The first coins appeared in 600 B.C., and were created by King Alyattes in Lydia, whereas the first paper money was introduced by the Chinese Tang Dynasty, which ruled from 618 – 907 A.D. China had already gone through a financial crisis due to inflation, and so it outlawed paper money entirely in 1455 A.D., long before the western world had a taste of the financial instrument. Even though coins and paper money have significant utility within the economy, they are limited to the jurisdiction of the issuing body. Therefore, other forms of remittance were formed to aid traders of foreign goods.
There are and continue to be forms of foreign remittance that predate and work alongside today’s formal banking and cross-country payment systems. The Tang Dynasty had a system to transfer funds named the fei-ch’ien (flying money). Also, by some accounts, the “hawala” system has existed since the 8th century as a vast network of money brokers that originated in India to serve Muslim, Arabic, and Indian traders along the Silk Road, with operations still underway today. Hawala is built on a network of trust and relationships between money tradesmen called hawalandars. These hawalandars are usually positioned large distances from each other, and hence rely on their counterparts to execute simple or complex reverse informal hawala transactions to settle their positions (World Bank and IMF, 2003).