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How Banking Has Changed

You may not notice how fast the way you do your banking has changed because you are so used to the trends now. If however you reflected back a decade or two, you will be astonished by how you got along without mobile payments and internet banking. And it is certainly a far cry from the banking done in the UK 300 years ago, with the coffee houses that were used as exchange


To get a clear picture how banking has changed, let’s explore 5 things that have undergone transformation through the years, in this guide by Misys.

History of Banking in the UK

Banking was prompted by a need in the mid 17th century, for payment to goldsmiths for their merchandise like silverware and religious ornaments.

Coffee houses served as banking halls as merchants and ship owners would meet there to purchase goods and services.

In 1694, the Bank of England was formed to fund the war against France and it later begun carrying out banking services on behalf of the government, taking deposits and issuing loans. Between the 17th and 18th century, there were limitations on private ownership of banks so the Bank of England enjoyed a monopoly for that period.

There were though a few individuals who owned banks.

For example, Thomas Smith owned a bank in Nottingham in the 1650s which eventually formed Royal Bank of Scotland. The 19th Century saw the relaxation of rules on private ownership of banks and a number of individuals opened up banks. By 1844, England had 442 different banks and 569 branches. Today those banks are merged to about 150 brands with about 9 thousand high street branches engaged in retail and investment banking globally.

Within 3 centuries, we have seen a whole lot of changes in the banking industry, not just the growing of banks and their branches.


Cheques started off as drawn notes’ issued by Goldsmiths in the 17th century.

Now we are seeing calls for cheques to be phased out as they require a couple of days to clear and there is reduced use of them in the banking industry. However, there is a section of people like the elderly and some small business owners who still use them a lot which is why they are still in use.

With technology like smartphones, new initiatives are being given for people to carry on using cheques but in a more advanced way. The government is pushing banks to adopt cheque imaging. Cheque imaging would involve using your smartphone to take a picture of the cheque and then send it to the bank to process payment. This will quicken the process of processing cheques as there will be no need to go to the bank physically and the processing period would be cut from six to two working days.


With the creation of the Bank of England in 1694, the responsibilities of the goldsmiths was phased out. The bank introduced the first banknote 2 years later in 1696. These banknotes were handwritten and continued to be used until 1745 when the first printed notes were issued.

There has also been a change in the denominations ever since then. With the change in value of money, more denominations have been issued of higher value.


With time, cash payments have been complemented by cards which have now become very popular. It is very convenient these days not to have to carry cash and still make payments for goods and services. With debit and prepaid Visa Card, you can make payments using money you have in your account while with credit cards you are able to use money you do not have and then pay back later with interest. Debit cards seem to be used more in the UK, accounting for 51.6 percent of purchases While Credit cards account for 23.5 percent of purchases

The history of card payments dates back to the early 20th century in America where American Express Cards and Dinner cards. They were introduced to the UK in the 1950s. It was not until 1966 that debit cards were introduced. The technology used now involves chip and pin technology which makes them more secure and efficient. There is also contactless technology used.


Payments using your card has become much easier with contactless payments. Instead of having to enter your pin to make payments with your card, you can now just touch it onto a reader and the payment will be made, although the maximum amount at the moment is restricted. Contactless payments have become the norm in pubs, bars and on trains.


Internet banking is one of the main indicators of how banking has changed. In the past, you needed to make a trip to the bank to transfer money, make payments, check on your statement and so forth, not anymore! Internet banking has greatly transformed the way we bank. Money transfers are now much faster, sometimes even instant. Banks have introduced Apps to help customers access their accounts on smartphones so banking can be done anywhere, anytime.

Taking it even further, you can now pay people using texts – more and more banks have brought out pay by text functionality.


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