Since money is really just a representation of value, it didn't take long for people to realize they could just send information about money by telegraph or other electronic means, and it was just as "real" as sending the money itself. After World War II, banks would record information about the day's transactions onto large magnetic reels, which were taken to the regional Federal Reserve Bank. This system eliminated the need for the large denominations that were printed prior to the war to facilitate these large-scale transfers. Today, the $500, $1,000, $5,000, and $10,000 bills printed during this period are very rare, though some are still in circulation.
Later, wire connections were established between the banks, so the transfer information could be sent directly.
By the early 1990s, all transfers between banks and the Federal Reserve were done electronically.
There are three other important steps in the history of electronic money:
tchaiks on April 16th, 2017 at 12:58 UTC »
It's in the computer???
Landlubber77 on April 16th, 2017 at 12:53 UTC »
That is sort of strange to think about now that you mention it. I literally have no money. If the bank decided to pretend I had no money in my account I'd be pretty well fucked.
panzerkampfwagen on April 16th, 2017 at 10:55 UTC »
It's been this way for centuries.
People used to put their "money" in vaults owned by people such as goldsmiths. The goldsmiths gave out receipts so you could come back and collect your money.
People, being lazy, just used to trade the receipts with each other. The goldsmiths caught on and started lending people receipts for gold, etc that they didn't actually have. Modern banking and money was born.