2 PAYMENT METHOD PROFILES: CASH
2.1 Cash Introduction
Cash’s longevity has proved its worth and dependence as a payment method. While most have been stripped away from being backed by physical assets, cash is mostly reliant on reserve currencies and the user’s trust in the government that issues the currency. In an ever-increasing digital world, cash is holding on and still preferred in some countries. Brief History Payment can be defined as providing money for a good, service, or debt incurred. The oldest form of payment didn’t involve money as we consider it today at all, however, but was rather an exchange of goods for other goods at a negotiated rate between parties. This was known as bartering and the system dates to 6,000 BC. 72 The first forms of currency were commodities, predominantly livestock (usually cattle) and minerals such as salt as civilizations progressed around 3,000 BC. 73, 74 Livestock could reproduce, transport itself and be used to transport materials, and provided food goods, while salt was valued as a food preserver. Commodities addressed challenges in the bartering system such as value due to livestock and food preservation being more ubiquitously accepted and valued than other goods. 75 This is especially the case regarding situations where certain communities had a surplus of one good due to their environment but were lacking in others. 76 This would decrease the value of the surplus goods. Other commodities such as textiles, leather, wood, and sugar were also used. 77,78 The main challenges of using commodities as currency are that some were perishable and not easily divisible, impacting accumulation of wealth and value conversion negotiations. Payment’s next major breakthrough was with the usage of metals as currency – first seen in modern day Turkey and China in the 7th century BC. 79, 80 Metal tools and coinage became preferred currency due to its ability to be stored in treasury, transportability, divisibility into exact amounts and transformed, and ability to impress information on the currency itself. The entity responsible for its issuance could also be imprinted on the currency itself as seen with Roman emperors around 300 BC. 81 This led to standardization of currency and made trade quicker. In varying parts of the world, coins were made from precious metals as well as more prevalent metals. Initially, coins were valued intrinsically, denoted by their purity, size, and makeup. Paper money was first seen in China sometime between the 7th and 11th century AD. 82, 83 Other paper money in the form of IOUs and receipts began to become prevalent as traveling with precious metals and coins more generally became dangerous and heavy. 84 Colonies oceans away from central banks began issuing bank notes as it took time to physically transfer coins. 85 Smiths, responsible for producing the coins or tools traded for their metal’s value, began issuing receipts to merchants that eventually were able to be used and redeemed as currency in lieu of individual merchants carrying their metals. 86 Central banks globally began backing their issued notes and paper documents on the amount of gold or silver reserves they had vaulted in the early 19th century. 87 Later in the evolution of physical currency, coins, banknotes, and cash became fiat or taken at face value as a reflection of the institutions that issued them. 88
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