Why Barter, When you can Buy on Credit?

Transactions have been a part of the human experience since the dawn of civilization. Obviously, it started in the simplest of forms — bartering. (i.e. I will trade my g0at for an allotment of textiles and a bunch of vegetables) Until one day someone said, “Hmm… I don’t have an available goat today, but I’ll get you one in the near future.” Then the term ‘credit’ was born.

Fast forward to modern commerce ‘credit’ has become a common concept. From simple bar tabs to home loans, credit has become an integral part of our modern society. When the cost of living outpaces income growth, as is the case right now, the use of credit rises. Credit cards are an ever increasing part of the credit landscape. Trends show people moving away from large loans in favor of lines of credit. This is just the most recent shift in the fairly rapid evolution of the universally accepted personal credit concept.

Personal credit is a long standing commerce tradition. Business owners sometimes allow loyal customers to collect charges and pay later, based on the strength of their relationship. The concept of company-backed credit is also old, where companies supply workers with store credit or some similar alternative in lieu of money. In an attempt to universalize this practice, during the late 1800’s, charge coins were adopted.

This was the first step widespread use of individual lines of credit. This item would have a stamped number which correlated to an account. This number would be recorded by the merchant and provided to the institution which holds that account for payment later. This very basic method innovation provides a few benefits which have ensured its popularity.

Similar to paper money alleviating the weight of transactions seen in coin currency, credit cards have once again reduced the physical size of money. Instead of a cases of large bills, high figure transactions could now be completed with the swipe of a card.

With a credit card, there is less need to have cash on hand on a day to day basis. Large banking institutions backing credit cards have allowed for a majority of merchants to accept these personal credit transactions. Mainstream acceptance of credit is important, but comes with some drawbacks.

The larger the bank, the higher the overhead; increased overhead brings more urgency to the profit of the business. This urgency can sometimes supersede what is best for the customer. To this end, fees can be introduced at an increased rate to generate more profit for the institution. Banks tax all transactions which occur on their payment network, as well as interest and many other kinds of fees and penalties.

Obvious need for improvement has caused the credit card concept to continue to evolve.

The next steps in credit card innovation have already begun. There is a shift from these services being provided by banks, and moving toward tech companies. Tech companies are currently invading every possible service; the shift toward technology is inexorable. The actual card is also under threat of replacement. Mobile transactions have already begun replacing card transactions, as can be seen at your local Starbucks. We are seeing an increased instance of payment options being centered around the phone.

It is very possible, one day soon, all our monetary needs will be handled by the smart phone. Beyond that, in the future we may only need to have our retinas scanned or voice confirmed to access our credit accounts. This integration of our financial identity with personal identity continues to grow.

So, scan my retina, confirm my voice, and fork over that goat.