Medieval law banned charging for loans. The word interest was invented to disguise profit as compensation.
The word interest comes from the Latin interesse, literally "to be between" or "to make a difference." In Roman law, it carried no financial meaning. It described what was at stake, what mattered, the difference between two states of affairs.1
The financial meaning emerged through a legal fiction. Christian canon law prohibited usury, the charging of money for the use of money. Lenders needed a way to be compensated without calling it usury. Medieval jurists developed the concept of interesse, arguing that a lender deserved compensation not for the loan itself but for the damage or lost opportunity the loan caused.2
The distinction between usury and interest proved decisive. By the thirteenth century, the term was widespread in Italian banking, where Florentine and Venetian lenders built sophisticated credit systems while maintaining nominal compliance with Church teaching.3 The Medici Bank, founded in 1397, managed papal finances while operating on principles that canon law officially condemned.
English inherited the word with both meanings intact. A person can have an interest in a subject and earn interest on a deposit. One describes what matters to someone. The other describes money earned from money. The connection is not accidental. The word that medieval jurists used to make lending acceptable was chosen precisely because it implied that something genuine was at stake.4