History of Banking: How the idea of a bank started

People nowadays have seen the importance of bank services. Banks have also expanded their services to not just deposits and withdrawals. They now offer mortgages, car loans and even business loans. But have you ever wondered how the idea of banking started?

During ancient times when there was still no monetary system, people trade with each other using produce like rice, fruits and vegetables. There were only temples and the monarchy which have a treasury that sort of acted as the bank. Money lending was done by Jews and goldsmiths. Eventually, that was polished into something more organized and the banking industry was born.

This is how the idea of banking started, the word “bank” originated from the Italian word “banco” or bench. During medieval times, people would conduct business transactions whilst seating on a bench. Later on, the benches turned into buildings. In Italy, powerful families like the Acciaiuoli, Mozzi, Bardi and Peruzzi families. However, the arrival of the Medici family gave them a run for their money, literally. 

The biggest improvement in banking happened when Giovanni di Bicci de Medici set up the Medici Bank in 1397.During the Renaissance in Italy, the Medici family of Florence has established a chain of successful banks all over Europe. Their biggest contribution in accounting is the improvement of the general ledger system and to track credits and debts they developed the double-entry booking system. 

During the 17^th and 18^th century, Court Jews or Jewish businessmen became integral in the handling of the finances of the rich and powerful families in Europe. Their main job is increase revenue, negotiating loans and creating new revenue. Court Jews receive privileges in exchange of the work they have done. They are popular in Germany, Holland, Austria and some parts of Spain, Portugal, Lithuania, Denmark, Poland, Hungary and England. 

The goldsmiths in London during 1600s have found another trade apart from crafting jewellery. They became depositories of gold and silver. Seeing that they can profit from this, they loaned it to merchants and the government at an interest.

Have you ever thought that debt is the new money? This is where the concept of credit card probably stemmed because at the issuance of the loan, the banker will give you promissory notes or IOUs. These state that the person’s acceptance of the transaction is payable upon demand. It further states that the notes can be used in negotiations. 

The developments throughout the centuries have contributed to how the idea of banking started. In the modern age, we still continue to make improvements, making the services accessible to everyone.