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In 2022, financial sector global wealth is estimated at USD 454.4 trillion, making money more central than ever.
Yet, what we consider ‘money’ is not static. It’s a dynamic entity that has evolved considerably over time. From financial sector barter systems to digital bytes, the form has changed, but the function remains consistent: to serve as a medium of exchange, a unit for measuring value, and a secure place to store wealth.
In this blog, we will cover how the financial sector has digitised and modernised payment methods, right from the barter system to UPI.
The Financial Sector Journey from Barter to Currency

Before money, people traded goods and services directly in a financial sector barter system. You might trade a sack of potatoes for a pair of shoes. But it had its limits.
Firstly, you needed a ‘double coincidence of wants’—basically, both parties had to want what the other was offering. Secondly, it was tough to determine how many potatoes made up the ‘value’ of one shoe.
While early societies resorted to the financial sector trading easily accessible items like animal skins and salt, this wasn’t very efficient for larger scales of business.
Enter the era of coins. Lydia, in 630 BCE, produced metal coins, including electrum and spade coins, setting a new financial sector standard. With a minting facility in place, coinage made transactions swifter and empowered both internal and external trading systems.
Transitioning to paper currency was another leap. Initially issued by banks and private institutions, paper money facilitated international financial sector trade and led to the first currency markets. China was among the early adopters, issuing paper money as early as 806 CE.
The emergence of paper currency wasn’t just a European or Asian phenomenon. North American colonies issued IOUs in the form of denominated playing cards as early as 1685, filling the void of cash shortages.
The gold standard came into play in the 1870s, tying currency to a country’s gold reserves. This eventually set the stage for currency wars, where nations would compete to influence each other’s currency values.
Transition into Modern Payment Methods
After the widespread use of currency, we entered a new financial sector era where cheques and credit cards emerged as the next big thing. Instead of carrying a bundle of cash, a small piece of paper or a plastic card could handle the payment.
A cheque is a paper-based method that instructs a bank to pay a specific amount from your account. Credit cards work similarly, but in digital form, they let you borrow money up to a certain limit to make a payment. Both these payment methods made transactions more secure and trackable compared to cash.
Just when we thought it couldn’t get any more convenient, along came digital wallets. Apps on your smartphone can now store your payment info securely.
With a tap or a scan, you can pay for anything from groceries to a new car. It’s the epitome of convenience. These digital wallets laid the groundwork for an increasingly mobile-centric financial world.
UPI and Its Impact
UPI, or Unified Payments Interface, burst onto India’s financial sector scene in 2016, courtesy of the National Payments Corporation of India (NPCI). This wasn’t just another payment method; it was revolutionary.
Why? Because it enabled real-time peer-to-peer transactions through a single mobile app. UPI’s real magic is its simplicity and inclusiveness, connecting many banks and enabling transactions via third-party apps like Google Pay and PhonePe.
UPI’s features are nothing short of revolutionary. Not only can you transfer money instantly, but you can also make payments using QR codes.
UPI 2.0 even brought additional perks like overdraft facilities and invoice payments. The system’s open architecture has led to a plethora of UPI-enabled apps, offering services like online shopping and bill payments.
As of now, UPI boasts 300 million users and 500 million merchants. It’s expected to hit 1 billion daily transactions by 2026-27, showing rapid growth.
Particularly impressive is UPI’s reach in bridging the urban-rural divide facilitating financial inclusion across various sections of society.UPI’s impact is far-reaching, from empowering small businesses to acting as a catalyst for economic growth.
It has not only eased the transaction process but also played a vital role in moving India towards a more transparent and accountable economy.
Conclusion
The financial sector has come a long way, from the rudimentary barter system to the cutting-edge digital payments of today.
Each transition, be it the introduction of currency, cheques, credit cards, or digital wallets, has been a leap towards simplification and security.
But it’s UPI that has truly been a game-changer, particularly for India.
DISCLAIMER: This article is not meant to be giving financial advice. Please seek a registered financial advisor for any investments.
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