The cheque had its origins in the ancient banking system, in which bankers would issue orders at the request of their customers, to pay money to identified payees. Such an order was referred to as a
bill of exchange. The use of bills of exchange facilitated trade by eliminating the need for merchants to carry large quantities of currency (e.g. gold) to purchase goods and services. A
draft is a bill of exchange which is not payable on demand of the payee. (However,
draft in the U.S.
Uniform Commercial Code today means any bill of exchange, whether payable on demand or at a later date; if payable on demand it is a "
demand draft", or if drawn on a financial institution, a cheque.)
The ancient Romans are believed
[5] to have used an early form of cheque known as
praescriptiones in the first century BC. During the 3rd century AD, banks in
Persia and other territories in the
Persian Empire under the
Sassanid Empire issued
letters of credit known as
Ṣakks.
Muslims are known to have used the cheque or
ṣakk system since the times of
Harun al-Rashid (9th century). In the 9th century, a Muslim businessman could cash an early form of the cheque in
China drawn on sources in
Baghdad,
[6] a tradition that was significantly strengthened in the 13th and 14th centuries, during the
Mongol Empire. Indeed, fragments found in the
Cairo Geniza indicate that in the 12th century cheques remarkably similar to our own were in use, only smaller to save costs on the paper. They contain a sum to be paid and then the order "May so and so pay the bearer such and such an amount". The date and name of the issuer are also apparent.
Between 1118 and 1307, it is believed the
Knights Templar introduced a cheque system for pilgrims travelling to the
Holy Land or across Europe.
[7] The pilgrims would deposit funds at one chapter house, then withdraw it from another chapter at their destination by showing a
draft of their claim. These
drafts would be written in a very complicated code only the Templars could decipher.
