The evolution of international money transfers has a rich and varied past that has transformed with the advancement of technology and the progression of people moving abroad from continent to continent.

As more advanced technology is created, we’ve become more connected than ever, making it easier now to transfer money around the world.

Curious about how money transfer systems got their start? Learn more about the evolution of money transfers to see how Remitly is now able to help people send money around the world.

The Hawala System

We’ll begin with the system that started it all: The Hawala System.

Did you know that you can send money abroad without any money physically moving? This is an ancient concept dating back to South Asia in the 8th century known as “hawala.”

Hawala is known throughout many parts of the world: in the Persian language it’s “havelah” or “hundi” and in the Somali language, it’s “xawala” or “xawilaad.” The word “hawala” has Arabic roots and has the same basic meaning throughout the world: transfer.

Hawala works as an informal way of transferring goods or money. One person pays an agent, who in turn sends the money transfer through a network of or hawala dealers which could be friends, family, or trusted acquaintances. 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 currency, coins, or banknotes.

Coin and Paper Currency

Hawala systems transfer goods and services, then coins and paper became a popular currency exchange method in other parts of the world.

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-day Turkey. The coins, known as “trites,” were made from a naturally occurring mixture of gold and silver called electrum, and had a roaring lion’s head on each side.

The first paper currency came from the Chinese Tang Dynasty (618-907 A.D.). These small folded bills existed for centuries in China before finally catching on throughout the rest of the world around 1661 A.D., when the first paper banknotes were printed in Sweden.

Coin and paper currency existed within the limits of specific towns, cities, and countries for a long time. But as communities began to grow in the 19th and 20th centuries, banks had to figure out how to transfer money between places that were far away from each other.

Telegraphs, Credit Cards, and Online Money Transfers

It wasn’t until the year 1851 that wire transfer company, Western Union, was established. Western Union started as a telegraph service and transitioned into a telegraph-based money transfer service in 1871. In 1918, the Federal Reserve Banks followed their example and began moving currency via telegraph.

Not long after, in the 1920s, a few department stores and oil companies offered a “courtesy card,” which was a metal card that could only be used at the store that issued it, and it had to be paid in full each month. Years later, in 1946, John Biggins introduced the “Charg-It” card as a way for small businesses to interact with local customers, which hinted at the beginning of credit cards. The Diners Club card soon followed this in 1950, becoming one of the first real credit cards.

This new “credit-based” system served as the beginning of a trusted way of transferring money for goods and services without exchanging physical cash.

In 1973, the Society for Worldwide Interbank Financial Telecommunications, or SWIFT, was formed and changed how the credit system worked. SWIFT became a global provider for secure financial messaging through a system of international banks.

Originally consisting of just seven banks, the number of banks in the SWIFT system today is in the thousands. Now more companies have decided to enter the industry to help people transfer money safely, securely, and without as many fees.

In recent decades, the evolution of money transfers has grown in leaps and bounds.

In 1999, European banks also began offering money transfers via cell phones, which was 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. However, many international online money transfer services still have numerous fees attached.

International Money Transfers Today

Today, there are a plethora of ways to send money internationally, including mobile apps that allow you to easily make online money transfers between banks, domestically and abroad, without much hassle.

Many companies offer digital services to transfer money by leveraging today’s mobile technology. Companies like Remitly transfer billions through its global money transfer platform with its reliable and easy-to-use mobile app, making the process of sending money faster, easier, more transparent, and less costly. They do this by eliminating the forms, codes, agents, extra time, and fees typical of the traditional, century-old money transfer process.

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.

One of the most recent innovations in international payments is bitcoin, a cryptocurrency (a form of electronic money) that lacks any centralized bank or administrator. The evolution of international money transfers will inevitably continue to change with 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.

When selecting a money transfer service to send money abroad, it’s important to do your research to find the easiest way to send money to your loved ones. Learn more about how Remitly allows you to transfer money quickly, securely, and at a low cost.

This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant or otherwise guarantee that the content is accurate, complete or up to date.