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Money orders were the first financial service to be supplied by the Post Office, and had their origins in a private business carried on within the department from 1792. A system of 'money letters' was established by six 'Clerks of the Road' with the sanction of the Postmaster General, to give the public the means of safely and economically transmitting small sums of money from any one part of the United Kingdom to any other. The Committee of Revenue Inquiry, which reported on the Post Office in 1829, expressed its disapproval. This profitable system was subsequently taken over by the Postmaster General in 1838, and reductions in poundage, followed by the introduction of the penny post in 1840, led to a rapid increase in traffic from 55,000 orders in 1836 to 1½ million orders in 1841.

The money order system was set up to be confined to areas of the market not covered by commercial banks and geared towards the 'poorer classes' for the transfer of small sums of money. However, most remittances continued to be made by enclosing cash in letters and by the late 1830s attention turned towards a cheap system of registration in order to provide a secure means of delivering cash.

A limited overseas money order service was introduced in 1856 during the Crimean War. This service spread rapidly to many parts of the Empire and, in 1868, the first money order agreement with a foreign country (Switzerland) was signed.

In 1871 a reduction in the poundage rates on inland money orders (under 10s to 1d and under 20s to 2d) led to further considerable increase in the use of such orders. But as the cost of the issue and payment of each order was approximately 3d the money order service was unprofitable as far as the low value orders were concerned, and by 1875 the inland service as a whole was run at a loss. This was despite Rowland Hill's efforts to develop the more profitable traffic in larger sums - the maximum value was increased to £10 in 1862 despite the misgivings of the Treasury which was concerned about creating competition for the banks.

In 1874 George Chetwynd, the Receiver and Accountant General, proposed a cheaper system of postal notes or orders which could be cashed by the bearer on sight, and after meeting concerns voiced by Parliament and an appointed Treasury Committee, the system of postal orders was introduced in 1881. Their usefulness was greatly increased by the permission to make them out for odd amounts by affixing the necessary postage stamps to the face of the order. They proved very popular and by 1885 the Post Office was selling annually over 25 million postal orders. In the twentieth century their use with entries for football pools increased their popularity still further. In 1938 sales reached 350 million per year.

After the outbreak of war in 1914 postal orders were declared legal tender by the government, in an effort to withdraw gold coinage from circulation. The same measure was again taken in 1939, to prevent disruption to coinage circulation by bombing.