Financial transaction

A financial transaction is an agreement, communication, or movement carried out between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals. The buyer and seller are separate entities or objects, often involving the exchange of items of value, such as information, goods, services, and money. It is still a transaction if the goods are exchanged at one time, and the money at another. This is known as a two-part transaction: part one is giving the money, part two is receiving the goods.

In ancient times non-financial transactions were commonly conducted through systems of credit, in which goods and services were exchanged for a promise of future recompense. Credit has certain disadvantages, including the requirement that traders or their intermediaries trust one another, or trust that authorities exist who can be relied on to enforce agreements. Debts must eventually be settled either with goods or by payment of money, a substance of agreed value such as gold and silver.

Systems of credit are evident throughout recorded history and from archeology. By contrast little evidence has been found of widespread use of pure barter, where traders meet face to face and transactions are completed in a single swap.

As cities, states, and empires were established, coins and other compact forms of specie were minted or printed as fiat money with set values, permitting the accumulation of assets that would not deteriorate over time as goods might and that had the relatively secure backing of a government which could adjust value by producing more or less of the currency. As fixed currencies were gradually replaced by floating currencies during the 20th century, and as the recent development of computer networks made electronic money possible, financial transactions have rapidly increased in speed and complexity.

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Wikipedia