It is probably hard to envisage paying for something with a cow or a barrel of grain when you are out shopping for your supper. And it would also be quite difficult if that was how we traded goods and services today.
Money is a human invention that facilitates trade and the division of labour. Today, we pay for goods and services by using cash, by transferring a deposit in a private financial institution via online banking, or by using a payment card or an app on our mobile phones. However, it hasn’t always been like this.
From barter economy to monetary economy
As long as organised societies have existed, we humans have engaged in trade with each other. First through simple barter, where people exchanged the goods they had made with each other, and later through the monetary economy we know today.
In order to simplify the exchange process, agreement has been reached throughout history on means of exchange which are widespread and easy to identify and use. To begin with, cattle or grain were used as measures of value. Eastern Mediterranean cultures began to use metals as a measure of value as early as the 2nd millennium BC.
In western Asia Minor, coins with a reliable indication of weight and precious metal content were first minted in the 7th century BC. It meant that you could simply count the coins when engaging in trade instead of having to check them carefully. And it laid the foundations for the monetary economy we know today.
Payment methods throughout history
The first coins were made of gold or silver, and their value was determined by their gold or silver content. Therefore, they could be used both locally and for trading with other countries.
Photo: CC BY-SA, Andreas Mogensen, The Royal Collection of Coins and Medals, National Museum of Denmark.
Back then, there was a lot of prestige associated with being able to mint coins as a country. It showed that the country belonged to the group of advanced European countries.
The first organised coinage was created by Cnut the Great around the year 1020.
Photo: CC BY-SA, Søren Greve, The Royal Collection of Coins and Medals, National Museum of Denmark.
The first European banknotes were issued by the Swedish Riksbank in 1661, while the first Danish banknotes were issued in 1713. The Danish banknotes should have had the same denominations as the coins, but could not be exchanged for coins. Danes, however, had no confidence in the paper money, and the exchange rate therefore fell to far below that of the coin denominations. The banknotes were withdrawn again in 1728, but returned in 1736 with the establishment of Denmark’s first bank, Kurantbanken, which was given the exclusive right to issue banknotes.
The first banknotes had very high denominations. The denomination of the largest banknote was 100 rigsbankdaler, which corresponded to a full year’s pay for an ordinary labourer. Even the lowest denomination banknote – 1 rigsbankdaler – corresponded to a few days’ pay. Most people therefore still used coins to pay for their daily purchases.
It was not until 1952 that the lowest denomination banknote equated to an hourly wage.
The use of cheques really took off in the 1890s, and in the 1970s cheques were the most common means of payment in Denmark in terms of amount. After a while, however, other, electronic payment solutions emerged which were easier to manage for banks, retailers and consumers alike. In 2004, only 2 per cent of retail payments were made by cheque, and in practice the paper cheque was completely phased out in 2016.
If you did not have a post giro account, you could pay your bill (your ‘giro form’) by paying money into the post office. In this way, the postal service had established an alternative to bank-based cheque payments. In the early 1980s, the amounts being transferred via giro transactions was on a par with that being transferred by cheque.
Photo: Hakon Nielsen/Ritzau Scanpix
Photo: Mottlau Michael/Ritzau Scanpix
Initially, paper notes and mechanical payment card imprinters were used to receive Dankort payments. The electronic Dankort system as we know it today, where payment takes place online in stores via payment terminals, was launched in Denmark in 1985.
From 1998, it became possible to also use the Dankort to pay for goods on the Internet. In 2015, contactless Dankort cards were introduced, where you simply held the card in front of a card reader rather than inserting it into a terminal. For small amounts, it is now not even necessary to enter a PIN.
Photo: Steen Jespersen/Ritzau Scanpix
Photo: Jan Woitas/AP/Ritzau Scanpix