Checking accounts are used every day by millions of people. However, many people today do not realize that while they take this financial instrument for granted, it was not always part of banking. What we know as the modern checking account developed over hundreds of years in response to consumer demand for greater access to cash.
The concept of the current account did not emerge until the early 16th century. It arose in the Netherlands when Amsterdam was an important center of commercial activity. Merchants who were accumulating large sums of money needed a place to put their cash.
The “tellers” emerged to meet this demand. Cashiers would keep the money for a small fee. You may not be a trader, but is this already familiar?
Soon a great demand emerged due to increasing competition as more and more people scrambled to become tellers. This lowered the cost of giving the money to an ATM. It also made the tellers themselves start looking for innovative and new ways to entice customers to choose them.
These new ways of attracting customers took the form of new or additional services assigned to a depositor. Like modern banks, these tellers had to come up with new services or even gimmicks to try and compete for customers. Today’s tricks seem to be quite different from those of the early 16th century. However, it is important to realize that we take the modern checking account for granted today. Back then, it was being invented because banking was still in its infancy.
The idea that someone could come in with a note from a depositor that would allow them to withdraw money from the depositor’s account was certainly a new and novel idea. This was one of the new services that emerged to meet demand and attract customers. Today, such a note would be called a “Check.” Just as a canceled check is kept for a paper record, the depositor’s written order was maintained at the time to provide proof of the transfer of funds.
This new development really got the gears oiled in the commercial industry, allowing money transfer to happen much more efficiently. This efficiency improvement helped improve the profitability of the trade and the merchant profession.
Due to the mobility of merchants, the concept of what we now know as a current account soon spread to other countries beyond the Netherlands. These countries included England, a great world power, and its many colonies where the sun “would never set.” Included in the colonies were those of what would become America.
The influence spread to the original American colonies in 1681. Massachusetts land magnates began mortgaging their parcels of land to tellers, who in turn began providing accounts that landlords could use to write notes or checks.
The modernization of the current account did not come until later. It was not until 1700 that checks began to appear in the sense that we understand them today. In England, banks began printing checks on behalf of their customers. These controls included serial numbers to help track them. In fact, it was not until then that the term “check” began to be used to refer to these financial notes.
The 18th century truly marked the period when these new services, once novel, began to be standardized and generalized. This is the period when enough banks started standardizing their checks and the problem arose of getting cleared checks. This precipitated the creation of the first clearing houses dedicated to streamlining check processing.
