Ease of spending isn’t the only quality that matters when picking a medium of exchange. Good money is also easy to move.
This concept is rather simple. Money has to be able to move from my possession into yours easily.
Cows were once considered money. It’s easy to see why that didn’t catch on. Not only are cows difficult to spend, but they are also difficult to move. The people you trade with need to be within walking distance.
Gold coins were easier to move. They could fit in a pocket and move across large chunks of land quickly without much thought. This proved to be the most efficient money to move until the invention of government-issued money.
When we invented central banks, we put our gold in a central location and used it to back our government currencies. Moving money at this point required either handing over our new paper currency or relying on banks and companies to process our checks, card swipes, or wire transfers.
While these systems that we use today seem convenient, they come at a cost. When I buy a cup of coffee with my Visa card, Visa has to:
- Make sure my account has the funds available.
- Authorize the payment (so I can leave with my coffee while the rest of this takes place.)
- Tell my bank to deduct my $4 purchase at the cafe.
- Tell the cafe’s payment provider to add that $4 payment, minus the costs and fees Visa and the banks take.
Assuming this process goes smoothly (and the payment isn’t disputed after it is authorized), it could take over 24 hours for the merchant to get their money.
Moving money to another country involves even more institutions. Payments can take over a week to settle and usually come with higher fees.
Needless to say, we’ve come a long way in our ability to move money, but it is far from perfect.