Hawala 5th - 10th century
Temples 10th -12th century
Banking systems 12th -14th century
Bank of England 1694
The Start of Modern Banking 1920s
Pawn-brokers up till 1950s
The First Credit Card 1966
Deregulation of banking 1980s - 1990s
Payday loans 1990s
Online Banking 2000
Risky Lending early 2000s
The Credit Crunch 2008
The Rise of Payday loans post-2008
Regulating Payday Loans 2009-2014
Regulating Payday Loans 2015
From the ancient loaning method of Hawala through to the online payday loans of today, loaning methods and banking systems have undergone many drastic changes. The earliest forms of banking were actually ancient temples, where merchants would leave their goods for safekeeping. Banks then developed into large and impressive institutions that catered for the wealthy, upper-class members of society, which left most citizens unable to open accounts or take out loans. It was this form of bank that Michael and Jane encountered with Mary Poppins in the early twentieth century period.
It was only in the last fifty years that banking institutions became what they are today, open to all parts of society, enabling millions of people to open accounts and borrow money. However, too much lending led to a sudden collapse of the banking systems, which became known as the credit crunch, the effects of which are still being felt in today’s economy. Loaning is now more needed than ever, with online payday loan companies helping over two million people in the UK make ends meet until their next pay check arrives.
Use the slider below to see in detail how banking and loaning methods have developed from Hawala and temples to the payday loans and banks of today.
1 in 10 people in the UK have used payday loans to pay an unexpected high bill or at times when spending is high, like Christmas
Banks began expanding their services to include pensions, insurances, loans and credit cards.
This traditional method of sending money originated in North Africa and the Middle East. The term 'hawala' means trust - this method is based on trust.
For A to give money to B, A gives it to C and D gives it to B. D now trusts that C will pay him back.
The earliest forms of banks were actually the ancient temples, where merchants would deposit their goods for safekeeping.
More and more banking systems were set up as a way for the wealthy to store their money and jewels. One of the more famous ones was founded by the Medici family in Venice in the 14th century
Banking developed as a way to pay for goods and services and bank notes were introduced in 1661. The currency was quickly followed by the establishment of the Bank Of England in 1694. This was the first of the central banks and is the banker for the English government.
Modern banking really started to come about after World War One when bigger bank companies formed through mergers and takeovers. However, in order to borrow money, and sometimes even just to open an account, you would need to prove you were creditworthy and supply references. Borrowing money from the bank was not an option for many people.
For many, pawnbrokers remained the only option for short-term money needs, where they would take an expensive item such as a ring or watch and lend money against it, within a specific time frame. If the money plus interest was not returned, the pawnbroker could sell the item.
Barclay's bank introduced the first credit card into the UK. Known as the Barclaycard, it was the forerunner to all of the credit cards that are in use today. The credit limits were low, and there were strict conditions that had to be met before you could be granted a card. Advertising helped spread the card to millions of people who found themselves able to buy things without saving up. The age of instant gratification had arrived.
London's banking systems were declining. To counter this, an agreement was made between the Thatcher government and the London Stock Exchange to relax regulations and restrictions in banking and stock exchange. This led to a dramatic boom in the economy, and made it much easier for people to open bank accounts and take out loans and mortages.
Being used to spending, people often found themselves running short and needed to borrow money until their next paycheck would arrive; payday loans were born.
Online banking is introduced and by the year 2000, many customers are managing their accounts online. You would no longer have to meet with the bank manager or go through such thorough checks in order to apply for credits cards and loans.
Banks found themselves making a huge profit from 'risky' loans; where a person had a dodgy credit record, they could charge a much higher interest. People were also growing used to living with debt, constantly borrowing money to cover their more luxurious, celebrity-inspired living style..
This rise in unsustainable
lending and personal debt led
to an almost total collapse in the
financial industry as banks began to fail, sparking a chain reaction across the financial markets globally. Investors started pulling out with a serious impact on the stock market. This was the financial crisis of 2008, also known as the 'credit crunch'.
Following the recession, the government looked into its causes and set in place many regulations in order to prevent it happening again. Banks were discouraged from risky lending This meant that many people were now unable to borrow money.
There has since been a steep rise in the number of payday loans and short-term loans issued to people who just need a bit of cash to help them through an unexpected financial crisis from one payday to another.