Payments stand as a powerful symbol of human cooperation, interdependence, and trust. As the world hurtles forward into an era of increasing economic integration through globalization, payments continue to escalate in importance, with McKinsey's forecasts indicating that the revenue from the global payments ecosystem will increase from $2.2 trillion in 2022 to $3.2 trillion in 2027.
The fundamentals underpinning payments are as ancient as human civilization itself. When a payment is executed, be it through tangible cash, a metal card, or a smartphone, the essence is the exchange of value. This notion traces its roots to the time when humanity began generating surplus value, exceeding personal consumption needs. At this pivotal juncture, the imperative to devise mechanisms for storing and exchanging this surplus value emerged as a natural consequence (having a surplus of corn while lacking meat, and your neighbor possessing an excess of meat but lacking corn, makes the exchange of goods highly appealing). For thousands of years, value exchange, or payment, was managed through barter, such as exchanging a sheep for a cow.
However, the barter system had its natural limitations, particularly for facilitating complex and widespread economic interactions. Millennia passed before humanity found a reliable store of value in gold. The Lydian empire made a historic leap forward in the 7th century BCE by crafting gold into standardized pieces we recognize today as coins. Fast-forward to the 15th century AD, in the vibrant city of Florence, where individuals could deposit their gold in exchange for small paper tokens. In 1661, Stockholms Banco in Sweden began issuing deposit certificates, a type of security that granted owners the ability to withdraw the deposited sum in coins. The deposits were accepted as a means to pay for things and, subsequently, became the first banknotes in Europe. This marked the inception of paper currency, which evolved into the currency we recognize today.
These tokens represented something profoundly important—a form of value storage that humans trusted and were willing to exchange. Governments and central banks eventually stepped in, issuing their own paper tokens. These governments bolstered the credibility of their paper currencies by tethering them to that timeless trust marker, gold. Indeed, until the transformative Nixon shock of 1971, the United States upheld this tradition by backing the US dollar with gold. In the contemporary payments landscape, physical tokens have evolved into digital counterparts.
As the pace of transformation in the global payment industry continues to increase, the exchange of value remains at its epicenter. A retrospective glance at history reveals a profound truth: humans exhibit a marked conservatism when it comes to matters of exchanging value. The human brain, imprinted by a nomadic existence long before the dawn of exchanges, innately prioritizes security above all else. In our contemporary world, where we're unsure about the source of social media content or the authenticity of what we see in images, trust emerges as perhaps the most valuable asset. Any entity aspiring to emerge as a dominant force in the ever-evolving payments landscape must navigate this intricate realm of trust—earning the confidence of billions of consumers worldwide. Trust bestowed upon traditional financial institutions, such as banks and card networks, provides a coveted advantage. A staggering 84% of global consumers place their trust in banks, while 74% extend the same trust to card networks. If these institutions can leverage their role as custodians of trust, banks and card networks will be not only poised to defend, but potentially even extend their position in the future of payments.
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