Banking History: Currency, Regulation, Money Management and Beyond! 

by | Jun 14, 2024 | Culture

Think about how you manage your money today. You likely have an account at a bank or fintech to store your money and use it to track spending, savings, and more. You may do everything from your computer (or mobile only) and may hardly ever step into a bank branch or use physical money to pay for items. 

Have you ever considered how if you lived a century ago, how you would have managed your money? What about if you lived 1,000 years ago? 

A common theme throughout history is that banking adapts to the way that people use money to pay for goods and services and grow their financial security. Whether it’s offering new financial products or supporting new payment methods, banks evolve over time. But how did we get to where banking is today? 

In this blog, we’ll explore the history of banking, diving into the global roots of different financial innovations that impact our relationship with money and money management! 

Historic Moments in Banking and Finance 

Time: 8000 BCE 
Place: Mesopotamia 
The earliest known version of banking goes back to a system of using clay tokens and envelopes to record trade transactions. This notes the first step in evolving from an economy supported by the direct barter system to one where currency supported the movement of money. 

Time: 7th century BCE 
Place: Present-day Türkiye 
The Kingdom of Lydia was the first place to use standardized metal coins for currency, being chosen for their durability. 

Time: 7th century CE 
Place: China 
China was the first known place to use paper for currency with the advantage that for large transactions, it is easier to carry and use paper notes than lots of heavy, metal coins. 

Time: 1472 
Place: Siena, Italy 
Banca Monte dei Paschi di Siena, which claims to be the oldest bank in the world, was founded. Its original purpose was to offer loans to those in need. 

Time: 1781 
Place: Philadelphia, Pennsylvania 
The Bank of North America was the first bank chartered in the United States. When a bank is chartered, it means that it is governed by a regulatory body; this ensures more security for customers of the bank because they must comply with rules, designed to minimize bank failures and/or protect consumers, and another organization is keeping an eye on it!  

Chart showing the number of banks in the United States from 1783 to 1860, starting with 24 banks in 1800 and rising to 1400 by 1860.
Source: Federal Deposit Insurance Corporation

Stock Brokerages in American History

Hold up – isn’t this blog about banking? What does stock trading have to do with banking? They are different but both important elements of the broader economy and a person’s financial security. While Milli offers banking services (and not investment services), we wanted to take a moment to share the history and impact of stock investing, because the stock market can influence someone’s saving and spending. 

Individuals and businesses can invest and growth their wealth by buying and selling shares of businesses, and this investment is a major factor in spurring the local and macro economy. The public trading of businesses goes back to Europe in the 1500s, but let’s take a look at some notable moments in stock brokerages in the United States: 

Time: May 17, 1792 
Place: New York, New York 
24 stockbrokers gathered to create the first stock brokerage in the United States, signing the Buttonwood Agreement that created the New York Stock Exchange. The agreement outlined how stocks could be traded and commissioned earned. The NYSE was founded in response to the first financial panic in the United States. This gave consumers more options for ways to invest their money.  

Time: 1870 
Place: New York, New York 
78 years after the first stock brokerage was created in the United States, Victoria Woodhull became the first female stockbroker in the United States, opening her own brokerage with her sister near Wall Street. She earned the equivalent of $12 million in modern dollars, and aimed to use her financial success to advance “the rights of women, workers, and the poor.” 

Photograph of Victoria Woodhull, in sepia
Source: New York Public Library

Time: February 8, 1971 
Place: New York, New York 
The NASDAQ is founded with the goal of being the first electronically-run stock market, though at first shares could not be traded electronically. It marked innovation beyond trading on a brokerage floor and set the stage for more accessible investing for individuals later on. 

20th Century Banking History

The 20th century of banking in the United States was marked by a gradual change from smaller, state-regulated banks to larger, federally regulated banks, and expanded options and protections for consumers. Let’s dig in to a few of the key highlights: 

Time: October 6, 1919  
Place: Clarksville, Tennessee 
Brenda Vineyard Runyon, head of the local Red Cross, was the first woman to open a bank, the First Woman’s Bank. It accepted $20,000 of deposits on its first day – the equivalent to $338,945 in 2023 dollars. 

(Quick note: another woman founded a ‘bank’ for women back in 1879 in Boston… but it ended up being a pyramid scheme to provide the 8% return, so it wasn’t quite a legitimate financial institution).

Time: June 16, 1933 
In response to bank failures during the Great Depression, President Franklin D. Roosevelt signed the Banking Act of 1933 which created the Federal Deposit Insurance Corporation, which insures deposits at banks up to a certain amount. The basic coverage started at $2,500.  

Time: 1950 
Place: New York, New York 
Frank McNamara and Ralph Schneider invented the first iteration of the credit card with the Diners Club card, which would charge the holder’s restaurant bill to their bank. It originally launched with acceptance at 28 restaurants and two hotels. 

Time: June 27, 1967 
Place: London, United Kingdom
John Shepherd-Barron invented the first automatic teller machine, with the first model being installed by Barclays at its Enfield branch. It used personal identification numbers, but paper cards instead of plastic like we have today. At the time, the maximum withdrawal was £10! 

Time: October 4, 1973 
Place: Washington, D.C. 
U.S. Representative Bella Abzug introduced H.R.10737, the Equal Credit Opportunity Act, and it was referred to House Committee on Banking and Currency. The next year, the Equal Credit Opportunity Act passed in the United States as a major step in the fight against discrimination. Among other things, it gave women the right to open their own bank or credit account, regardless of marital status. Prior to the passing of this law, lenders could charge higher fees or interest rate or deny mortgages to women or discount their income in a mortgage application.  

Time: May 1, 1982 
Place: Cleveland, Ohio 
Karen Horn, PhD was the first woman president in the United States Federal Reserve System, serving about five years as the president of the Federal Reserve Bank of Cleveland, leaving to take on the chief executive officer role at the largest bank in Ohio at the time. She played an important role in addressing the savings and loan crisis of the 1980s, the first large banking crisis after the Great Depression.  

Time: November 17, 1993 
Place: Palo Alto, California 
Stanford Federal Credit Union was the first institution to offer online banking. It only had 600 customers in its first year! 

21st Century Banking History

We’re almost a quarter of the way through this century and the innovation and progress doesn’t stop. Let’s explore developments in a few different areas! 

Time: 2007 
Place: Barcelona, Spain 
Before the launch of the iPhone and Android, Finanteq exhibited multiplatform mobile banking applications available for the earliest smartphones: Blackberry, Nokia, and Windows phone devices.

Time: July 21, 2010 
Place: Washington, D.C. 
The Dodd–Frank Wall Street Reform and Consumer Protection Act passes, reforming the financial services industry in the hopes of mitigating risk-taking that can lead to a financial crisis. Among other things, it created the Consumer Financial Protection Bureau, an agency of the federal government that oversees banks and aims to protect consumers.

Time: February 3, 2014 
Janet Yellen, PhD began a four-year term as the chair for the Board of Governors of the Federal Reserve System, the first woman to hold the position.  

Conclusion

From a system of clay tokens to paper bills plastic cards to now touchless transactions, money and how we use it has changed over the thousands of years since we have shifted from an agrarian society. In response, governments and banks have adapted to support individual financial needs and the broader economy’s needs. Notable figures, whether they be innovators in financial services or government officials, can also shape our world for years or decades into the future. Taking time to understand the history of something we use every day can help us connect the dots between the past and the present, and get inspiration for future financial innovations. 

If you’re looking for a bank that makes it easy to save and keep track of your spending, check out Milli. Our helpful, customizable spending tracking and savings automations help keep you on pace with your financial goals. Our competitive Annual Percentage Yield helps you build your savings. Download Milli from the App Store or Google Play and get started today! 

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