Digitalisation of payment and cash are issues we observe in daily life; we constantly witness debates on transformation of the society into a cashless one. While new generation payment methods appear almost everywhere, in this article we will briefly recall the history of payment and examine the digitalization of payment.
A Brief History of Exchange and Money
Invention of Money
What is money actually, how did it come about? To answer these questions, let us take a quick look at the history of exchange and money.
Before the invention of money, people exchanged goods in various ways. One of the known examples is payment through beer. Depicted on a tablet found in the Sumerian city of Uruk, around 3000 BC, the employer gives beers to the workers in return for their labour. Similar ways of exchanging continue for centuries. Fast forward to 700 BC, the Lydians minted the first known coin in history. Following the Lydians, we see coins minted in the Roman Empire and in China. The real revolution of money was with the paper banknotes that appeared in China in the 1000s AD. Payment methods have developed over time, and nowadays it has become possible to make transactions only digitally.
Internet and Digitalization
If we look at how e-payment and digitalization emerged, we can say that it is closely related to the invention of the internet, namely the World Wide Web (www). With the development of the World Wide Web, online stores and e-services came into being.
The internet first appeared in 1969 under the name “ARPANET”, a military network used during the Vietnam War. However, the turning point was when Tim Berners-Lee introduced his solution to disseminating and facilitating information over the internet, through sites or pages in 1989.
With the evolution of the internet, pioneering online payment services began to operate in the first half of the 90s. In 1994, Stanford Federal Credit Union was established, the first financial institution to offer online internet banking services to all its members. The first online payment systems naturally had shortcomings and vulnerabilities in specific areas such as data transfer and encryption. In addition, this first system installed was not adjusted to the constant change in the number of users and transactions.
Giants of the E-payment Industry Are Born
The leaders of the e-payment market are Millicent, founded in 1995, ECash and CyberCoin, founded in 1996. Many of the early online services used micropayment methods, such as e-money and digital cash.
After the birth of online payment services in the flourishing internet network, we see the e-commerce site: Amazon was founded in 1994. Pizza Hut stepped in as the first online restaurant category soon after. The first online food order started with this step taken by Pizza Hut and was ahead of its competitors by a significant margin.
E-Commerce: Speed and Security
While the expansion of the internet network and the increase in e-commerce services mean that online payment methods become more widespread, we are also witnessing smart technologies that are getting ahead of traditional banking. Today, we can do our grocery shopping and pay for a hardware store online by simply opening a new tab in our internet browser. Similarly, we can buy a flight ticket to another country, determine where we will stay, and make the payment instantly. Online payment transactions allow us to do a job miles away in a second.
Thanks to online payment methods, it is very simple to access anything and to have orders delivered to our door with one click -or touch-. So what are the other advantages and disadvantages? Let us talk a little bit about these and start with the advantages. According to Bankrate, more than two-thirds of consumers carry less than $50 a day, giving businesses who adopt online payments a competitive advantage over traditional businesses. Online payment costs less than manual transactions such as checks, money orders, cash and EFTPOS because the steps are automated. In online payments, payer and receiver get feedback quickly, minimizing the risk of theft.
As we explore the disadvantages; we come across the transaction fees the third-party payment processors charge. Especially small and medium-sized businesses may not be able to maintain a tight security stance in the constantly updated cyberspace. In case of any cyber security vulnerability during payment, cybercriminals can infiltrate the system and obtain personal data or money; online payment methods can be disabled as a result of any cyber attack. In the event of a technical malfunction, access may be denied until the issue is resolved.
It would not be wrong to say that online shopping is inevitable nowadays. It is possible to make safe transaction in a system by analyzing cyber security risks, taking precautions and remediating any vulnerability that cyber criminals may exploit. Consider the days with remarkable online shopping data; Halloween and Single’s Day. According to the Influence Center, a next-generation marketing and promotion company for Halloween, 55% of parents planned to buy their kids’ costumes online this year, and 42% in-store. In 2020, the rate of physical shopping from the store was 52%. Looking at this example, we can say that our online shopping habits have increased. As another example, when we analyze Single’s Day, the world’s largest 24-hour online shopping event initiated by Alibaba, we see that the gross merchandise value reached US$33.5 billion this year, up from US$31 billion last year.
In the Estimated Global E-Commerce Report prepared by Insider Intelligence, it is stated that online purchases are accelerating with the pandemic and is expected to continue its trend. As to e-commerce sales, the global market shares are as follows: China 52.1%, the United States 19%, the United Kingdom 4.8%, Japan 3.0%, South Korea 2.5%, Germany 2.1%, France 1.6%, India 1.4, Canada 1.3% and Brazil 0.8%.
On the other hand, 2021 e-commerce growth rates for the following countries are: India 27.0%, Brazil 26.8%, Russia 26.2%, Argentina 26.0%, Mexico 21.1%, United Kingdom 20.5%, Philippines 20.0%, China 18.5%, Vietnam 18.0%, United States 17.9%. Global growth rate is 16.8%.
Conclusion
In summary, we touched upon a method of exchange in the Sumerians, followed by the Lydians inventing money as an item. Trade and payment methods keep pace with and even lead the globalizing and digitalizing world. The data we provided above shows that the share of e-commerce and online payments are expected to increase. While adapting innovations, it will definitely not do any harm to recognise the new security risks that develop in parallel and take the necessary measures.
References
https://arkeofili.com/gecmisten-gunumuze-para/
https://securionpay.com/blog/5-turning-points-history-e-payments/
