Seventeenth-century English goldsmiths are usually credited with this transition to modern banking, though the first paper money was introduced in China in the seventh century, a thousand years before the practice became widespread in Europe. Paper notes and early banking were introduced in Europe in medieval times and further advanced by the great banking families of the Renaissance.
The spread of paper notes and fractional reserve banking opened up the potential for credit expansion to support economic development but also introduced the possibility of runs and liquidity crises as well as the risk of insolvency through the credit risk associated with the lending.