a call to find out their intended buyer's credit limit and clear a purchase. There was a time issue with this and chance for error with a human on the other end of the line looking up this information. The invention of the stripe on the cards and computers to verify credit limits only increased the usage of credit cards. Debit cards first made an appearance in 1966. Debit cards look like credit cards but pull money directly from a bank account. The usage greatly increased in the 1980s and 1990s when ATMs cropped up across the US. Users could use their debit cards to pull money from their account at any ATM which is a huge benefit to travelers. A credit card or debit card is less to carry than the cash needed for purchases. One con of this form of payment is card numbers are stored in computer systems and these can be hacked. 

The early 2000's saw the emergence of Biometric payment systems. The first example of this Pay By Touch using fingerprints. Other examples of biometric payment options include iris or retina matching, face recognition, DNA matching and vein patterns. This is primarily used for the government. These payments provide higher security than passwords or PINS. One con for merchants would be the cost of equipment to accept such payments. These are often used in two step processes such as authenticating digital wallets.

Google was the first to introduce the digital wallet in 2011. This first version only worked on one model of phone and only with Mastercard issued by Citibank. Apple Pay followed in 2014. The concept is a cloud wallet holds your credit cards, vouchers, travel documents and more. You pay with this "wallet" using near-field communication (NFC) technology. The huge benefit of this payment option is your name and credit card information is not stored by stores. This reduces the risk of fraud. If your phone is stolen or lost, these payments can be suspended using Find My iPhone. A con is that Apple and Google Pay is not always guaranteed to be accepted everywhere, such as small vendors or markets.