Final answer:
The payment system evolved from barter to fiat money and checks as a response to the need for more convenient, safe, and efficient trade as trade and economies grew. Fiat money, which is not commodity-based but legally declared as tender, and checks reduced the impracticality and risk of carrying physical money.
Step-by-step explanation:
The evolution of the payments system from barter to precious metals, then to fiat money, and finally to checks can be best understood as a series of improvements aiming to facilitate trade as societies and economies became more complex and global. The transition from tangible commodity money, like precious metals, to fiat money and eventually to checks and other financial instruments, was driven by the need for convenience, safety, and efficiency in transactions.
Precious metals, like gold and silver, served as an effective medium of exchange due to their intrinsic value, durability, and divisibility. However, as economies expanded, carrying large amounts of these metals became impractical and risky. To address these issues, societies adopted fiat money, which is not backed by physical commodities but is established as legal tender by government decree. The value of fiat money comes from the universal faith and trust that it will be accepted as a means of payment.
Checks became a natural evolution in the payments system as they offered a secure and convenient way to transfer large sums of money without the physical exchange of cash, reducing the risks involved with carrying and transporting money.