Page last updated at 11:53 GMT, Monday, 16 February 2009

The history of payments in the UK

Time is money and UK payments have seen major changes in relatively recent history.

The cheque was an innovation 350 years ago, but now it is said to be in irreversible decline. Replacing it are new types of technology including debit cards that you press to a sensor in order to pay.

How did we get to this stage? This timeline looks at key moments from the past four centuries that influenced the way we pay.

1659: THE EARLIEST KNOWN CHEQUE

An early example of the cheque
This is one of the earliest examples of a handwritten cheque

Dated 16 February 1659 the earliest known handwritten cheque was drawn on an account at Clayton and Morris, a goldsmiths' bank based in London.

Early cheques were generally high denominations and only used by merchants and traders, not for everyday consumer use.

For many years both cheques and banknotes were handwritten.

1694: BANK OF ENGLAND ESTABLISHED

The Bank of England
The Bank of England is on Threadneedle Street in London

The Bank was used to raise money for King William III's war against France. Banknotes were issued in return for deposits with a promise to pay the bearer the sum of the note on demand.

To start with all banknotes were handwritten and made out for the exact sum of money deposited and signed by one of the Bank's cashiers.

After 1696 the Bank decided not to issue any notes for sums of less than 50. The average annual income at this time was only 20 so most people never came into contact with a banknote.

1728: THE OVERDRAFT IS INVENTED
Empty pocket
A merchant was the first of many to take out an overdraft

The Royal Bank of Scotland invented the overdraft, one of the most important banking innovations.

The bank allowed William Hog, a merchant, to take 1,000 - the equivalent of 63,664 today - more out of his account than he had in it.

Charges made by a number of banks for unauthorised overdrafts have recently come under the spotlight in a continuing legal case.

1793: THE FIRST 5 NOTE IS ISSUED

An early 5 note
This 5 note is the earliest in the Bank of England Museum's collection

The first 5 notes were issued by the Bank of England in 1793 at the start of the war against Revolutionary France.

This remained the lowest denomination until 1797, when a series of runs on the Bank, caused by the uncertainty of the war, drained its bullion reserve, so it was forced to stop paying out gold for its notes.

Instead, it issued 1 and 2 notes.

1855: FIRST FULLY PRINTED NOTES

Name being signed
Cashiers were given a rest as printed notes replaced handwritten ones.

From 1855 the cashier no longer had to write the name of the payee on the banknote or sign each one individually.

The phrase "I promise to pay the bearer on demand the sum of ", appeared for the first time and has remained unchanged to this day.

The printed signature on the note continued to be that of one of three cashiers until 1870, since when it has always been that of the chief cashier.

1960: THE QUEEN'S HEAD

1 note from 1960
The monarch first appeared on Bank of England notes in 1960

Queen Elizabeth II was the first monarch to appear on an English banknote.

In Scotland monarchs have featured on Royal Bank of Scotland banknotes since 1727.

Three banks in Scotland have the right to print their own money, The Royal Bank of Scotland, the Clydesdale Bank and the Bank of Scotland.

1966: FIRST UK CREDIT CARD

Folk singer Joan Baez
Shoppers in America could use credit cards when the 60s were in full swing

On 29 June 1966 Barclays issued the UK's first credit card.

It was based on the BankAmericard that had been issued a few years earlier in the USA.

By 2008, 30.8 million people in the UK had a credit card and used them to make 1.9 billion purchases that year.

1971: DECIMALISATION IN THE UK

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Public reaction to decimalisation in 1971

On 15 February 1971 the UK currency switched to a decimal system and residents stopped using pounds, shillings and pence.

Banks were closed for the two previous working days to prepare for the launch of the new decimal currency.

For a short time the old and new currencies ran hand in hand. People could pay with pounds, shillings and pence and receive the new coins as their change.

1987: FIRST UK DEBIT CARD

Channel Tunnel
Channel tunnel construction and debit cards started in the same year

The first debit card was launched in the UK, incorporating a magnetic stripe on the reverse of the card, together with other security features on the front of the card such as holograms and secure printing.

Barclays was the first to issue a Visa Delta card under the Connect brand. Midland, National Westminster Bank and Royal Bank of Scotland followed closely in 1988 issuing debit cards under the Switch brand (which itself became Maestro in 2004).

There are now 41.7 million personal debit card holders in the UK.

1997: FIRST INTERNET BANKING SERVICE

Padlock on computer keyboard
Internet banking has blossomed as more people have a computer at home

The first internet banking service was introduced by the Nationwide Building Society in 1997.

Now all major banks and building societies have internet access for customers, and some institutions offer internet-only accounts.

But the advance in online technology has also attracted fraudsters, often through 'phishing', an e-mail practise used by con-artists who try to get unsuspecting members of the public to divulge their personal security information by posing as online banks or businesses.

More than 20,000 fraudulent phishing websites were set up in the first half of 2008.

2003: CHIP-AND-PIN INTRODUCED

Chip and PIN machine
Chip and pin was the biggest change to payments since decimalisation

Chip-and-pin cards began to be issued throughout the UK.

These debit and credit cards contained a microchip which was used to store data on the card. It was hoped the system would reduce card fraud because the embedded chip stores information more securely than the old magnetic strips on cards.

Customers enter a four-digit Pin in to a keypad to authorise any payment rather than write their signature on a receipt.

2007: CONTACTLESS CREDIT CARDS APPEAR

Barclaycard
Barclaycard is one of the most high-profile credit cards in the UK

Barclaycard issued "wave-and-pay" credit cards.

For purchases under 10 customers place their credit card near a special reader which adds the purchase price to their credit card bill.

For a purchase over 10 and for occasional security checks, customers enter their Pin.

2009: PLANNED LAUNCH OF CONTACTLESS DEBIT CARDS

Barclays headquarters
Barclays' customers will start to receive contactless debit cards soon

The first contactless debit cards are expected to be introduced.

Barclays say that from March they will begin to issue contactless debit cards to their customers.

By then end of the year, three million people are expected to have contactless debit cards. This is set to rise to more than nine million in the future.



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