A History of Cross-Border Payments, from Barter to FinTechs

The history of cross-border payments goes hand-in-hand with the history of money, industrialization, and globalization. These payments include remittances by migrants to people back home and businesses that have expanded across the globe, necessitating fund transfers between entities and suppliers. 

At AZA, we are in the business of helping you make cross-border payments quickly and cost-efficiently. Let’s walk down the fascinating history of cross-border payments to see how we’re able to offer best-in-class financial services today. With this knowledge, you will know how to pick the best payment provider to grow your business.

Barter System

The need to exchange goods has existed from the early days of long-distance trade. People travelled long distances to exchange precious stones, spices and fabric. This exchange in value can be seen as the beginning of cross-border transfers as people moved value physically across many borders. 

Cross-border payments via coins
The rise of coins to make payments

The Rise of Coins and Currencies

Eventually, precious metals were converted into rudimentary coins which could be exchanged as value for goods and services. In the 8th century, the hawala system took shape. In this system, money did not move physically but instead relied on a trust system of money brokers in different countries. Todate, the hawala system is still a popular way to send money back home especially within the Islamic community.

Currency Exchange

The exchange of currencies was an automatic result of different coins/currencies made in cities and countries. As far back as biblical times, money changers existed in markets to convert foreign currencies back to local currencies to enable the purchase of goods and services in that particular market. This still relied on the physical movement of the currencies.

Making cross-border payments through wire transfers

Banking and Wire Transfers

The need to transfer funds between places that were very far from each other arose with industrialization. In the late 19th century, Western Union, formerly a telegraph company, began facilitating money transfer through “wiring” to another location. A sender would pay money in one office for the operator to send a message and “wire” the money to be collected by the recipient in another office location. Today, many remittance companies have millions of agents around the world where recipients pick up cash sent to them.

Shortly after this, banks adopted the wire method to telegraphically transfer funds from one location to another, giving rise to EFT (Electronic Funds Transfer). To this day, you can still see this as an option in your banking app when you need to move money locally. 

Eventually banks adopted the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network in which international payments would be relayed securely. One noticeable characteristic of all these modes of money transfer up to this point is the length of time it takes for the recipient to receive funds. It can take days or even weeks.

Cross-Border FinTech

The era where you had to wait for days for money to hit a recipient’s account is long gone. Innovations have sprung up around the world to ease the speed and cost of making cross-border payments. Mobile money has ensured that people around Africa receive instant payments from family abroad through apps like Sendwave which is a hit among the Kenyan diaspora in the US. APIs have created an interconnected network of payment systems that deliver instant bank settlements in many countries. In the near future, blockchain technologies are bound to revolutionize the entire industry.

AZA’s financial products embrace the latest and most secure innovations to improve your cross-border payment experience wherever you are looking to transact in, out, and around Africa. If you are paying a supplier abroad, you can do it at the touch of a button via BFX. If you are sending multiple payments to Ghana every day, TransferZero is your payment gateway of choice. Talk to us today.


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