A Standard of Deferred Payment

The 4th Job-to-be-done with money

Deferred payments refer to those payments which are to be made at some time in the future. In a modern economy, a large number of transactions involve future payments which can easily be stated in terms of money. This is possible because the value of money remains more or less constant and it possesses the quality of general acceptability. It is the accepted way (in a given market) to settle a debt. For example, while the gold standard reigned, gold or any currency convertible to gold at a fixed rate constituted such a standard.

In the barter system, it was difficult to make such future payments in terms of goods and services. There was always the risk of increase or decrease in the value of the repayment commodity. There could also be disagreements regarding the quality of goods or services to be repaid. This function of money has facilitated borrowing and lending activities and promoted credit. Financial institutions have been established primarily owing to this function of money.