International money transfers can be a very complex process, and sending money or goods abroad has a fascinating history that dates back as far as the 8th century. The evolution of international transfers, also known as remittance, has a rich and varied past that has transformed with the advancement of technology and the progression of immigration from country to country, and from continent to continent. As more and more advanced technology is created we are more connected than ever, which increases the ease of money transfers with each passing day.
Did you know that you can actually send money abroad without any money actually changing hands? This is an ancient concept that dates back to South Asia in the 8th century known as “hawala,” and was often used in the Islamic world. Hawala is known throughout many parts of the world: in Persian, it is known as “havelah” or “hundi” and in Somali, it is known as “xawala” or “xawilaad.” No matter its pronunciation, the Arabic word “hawala” has the same basic meaning throughout the world, which is “trust” or “transfer.” It is an informal way to transfer money, during which one person pays an agent, who in turn sends the transfer through a network of “hawaladers” or hawala dealers. Hawala dealers may settle debts between parties with cash, property, or services. In fact, the very first systems of exchange often involved bartering in goods or services, rather than any actual currency, coins, or bank notes.
Hawala was widely considered a way to protect against theft, supported by trust, honor, family connections, and regional relationships. If a hawala dealer did not uphold their end of the deal, they would be excommunicated from the network to keep the trust and security of these transfers intact. The concept of hawala eventually influenced common and civil laws in more modern societies, both as “aval” in France, and “avallo” in Italian law.
The first known coin currency was created by King Alyattes in Lydia, a kingdom that existed in 600 B.C. in what is now modern Turkey. The coins, known as “trite,” were made from a naturally occurring mixture of gold and silver called electrum, and imprinted with a roaring lion’s head on each side. The first paper money is attributed to the Chinese Tang Dynasty, which existed from around 618 until 907 A.D. The first paper currency were often small folded bills of credit or exchange notes, and existed for centuries in China before finally catching on the rest of the world around 1661 A.D. when the first bank notes were printed in Sweden.
It wasn’t until 1851 A.D. that the modern wire transfer company, Western Union, was established and would eventually lead the international remittance world. Western Union started as a telegraph service and was widely successful, before making the transition into telegraph-based money transfer services in 1871. They achieved much success and became one of the first companies to ever be listed on the New York Stock Exchange in 1884. In 1918, the Federal Reserve Banks followed their example and began moving currency via telegraph, and not long after, in the 1920s, credit cards and “virtual currency” began to gain popularity. In 1946, the first credit card was introduced by John Biggins, who worked at Flatbush National Bank in New York. The card was named “Charg-It” and was initially introduced as a way for small businesses to interact with local customers, where businesses would submit sales receipts, and the bank would bill the customer.
In 1973, the Society for Worldwide Interbank Financial Telecommunications, or SWIFT, was formed, as a global provider of secure financial messaging through a system of international banks. Originally consisting of just seven banks, the number of banks in the SWIFT system today number in the thousands. For years, SWIFT was one of the dominating forces in the international money transfer world, mostly due to their intensive security measures, but it also requires a number of extra costs. There is a fee to join the SWIFT network, annual support charges, and other charges for each message or transaction.
In recent years and decades, the evolution of money transfers has grown by leaps and bounds. Paypal was formed in 1998 under the company name Confinity, which became one of the first international transfer methods available online. In 1999, European banks began offering money transfers via cell phones, technology that was still in its infancy at the time. In 2008, radio frequency identification (RFID) allowed the introduction of touchless ID verification, which was first introduced in the United Kingdom before it became more widespread.
Today, there are a plethora of ways to send money abroad. There are a number of mobile apps that allow you to easily make online money transfers, between banks, domestically and abroad. Paypal is still widely used for international money transfers, although the process may come with a hefty fee, depending on which country the money is being transferred to. Venmo recently came on to the market as a major competitor for Paypal for money transfers, but Venmo is limited solely to US currency, eliminating it as an option for international transfers. Square Cash, Apple Pay, and Google Wallet are similarly limited. Remitly offers some of the best rates for international exchanges, low fees, and a state-of-the-art security system of verification and risk management procedures that ensure all international money transfers are entirely secure.
The most recent innovation in international payment is bitcoin. Bitcoin is a cryptocurrency, which is a form of electronic money, and it lacks any centralized bank or administrator. The emergence of bitcoin as a major form of currency seems to be an indicator of the future of international money transfers, which are headed the way of electronic and exclusively online forms of currency.
The evolution of international money transfers will inevitably continue to change and flow with the current and newly emerging technologies. The future of money and international money transfers could exist in an entirely new reality in just a few decades time. What lies in the future of international money transfers? Only time will tell.