EVOLUTION OF THE PAYMENT SYSTEM
Throughout history, there has been a major change of the payment system. Early methods of payment entailed bartering, which involved trading one commodity or service for another without the use of a standard unit of account. As time went on, many communities created standardised forms of money, including coins made of priceless metals, which facilitated and expedited trade.
New payment methods appeared as a technology developed. Because individuals were no longer need to carry around bulky coins, transactions became even more practical and effective after the advent of paper money in the 17th century. The electronic transfer of money made possible by the telegraph and subsequently the telephone prepared the way for the invention of credit and debit cards in the 20th century. There are several changes in the evolution of the payment system such as ;
- Commodity Money
- Fiat Money
- E-Money
- Checks
- Electronic Payment
A type of money known as commodity money is backed by a tangible good, such gold or silver. The currency may be traded for the underlying commodity and has a value that is directly correlated with it.
Many cultures have utilize commodity money as a sort of currency in the past. For instance, coins made of gold and silver were often used as currency in ancient civilizations, as well as in many other nations during the Middle Ages and up to the 20th century. The coin's worth was defined by its weight and the precious metal it was made of, and it may be exchanged for an equivalent quantity of the precious metal.
A sort of currency known as fiat money is one that is created and supported by a government or other central authority but is not backed by any real assets. People's faith and confidence in the government or other central authority that creates fiat currency determines its value. Contrast this with commodity money, which is backed by a tangible good like gold or silver.
Fiat money is accepted as legal currency, which means it may be used to settle obligations and pay taxes. Governments are not limited by the availability of a tangible good when issuing fiat money, and they are free to do so in unlimited quantities. As a result, they have more freedom to control the money supply and react to changes in the economy.
The term of E-Money, often referred to as "digital money," refers to a representation of value that functions similarly to cash and other kinds of fiat money in the digital realm. It can be kept in a digital wallet or on a smart card and is often issued by a financial institution or other approved body.
E-money may be used for peer-to-peer exchanges as well as in-person and online purchases. Additionally, it may be utilized for contactless payments, such as when a smart card or smartphone is tapped at a point-of-sale terminal.
Similar to regular banking services, e-money enables you to conduct transactions without utilizing conventional payment methods like cash or checks. E-payment service companies such as PayPal and Venmo.
A personal check, which is a written request from the owner of a bank account to their bank to pay money to a specified person or organization, is one sort of payment made by the general public. People must have a checking account with a bank or credit union, write a check payable to the individual or business to whom the payment is made, and provide the amount and the date on the check in order to make a payment by check. The monies will then be moved from the person's account to the receiver's account when the recipient deposits the check into their own account.
A sort of digital representation of value that may be used to conduct electronic payments is known as electronic money, sometimes referred to as digital currency or e-money. Electronic money may be used to make purchases and pay payments. It is often held on a device, such as a smartphone, in an online account, or on a card. Electronic money comes in a variety of forms, including ;
Digital wallets : this is a programmer or services that enable you to store and spend digital currency on a computer or mobile device. Google Pay, PayPal, and Apple Pay are a few well-known instances.
Prepaid cards : You can withdraw money or make payments using these actual cards.
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