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Concept
Financial transaction
Summary
A financial transaction is an agreement, or communication, between a buyer and seller to exchange goods, services, or assets for payment. Any transaction involves a change in the status of the finances of two or more businesses or individuals. A financial transaction always involves one or more financial asset, most commonly money or another valuable item such as gold or silver.
There are many types of financial transactions. The most common type, purchases, occur when a good, service, or other commodity is sold to a consumer in exchange for money. Most purchases are made with cash payments, including physical currency, debit cards, or cheques. The other main form of payment is credit, which gives immediate access to funds in exchange for repayment at a later date.
History of money
There is no evidence to support the theory that ancient civilizations worked on systems of barter. Instead, most historians believe that ancient cultures worked on principles of gift economy and debt. In a gift economy, valuables are given without any formal declaration of repayment, often thought to be a form of reciprocal altruism. Official systems of credit and debt were first created around 1800 BCE by the Babylonians, who established the first formal interest rate limits with the Code of Hammurabi.
Many cultures around the world began using commodity moneyobjects whose value comes from their intrinsic value. These often included gold or silver coins, along with non-metal objects such as cowrie shells, beaver pelts, and dried corn. Between 1000 BCE and the first millennium CE, coinage became increasingly common throughout Europe and Asia. In England, banknotes were introduced starting in the 17th century. Each note promised to pay the bearer the value in gold upon demandthis is called a gold standard. In the 20th century, many countries gradually phased out the gold standard in favour of fiat moneymoney that is not backed by any commodity.
Since the start of the 21st century, online banking has become much more widespread.
Official source
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