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The History and Future of the Telegraphic Transfer

The word telegraphic transfer is a nostalgic term in banking and finance because it refers to a time when sending money in any way electronic was unusual. In the early history of banking all bookkeeping was done manually, money transfers were done in cash or cheque and transactions were accounted for on paper ledgers. Then came electricity, cable communication and telegraphic transfers were born.

Telegraphic transfer is when one party remits to another electronically. It was first done using cables and now get used to identify any electronic funds transfer. In many parts of the world, it is said as a form sarcasm toward the reminiscence of aristocratic society, as a sort of snub. Prior to the internet, transferring money electronically was reserved to the elite in large important transactions but today more and more people are accessing it. Electronic payments still being relatively new, we have yet to witness the bulk of it historical societal change. Money was electronic and now is digitizing.

The first idea of electronic money came in 1880 when renown American scientist Edward Bellamy suggested accounting for transactions on a card but technology was not yet mature enough to support the application. It wasn’t until Diners Club International issued the first universal payment card that the movement developed steam. In 1957 came Americard (better known as Visa), then in 1966 came Master Charge (known as MasterCard) and in 1968 came the Electronic Data Interchange (EDI) which allowed for what is known today as EFT (Electronic Funds Transfer).  Up until the mid 1990s, the developed world gradually transitioned over to electronic payment systems. Pop culture started depicting electronic payments as more mainstream and mass adoption to root.

1981 sparked the official beginning of the digital revolution with the first use of internet protocol. Large financial institutions at this time started implementing digital payment networks and international settlement became faster. This is when securitization began, the cabal of large institutions started not only digitizing money but investments and all forms of economic value. In turning these formally illiquid values transactable, the established financial community increased trade and became more interwoven but this did not stop the digitizing of assets.

Despite large regular financial market panics, money has continued to move faster and faster while markets digitized. Long gone are the days of physical stock exchanges and trading is mostly done on computer and often through the use of algorithm (within developed centres). The Internet being peer to peer, one would think that markets would have decentralized with increasing use but we are yet to see this on a large scale. Even today, much of the worlds exchange of money and securities is done on proprietary networks that are centrally owned. Innovations in payment networks has been made and the technology is now existent to start decentralizing financial markets.

Transaction authentication has long been the primary obstacle to removing third parties to individual transactions. By the very nature of a financial exchange you need to confirm that an exchange of value has been made and in early times this was done with a unique and hard to replicate physical token (a currency). When electronic ledgers appeared, a settling agent and clearing house was required to confirm that a unit of trade was not spent twice and was in fact transferred.

Since the introduction of HasCash in 1997 and the latter expansion into Bitcoin in 2009, encryption has successfully solved this issue. No longer do you need any witness to you transactions as they are automatically accounted for in a public ledger and authenticated by the entire network using cryptology. This has sprung a entirely new sub sector within finance that revolves around peer to peer trade based on encryption as enthenticators to trust. Entire markets such as Coinffein have sprung up to exchange digital currencies without a third party.

Many insiders today, are referring to the underlining technology of Bitcoin (the blockchain) in the same light as Linux was viewed. Many suggest that it has the potential to impact financial markets in the very way that many aspects of the Linux OS has impacted electronics. The Linux architecture is present in some way, shape or form in just about every computerized devise and has been built upon to serve a wide variety applications in just about every industry. Linux changed computers forever because it was a base an architecture that could be improved upon. The blockchain shares that commonality with Linux.

Telegraphic transfers are simply electronic transfers. To know where we are going it’s important to know where we have been. We have come from a place exclusive use to a more and more open economy. I would anticipate this continue and the only logical directory would be to have a larger number of people take more control over their units of trade and thus their measurement of wealth. The exchange of value is becoming more peer to peer and this has the potential to empower money people. We are currently witnessing a turning point in our economic history and spotting the opportunity is often half the battle.