History of the Payment System

The history of the payment system itself is dated back to the years of the barter system, which then led to coins and bank notes to debit and credit cards and most recently online payment.

According to Chown (1994, p.2)
“The history of money actually began in about 800 BC when the first coins were struck from electrum, a naturally occurring alloy of silver and gold, bearing the sign of a half lion as a guarantee of their weight. The coins were then supplemented with bank notes, before convenient method of cheque and now electronic method of payment using mobile platform and electronic transfer”
Barter

Bartering can be dated back to 6000BC and according to Chapman (1980, p.35)

“Barter is typically considered as exchange that is to say that no third object (money) part takes in the transaction”.

In simpler terms bartering was the system in which people exchanged the goods that both parties needed without the need for cash or money.

The Coin Age

According to Surowiecki (2012), it was in the seventh century BC, when the small kingdom of Lydia which is now situated in Turkey introduced the world’s first standardized metal coins which led to people recognising it as being valuable and hence using it as money. Soon after it was recognised that a coin was not enough and by end of fourteenth century nearly every country in Europe were using three coinage metals: gold, silver, and copper or nickel, Chown (2004 p.14).

Bank Note
Paper money was first issued in China during the eleventh century by the Song Dynasty; the purpose was to issue it as a receipt of deposit in order to avoid the bulk of copper coinage. In Europe according to Salmony (2011) “Paper money was recognised as legal tender in Germany over 100 years ago and today over 75 percent of retail payments are still made using cash”

Credit/Debit Cards
The phenomenon of using a card as means of payment dates back to 1950 when Frank McNamara, the head of a financial company in New York City came up with the idea to use a “charge card” instead of physical money itself as a means of payment. McNamara named the card “The Diner Club Card” which was originally made from paper and was accepted by a range of different businesses including restaurants, retail stores and travel institutions. The Diners Club Card was hugely popular between 1951 and 1955 and the company monopolised the credit card industry until 1958 (Credit Card 2010). However, during this year other companies emerged, such as American Express who launched the first plastic credit card and BankAmericard also known as Visa who then began to dominate the market.
Internet Payment
In the mid to late 1990’s, organisations in the retail, business to consumer and business to business industries began to embrace the Internet as a new sales channel and in turn provided new possibilities for payment innovation, this subsequently led to the emergence of hundreds of new payment companies which aided the online transaction (Weichert 2007).