Bill of exchange

Bills of exchange evolved with the growth of banking in Europe from the thirteenth century. Paper money like the banknotes we use today was not then part of everyday currency in the West, but bankers and merchants did use written records for settling payments, especially in trade.

In their simplest form, bills of exchange were written instructions by one person to an agent, authorizing payment to a named individual or firm at a specified future date. They were therefore a convenient way of providing credit or making payments over a distance. In this example, John Emerson in Hamburg has instructed Austin Goodwin, a merchant in Bristol, to pay £380 to Joachim Coldorph in three months' time. If Coldolph needed money sooner, he might choose to sell the bill to a fourth party at a discounted rate. That buyer would then present the bill for payment in Bristol at the appointed date.