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The way we exchange value and conduct transactions has come a long way throughout human history. 

From the humble beginnings of bartering to the digital age of Web3, the evolution of payments has been marked by significant milestones and transformative technologies. 

So, let’s take a journey through time and look back at the evolution of payments, tracing its fascinating progression from ancient trade to the world of decentralised finance (DeFi) in the Web3 era.

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1. Bartering: The Birth of Trade and Exchange
   To begin, we have to go way back to ancient times when goods and services were exchanged without using money. This was known as “bartering” and is the oldest form of commerce, dating back to before hard currency existed. 

For example, a carpenter may offer their services and build a fence for a farmer. Instead of the farmer paying $1,000, they would instead compensate them with crops or foodstuffs worth the same amount.

Even in today’s world, bartering is still used as a form of exchange in many settings, such as childcare cooperatives, housesitting and even online through social media marketing and web design.

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2. The Rise of Precious Metals and Coinage

The exact timeline of when precious metals were used as a form of currency is difficult to pinpoint, but there are significant moments in history, such as the use of gold in Ancient Mesopotamia and gold and silver in Ancient Egypt.

It was then around 700 BC that coins became minted, and payments are now accepted with distinct coins that hold value.

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3. Paper Money and Banking

The introduction of paper notes was first introduced in China in the 7th century, but it wasn’t until thousands of years later that they were fully adopted in Europe.

In the 17th century, the Bank of England started to issue banknotes permanently, though these were initially handwritten to an exact amount. But by 1745, they had become fixed denomination notes of between £20 and £1,000. Then, during the Seven Years’ War (1756-1763) £10 notes were introduced due to gold shortages, with £5 coming in 1793.

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4. The Age of Plastic: Credit Cards and Electronic Payments

While the concept of credit systems goes back as far as the Bronze Age, the beginning of the 20th century is when we indeed saw further advancements in this.

It all started in 1918 when Western Union began to issue metal plates, known as “Metal Money” to specific customers. This allowed customers to defer payments on the purchases they made, and while similar to the credit cards we know today, these metal plates were very limited and only allowed for certain purchases.

The 1920s saw oil companies and hotels issuing their form of credit cards for customers to use. Fast forward to 1946, and the metal plates had become obsolete due to a new payment method called the “Charg-It Card” - the first example of a closed-loop credit card in which the bank initially paid merchants for items purchased, which would then be paid back by the owner of the Charg-It Card later.

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5. The Internet Revolutionises Payments

Electronic banking first came into play with the rise of the Internet in the 1990s. It was in 1994 when we saw the first online payment system, in which customers could make online payments through their credit cards.

PayPal then came onto the scene in the early 2000s, letting customers make online payments without having to provide merchants with their credit card details. This innovation introduced a new level of security and convenience, and today, PayPal is one of the most prominent online payment platforms.

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6. Mobile payments and contactless technology

The introduction of smartphones in the late 2000s/early 2010s inevitably paved the way for a new means of payment through contactless technology.

The first contactless cards introduced in the UK were issued by Barclaycard in 2007. At first, this was only compatible with credit cards, until 2009 when contactless debit cards became available.

As the use of contactless technology grew, it wasn’t long before we saw the introduction of contactless mobile payment systems, such as Apple Pay, Google Wallet and Samsung Pay. Today, contactless payments have become so widely adopted, that Meanwhile, the use of contactless mobile payments increased by 109%, accounting for 4% of all contactless transactions by value.

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7. Cryptocurrencies and Decentralised Finance (DeFi)

Around the same time that contactless payments were introduced, so was the birth of the world’s first completely digital currency - Bitcoin.

First launched in January 2009 by an anonymous creator, only known as “Satoshi Nakamoto”. The overall aim of Bitcoin was to support peer-to-peer transactions between users through blockchain technology, without the need for third-party involvement.

Around two years after the launch of Bitcoin, we soon saw rival projects popping up - the earliest examples being Namecoin and Litecoin. While some point to Bitcoin’s launch as the beginning of the DeFi movement, the launch of the Ethereum network in 2015 is widely considered to be the start of it - primarily because of the introduction of smart contracts, allowing the creation of decentralised apps (dApps).

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So, what’s next?

As we enter the Web3 era, new technologies have the potential to revolutionise global payments.

Web3 payments are entirely peer-to-peer and built on trustless systems, cutting out the middleman completely (e.g. banks and intermediaries) and allowing users to execute fast transactions with low fees, depending on the amount sent or received.

Web3 payments also provide better accessibility, as it allows users to send and receive money without registering for financial services. With data encrypted, user details are protected and stored securely online.

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