Breaking Banks

Chapter 2The Era of the Faster, Smarter Payment

From the check¹ you used to get on your birthday from Grandma, to your regular monthly salary to the mortgage or rent payments you make each month, much of the utility we enjoy in banking revolves around payments. Whether it is card payments at a store, bank-to-bank payments, or international wire transfers, the “bank” has often been the go-to place for such basic capabilities. Today, however, a virtual and digital payments revolution is taking place, much of it at the hands of non-banks.

From the emergence of PayPal, creating very simple payment transfer mechanisms, to the recent emergence of players like Dwolla, Square, Venmo, LevelUp, M-Pesa, AliPay and others, there are more payment options today than a humble banker could ever have imagined a few years ago.²

WHAT DOES HISTORY TEACH US ABOUT PAYMENTS?

If we look at payments history, we find that even from the earliest days of exchange and barter systems, payment methods were generally fairly simple. In Europe, paper money was first introduced in Sweden in 1661, not that long ago in historical terms. The exchange of a centrally valued currency was certainly well-established by the eighteenth century, but at its essence it was a fairly simple value exchange system.

With the advent of telephony, and then computers, the ability to send cash from one side of the world to the other emerged, but this was more complex than traditional monetary exchanges based on paper currency or ...