The Evolution of Money Transfers

The transfer of money from one country to another is now such an important process for so many people that it’s difficult to imagine life without it. It’s especially important for developing countries...

The Evolution of Money Transfers

The transfer of money from one country to another is now such an important process for so many people that it’s difficult to imagine life without it. It’s especially important for developing countries, where an estimated $551 billion came in from overseas workers in 2019 (according to World Bank figures). This forms a significant part of the national economy, for some countries. In other cases, they receive more from overseas workers sending money home than they get from international aid.

But how did we get to this point? How did we go from having to cart around huge sums in hard cash to the ability to digitally transfer money with your smartphone, with the confident expectation that it will arrive less than a second later? It is a fascinating journey, with a number of important contributing factors…

The first money

It’s impossible to tell precisely when and where the concept of money first emerged as it appeared before written history. It’s believed that basic concepts of barter led to the first medium of exchange in the form of attractive items - pretty shells and beads, perhaps. That still doesn’t constitute ‘money’ because, without a system of accounting, it is nothing more than a protracted bartering system. It was not until someone came up with the idea of the “I owe you” that money properly came into being.

Let’s jump forward into recorded history, and that concept of owing someone ‘one unit of something’ evolved into units of currency. In the early days, this was generally in the form of some precious commodity. You’ve perhaps heard of the concept of a ‘salary’ coming from people being paid in salt, for example. However, the concept of coinage appeared in China from around 1000 BC and eventually spread across the world, creating what we can all agree is our modern understanding of money.

The problem with this early money is that it was heavy and ungainly. For the most part, it consisted of precious metals — especially gold and silver, though bronze was also widely used at first. What’s more, your ‘bank’ consisted of just your pocket or a secure store in your home. While the concept of money-lending is as old as the concept of “I owe you”, money storage is comparatively new. This being the case, the only process of money transfer, especially across international borders, was physically carrying your money to your destination.

The first money transfers

The problem with this approach to transferring money internationally is that it is extremely impractical and insecure. Bear in mind that the concept of a national police force is a relatively recent one, so your safety on long journeys was generally your own problem. That being the case, a wagon loaded with currency would be a prime target for bandits, thieves, hostile armies and basically any chancer with a heavy stone or two and a bit of luck.

With regular long-distance movement came the need to develop a safer, more efficient system of transferring funds from place to place. The first such long-distance movement was the Silk Road — a network of trade routes connecting China with the Indian subcontinent, Central Asia, the Middle East and even parts of Africa. It led to the large-scale proliferation of a wide variety of ideas, from Buddhism to gunpowder. It also led to the development of the hawala system in about the 8th century.

Hawala is basically a somewhat convoluted system of “I owe you”s. A person in one city would speak to a merchant and explain that they wanted to move some of their money to a second city. That merchant would send a message to someone they knew in the destination city to issue the agreed amount of money to any person who gives a pre-arranged password on the understanding that the debt would be repaid later. Obviously this requires a lot of trust between the two merchants, so they would often be family relations or at least very close friends. The person could then either travel to their destination without having to carry all their money or could even give the password to someone else in that city so that they could claim the funds.

Astonishingly enough, this exact money remittance system is still in use today and has evolved very little. However, being unregulated and unrecorded, it is widely used for money laundering and is, therefore, illegal in many countries.

The first bank transfers

The hawala system has some significant flaws. For one, the password system is decidedly insecure. This problem was easily resolved with the development of the hundi, which was effectively the first semi-official “I owe you” and, like the hawala system, is still in use today (and is also illegal in many places).

The more pressing problem with hawala is that it depends on there being a network of sufficiently wealthy merchants in every major city (as well as minor ones) with enough trust between them to be able to complete the transaction. While this is probably going to be perfectly fine for your average yeoman and moderately successful merchant or Silk Road trader, the sort of wealthy nobles who most need a secure money transfer system are going to be unable to use it.

This became a serious problem following the First Crusade in 1099. With holy sites like Jerusalem now in Christian hands, huge numbers of pilgrims started making their way to the Holy Land, only to find their journey beset by bandits and highwaymen. While the major cities of the area had been secured in the crusade, much of the outlying territory had not and it led to pilgrims dying by the hundreds. In response, the Poor Fellow-Soldiers of Christ and of the Temple of Solomon — commonly known as the Knights Templar — were formed.

While these military monks were primarily tasked with fighting off threats, they took their remit of protecting pilgrims very seriously. Apparently understanding that prevention is a far more effective method of reducing crime than prosecution, they created one of the earlier forms of what we would now consider to be modern banking, along with the concept of an international bank transfer.

The main difference between the Templars and the hawala system was that the former did not depend on a network of trusted merchants. Instead, the Templar order had its own network of nearly 1,000 outposts dotted around Europe and the Holy Land. While these served a primarily military purpose, they also acted a little like bank branches. A prospective pilgrim could go to one of these outposts, deposit their money, receive a document very similar to a hundi, carry that on their pilgrimage and then visit another outpost in Jerusalem and exchange the document for the same sum of money they deposited.

As successful as this system was, it was short-lived. Jerusalem fell to Muslim forces in 1187 and, while it was recaptured in the Sixth Crusade in 1229, it fell for good in 1244. Forced out of the Holy Land, the Templars were effectively homeless and, with no pilgrims to protect, purposeless. They retained the extraordinary wealth they had amassed for some time and continued providing banking services to the nobles and monarchs of Europe until the early 1300s, when the order was violently dissolved.

The first forex

Let’s forward in history again, to a time when banks were a well-established concept and not run by the medieval equivalent of special forces soldiers. That time is around the 15th century, when the Italian banking family Medici started opening overseas branches. This, again, was in service of traders, allowing textile merchants to exchange currencies, making their trades easier to organise and manage. They created the nostro account book, which showed amounts in both local and foreign currencies.

While the word nostro translates as “ours” in Italian, the idea caught on and, a couple of centuries later, forex was common enough that an active market for it existed in Amsterdam. By 1704, there was enough trade between England and Holland that the forex market was essential.

The first wire transfers

The invention of the telegraph in the late 18th century and its widespread adoption around the world (but, for the purposes of this example, particularly the United States) led to the development of what you could call the first electronic fund transfers. The New York & Mississippi Valley Printing Telegraphy Company (which would later become the Western Union Telegraph Company) launched their wire transfer service in 1872. It used basically the same concept as the hawala or the Templars’ notes of credit, but took advantage of the telegraph network’s remarkable speed to allow credit to be transmitted right across the country in minutes.

As global industry began to take off in the late 19th century, the need for wire transfers rapidly increased. More people were now working overseas, wanting to send money back to their families. Remittance began to transfer from a process of safely moving cash from one place to another and became what the word makes us think of today — a means of sending money to an account or person in another country.


The Society for Worldwide Interbank Financial Telecommunication (SWIFT) was founded only as recently as 1973. It offers an alternative to wire transfers, with the main difference being the scale they work on. As with the original hawala transfers, Western Union was always going to be limited by the amount of money they could transfer since they are, at the end of the day, just a merchant.

SWIFT is sort of like the modern equivalent of the service the Templars were offering, giving big businesses the option to transfer millions of dollars in one go. Mostly used by banks, it enables to transfer of messages from one institution to the other. While it ultimately works on the same trust as hawala do, that trust is supported by a lot more documentation. This has both advantages and disadvantages. The main disadvantage is that SWIFT really does not live up to its name — the process of checks and balances at each stage means that a single transfer can take days to complete. However, the advantage is that those checks and balances allow transactions worth $5 trillion per day to take place, which is far beyond the scope of any wire transfer service.

The digital revolution

The first online money transfers only appeared towards the very end of the 20th century, when PayPal launched. Conceptually the same as the wire transfer, their service was significantly simpler and faster. They opened the doors for many more money transfer operators, building off that simple premise while adding new developments and technology refining the process. Even Western Union have caught up with the times.

The shift into digital technology has also brought other options and alternatives, such as using cryptocurrencies to transfer money, but such options are still in their infancy and currently add more complexity for customers who are seeking simplicity. Perhaps the process will improve in the future, but online money transfer operators like DeeMoney are currently at the forefront of remittance and continue to further refine the technology used to make the process safer, faster and simpler.

This article is provided to you by DeeMoney. Thailand's money transfer solutions provider licensed by the Bank of Thailand. Interested in transferring money from Thailand to the world? Download the app from the Google PlayStore or the Appstore to get started.