From Barter to Internet Banking

From Barter to Internet Banking

Shaukat Ali Khattak

In our childhood, a hairdresser used to dress our hair by getting some wheat for it, i.e., an exchange of goods for his service would take place. Along the same lines, we used to get our peanuts harvested by our villagers who would get the peanut leaves, or a part of the harvested fruits, for their labor. Similarly, some people would get the wheat straw for its harvesting, which they would use for animal feeding, i.e., exchange of goods for their service would occur.

 Back then, there was no money involved in such transactions, a concept known as barter, which is an act of trading goods or services between two or more parties without the use of money (or a monetary medium, such as a credit card), i.e., an exchange of goods with services, or goods with goods or services with services would take place. In the above-mentioned examples, an exchange of goods (wheat, peanut leaves or fruits and wheat straw) for services (hairdressing and peanuts and wheat harvesting) would occur. It was a time where most of the transactions used to happen with money but there were few instances, as stated above, where the barter still existed. Presumably, barter is not practiced today anywhere in the world in its old-fashioned way, i.e., where the people involved in the transaction belong to the same area. In the modern barter, which is not as prevalent as it used to be in the pre-modern era, people barter by swapping and auctioning things through the internet.

Being a good way of transaction, barter suffered, however, from some limitations. For instance, if you would need a chair and had a spare table; you would need someone with a spare chair to do the transaction with. With such a person you could swap the chair for the table only if he would need the table and be willing to swap his chair for it. But finding someone, if there was one in the first place, would be hard.

 Besides, what if you were traveling? What good and service could you provide to others to get a good or service in return? Could you carry all of your available goods along with yourself so that you could swap a good for something else you would need? That would have been impossible and doing transactions while being away from your home would have been more challenging: you wouldn’t be able to exchange any of your goods at all. At most, in such circumstances, you could provide your service for another good or service you would need. For instance, you could cook and wash utensils for a meal, but would someone need your service and agree on exchanging it for the meal? This shows that the barter does not work in all cases but in certain environments only such as in a small village and that, too, when the parties involved in a transaction agree to barter.

Here the money comes in, which is one of the most fascinating ingenuities humans have exhibited so far. Although, money in the form of any currency carries no inherent value, i.e., you can’t use it directly for your need, unlike an item of food which you can eat to do away with your hunger or a blanket which you can use for doing away with the cold, humans have ‘put’ value in it by ‘trusting’ on it. With money, you can swap anything with another thing of the same value. For instance, transforming your car into a land without a medium of money would be harder as you would need to find someone with the land of the same value and would be willing to give it for the car. The involvement of money makes it easier: you would need just someone who wants to sell his land without needing the car. You could get the value of your car in the form of money and get land with the same money.

What is money all about? It is just a piece of paper, numbered, stamped, registered, and authenticated by a government to do the transaction with and the ‘value’ of which is widely being ‘trusted’ by the citizens of a country. One could imagine that losing ‘trust’ on the very paper would halt all sorts of transactions, leading to an unimaginable economic catastrophe. That’s why a counterfeit of money is considered a heinous crime in the law of all lands.

 Unable to rust, being bright and hard to be produced, gold metal had been used in the international monetary system. With limited availability, it was realized at some point that trade with gold can’t be increased with the increasing demand of the developing civilizations. This is where the paper currency, consisting of banknotes and coins, was introduced as that can be printed seamlessly. Initially, it was linked with the amount of gold available in a country. , i.e., a country was not authorized to print as much paper currency as it wished; rather it used to be bound to print it just according to the number of gold reserves in that country. In 1971, however, Richard Nixon, the U.S. President, cut the dollar’s tie to the gold. Since then, no country has money equal to the gold reserves it has. Previously, it was thought that if the masses would approach the State Bank of Pakistan, for instance, and ask for gold in exchange for money they have, the bank could provide gold for the money, but today doing so will be futile as the bank has no more gold equivalent to the money possessed by the masses.

 The disconnection of gold with the money is reflected from a statement written on each note of money we have. On a banknote of Rs100, for instance, a sentence is written as ‘Bank Doulat-e-Pakistan 100 RupeiaHamile-HazaKoMutalibaPer Ada Karega’, i.e., ‘The State Bank of Pakistan will issue 100 Rupees to the bearer of this note on-demand’, an inexplicable statement. There is no mention of gold. Since the bearer of the banknote has already Rs100, stating that the bearer will be issued money of Rs100 by the State Bank is incomprehensible as the bank doesn’t sell anything other than the note which the bearer has held already? At most, the bank can replace the banknote held by the bearer with a new one, which is not meant by the statement ostensibly.

 Having said that, despite carrying such vagueness, the paper currency has revolutionized the economy and perhaps the economic progress wouldn’t have been possible without it. On top of that, a digital currency in the form of just some digits on a computer server, which is even more virtual and intangible than the paper currency, has made the economy thrive even further. The digital currency has made the trade easier as the parties involved in a transaction can get gain or give the money by the credit or debit card, or by online transfer through the internet, in a blink of seconds, and the history of which is recorded automatically.

This has decreased the use of paper money substantially. For instance, my monthly salary is transferred to my bank account by Abdul Wali Khan University Mardan (AWKUM), my employer, in the form of digits without involving the paper currency. Except for the cash paid out for buying some grocery items, I make several transactions digitally from my bank accounts such as paying my house rent, utility bills, school fees of kids, and the likes: I see one-third of my salary in the form of paper currency while the rest, two-third, is spent digitally. One can imagine how much it is intriguing that most of the transactions are carried out by intangible money, i.e., without even touching the medium of exchange.

According to an estimate, total money in the world was about $60 trillion, in 2006, where a small part of it, less than $6 trillion, was in the form of banknotes and coins while the rest of it, more than 90 %, i.e., more than $50 trillion, existed in the form of digits only on computer servers. The paper currency may completely disappear in the years to come. Who knows?

Undeniably, moving the transactions nature from barter to paper currency to the digits on computer servers has created more wealth in the world which has benefited the humans’ societies holistically, the disparity in the wealth distribution has, however, increased. For instance, the contagious Covid-19 has made, on one hand, million people jobless over the entire globe, some high-tech companies such as Google and Facebook, on the other hand, generated more revenue during the pandemic period. The world intelligentsia fears that the increasing concentration of world wealth in the hands of few is a catastrophic challenge.  The world leaders need to mull over the issue and come up with a workable solution.

 The Author has earned a Ph.D. degree in Physics from Lancaster University, UK, and serves as Associate Professor at Department of Physics, Abdul Wali Khan University Mardan (AWKUM), Mardan. He can be reached at

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