Stefan Henningsson, Jonas Hedman and Bo Andersson
when travelling, since a holder of a bill of exchange could use it to withdraw money in another town. The House of Medici, in Florence, Italy, popularized them and become the leading bank institution at its time( Ferguson, 2009). Prior to bills of exchange, the Song Dynasty in China introduced paper money, known as " jiaozi ", but they are not the source of our current banknotes. Instead, this is credited to Stockholms Banco, which later became the central bank of Sweden. In 1661, the bank started to print bank notes. Behind, these banknotes there was a deposit in physical goods( e. g. gold) with the same value. Building upon this principle with deposits lead to the gold standard as monetary system, i. e. banknotes are the medium of exchange that can be changed into a fixed amount of gold. With this innovation, it was possible to replace gold coins. This system lasted until the Bretton Woods Conference in 1944, where most countries decided to adopt fiat currencies( Selgin, 2003). A fiat currency is an official legal tender, even though it has no intrinsic value, meaning that they are based solely on trust( George 2003). In addition, to fiat currencies most currencies were pegged, at that time to the US dollar, with a fixed exchange rate. The gold standard prevailed in the USA until 1971, when US government suspended the gold standard.
4.2 Global payment infrastructure
The innovations describe above are the foundation of our payment infrastructure. For instance, fiat money exists as digital representations in our bank accounts. Upon these building blocks a global infrastructure have emerged, consisting of financial institutions, central banks, payment transaction systems, payment methods, standards, and legal frameworks. We focus payments cards, standards and legal frameworks, and globally acting governmental agencies
4.2.1 Payment cards
Payment cards have changed how we pay and spend money( Evans and Schmalensee 2005). They where introduced by Sears in the early 1900s, but not until the introduction of Diners card in the 1950s they reached a mass market. A few years later American Express followed. Diners and Amex are charge cards and exists in a ' closed‐loop ' system with users, merchants and issuers of cards.
In 1966, Bank of America launched the general‐purpose credit card. Today known as VISA. The same year, the InterBank Card Association( later re‐named as MasterCard) began to issue credit cards. MasterCard and VISA create and governs the rules for authorization, clearing and settlement, and develops and maintain the payment network system to process transactions. The Automatic Teller machine( ATM) can into the market the following year( Evans and Schmalensee, 2005).
4.2.2 Standards and legal frameworks
Payments, including authorization, clearing and settlement are governed by standards( Kokkola, 2010). ISO( International Organization for Standardization) is the world’ s largest developer of International Standards and develop standards for the payment infrastructure. The ISO 4217 is the International Standard for currency codes, used for currency conversions. Banking institutions, businesses, and individuals worldwide for defining different currencies uses this code. Using these codes helps to eliminate any confusion regarding currency names and symbols that can occur during international exchange. The ISO 13491‐2:2005 specifies checklists to be used to evaluate secure cryptographic devices in the financial services environment. ISO are also working on standards for mobile payments. For instance, the future standard ISO 12812 will address: security and data protection, Mobile person‐to‐person payments, Mobile person‐to‐business payments, and requirements for mobile banking applications.
International commercial law governs international sale transactions, including payments. A number of organizations participate in development of commercial law, United Nations Commission on International Trade Law and World Trade Organization. One of the tools is model laws that can be locally adjusted and adopted, for instance the United Nation Convention on International Bills of Exchange and International Promissory Notes from 1988
4.3 European outlook
Payment infrastructure in Europe has drastically changes over the last decade( Danmarks‐Nationalbank, 2005, Garcia‐Swartz et al., 2006). The introduction of the Eurozone and European Central Bank has harmonized the payment infrastructure( Kokkola, 2010). The Single Euro Payments Area( SEPA) legislation aims to make the
243