Before the advent of the first specialized trading cities like Bruges, Antwerp, and Amsterdam, trade in Europe relied on a system of fairs that followed the same circuit each year. In the Middle Ages, these fairs brought together merchants from much of Europe. Conducting trade over such long distances at larger scale increased the demands on finance. Filling the need were some of the first merchant-bankers who leveraged the fairs as a source of business but also as a clearing house for international payments.


             Some of the first and the most well-known medieval trade fairs took place in the Champagne region of France. Most notably, these fairs hosted trade in Flemish cloth in the 12th and 13th centuries. It was a cycle of six events; fairs were held each year at Lagny-sur-Marne, Bar-sur-Aube, Provins, Troyes, followed by Provins and Troyes again. Merchants from Northern and Southern Europe alike met there to sell and trade their wares. They would use the fairs as a chance to purchase products more valuable in other regions and sell wares acquired more cheaply elsewhere.

‘Une foire en Champagne au XIIIe siècle’  (engraving)

             Medieval fairs were highly organized. They arrived at regular places on a regular schedule with certain days dedicated to certain products. The Champagne fairs had ten days dedicated to trading cloth and eleven for leather. Records show merchants from Genoa selling at these fairs leather brought with them from Italy and buying cloth which they could sell back home. In addition, goods sold by weight would have certain days dedicated to them and there were fixed days for settling purchases at the conclusion of each of the six Champagne fairs.

             The settlement process was centralized by fair officials. Merchants’ receivables from what they had sold and their payables arising from what they had purchased were consolidated into a single net payment that would be made to or received by fair officials. Payment could be made in coins or in bills of exchange. Bills could also be drawn to carry over any debt into the next fair in the circuit.

             Medieval fairs held trading not only in merchandise but also in currencies, real estate, insurance, lotteries, and financial instruments. Nonetheless, they began to decline in the 14th century and this trend continued into the 15th century by which point they were more-or-less replaced by year-round trading cities like Bruges and Antwerp.

Bills and Notes

             Developed in the 13th century by Italian merchant-bankers, bills of exchange were an alternative to making payments in bulky coins, including when exchanging money in one currency for money in another. Records dating to the era of the medieval fair show that merchants only conducted a small part of their trade in coin. Dealing in bills reduced the risk of loss or theft and were generally more convenient. Put simply, bills were promises to pay a specified sum at a certain time and place.

             Merchants would often arrange themselves in partnerships and use courier services to be able to trade over a larger area. Bills would facilitate this breadth by allowing the transfer of money or debts from one place to another. The term after which a bill would be due usually corresponded to the distance to the location of payment. These became standardized over time, just six days for a payment between Genoa and Milan or two months between Genoa and Bruges.

             Since the money would not be paid for some period of time, the bill of exchange was also a credit instrument and was used as such. As just one example, if a merchant owed money at the conclusion of a fair, he might sell a bill payable by himself at the time and location of the next fair, to carry that debt into the future. In its more typical use, a bill was used to finance inventories while they were in transit or in the process of being sold.

             Imagine a Genoa-based merchant planning to attend a Champagne fair; he would eventually receive revenue in France but first required funds in Italy to purchase the inventory he planned to sell in Champagne. To purchase this inventory from a seller in Genoa, the merchant would draw up a bill of exchange ordering a drawee, his representative in Champagne where the merchant would later make his money, to pay a payee at a later date. The payee would be the local Champagne correspondent of the Genoa based seller of inventories acquired by the merchant. By accepting this bill as means of payment, the seller would essentially be offering financing to the merchant.

Four-party medieval bill of payment from Benjamin Geva’s ‘The Order to Pay Money in Medieval Continental Europe’

             Obviously, it takes two sides to make a payment so merchants would not only give bills in payment but would accept the bills of others routinely in their trade. Since they could be sold to third persons, bills would essentially circulate as money themselves. So, if a merchant in Florence had just sold some product in Bruges and received a bill payable in Bruges in return, he might sell that bill back home in Florence to a merchant needing cash in Bruges to purchase inventories there.

Credit and Banking

             Merchants and moneychangers would serve as intermediaries in this sort of trade, buying and selling bills paid in different cities as they would different currencies. By buying a bill before it was due, these new merchant-bankers were essentially lending money as much as changing money.

             Of course, buying these bills at a discount could have been considered usurious. Instead, the merchant-bankers profited by buying these bills at an less favorable exchange rate between the currency of the bill and the currency preferred by the seller, than the prevailing market exchange rate. Because the exchange rates at the time the bill of exchange came due were uncertain, the banker was taking a risk that could distinguish the activity from simple lending.

             Nonetheless, efforts to disguise these transactions as something other than lending lost importance as time went on and the practical legal penalties for lending at interest evaporated. Whether at interest or not, merchants were creditors to one another and to other prominent members of society, from bishops to royalty. Agents of royal borrowers would attend the same fairs to raise money.

             The trade facilitated by the fairs increased the need for credit. Purchases of inventories to be sold at the fairs were frequently made on credit as were the sales of product brought by merchants to the fairs. Merchants themselves would extend credit to one another and they would make use of agents to collect on these debts given the mobile nature of their business. Still, the Champagne fairs continued to function as payment clearing houses, retaining their settlement functions long after they ceased to be markets in actual goods


              The fairs of Champagne and others in medieval Europe were nodes in a circuit of trade that connected the traders, producers, and consumers of various products. They were also nodes in a financial circuit that enabled the movement of money across time and place. Wherever a trade in merchandise can be found in large scale, finance follows, since the limits of the simplest of transactions facilitated by barter or metal coin become intolerable when the potential gains from trade are limited by their inadequacies.

More from the Tontine Coffee-House

           Read about how the Medici banking family used bills of exchange and letters of credit and how Bruges became a prominent trading city in the 14th century. Consider subscribing to this blog’s newsletter here

Further Reading

1.     Boerner, Lars, and John William Hatfield. “The Economics of Debt Clearing Mechanisms.” SSRN Electronic Journal, 29 May 2010.

2.     Face, R. D. “Techniques of Business in the Trade between the Fairs of Champagne and the South of Europe in the Twelfth and Thirteenth Centuries.” The Economic History Review, vol. 10, no. 3, 1958, pp. 427–438.

3.     Geva, Benjamin. “Chapter 20: The Order to Pay Money in Medieval Continental Europe.” Money in the Western Legal Tradition: Middle Ages to Bretton Woods, edited by David Fox and Wolfgang Ernst, Oxford University Press, Oxford, 2016, pp. 409–440.

4.     Kindleberger, Charles P. A Financial History of Western Europe. George Allen and Unwin, 1993. 

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