Understanding Point of Sale (POS) Systems: Features and Benefits
What Is a Point of Sale (POS)?
A point of sale (POS) allows merchants to handle payments and record transactions. It’s a computer-based terminal that can also track inventory, monitor buying trends, create invoices, and collect marketing data.
A POS system can be used in both physical stores and online platforms. Its integrated technologies include barcode scanning and touchless payments.
Point of sale systems also have advanced security measures, like Europay, Mastercard, and Visa (EMV) chips and near-field communication (NFC) technology, to ensure transaction safety.
Key Takeaways
- A point of sale (POS) system is integral to both brick-and-mortar and online stores, enabling payment processing, inventory tracking, and data collection for marketing insights.
- POS systems have evolved to include technologies such as EMV chips and NFC, which enhance security by preventing fraudulent transactions.
- The integration of cloud-based POS solutions reduces the costs of implementation for retailers and allows for more flexible transaction processing locations.
- The global point of sale market has seen significant growth, with an estimated value of $33.41 billion in 2024, showcasing the importance and prevalence of POS systems in modern commerce.
- Retailers can optimize sales by placing POS terminals strategically within stores, encouraging impulse purchases and providing opportunities for micromarketing through targeted product placement.
Understanding How POS Technology Operates
POS technology uses barcode scanning to calculate costs, accept payment, and record transactions. The software records the data, including the name and quantity of the items.
Cash payments mean putting notes or coins into a machine. Card payments require swiping, inserting, or tapping the card onto the reader. The POS system connects to the cardholder’s bank, potentially asks for a PIN code, checks funds to clear the transaction, and confirms whether the payment has been completed or rejected. Ecommerce businesses use POS platforms to track and manage online sales. Consumers click the checkout option and input payment details.
EMV chips and NFC technology help prevent fraud at POS terminals. Systems read encrypted data in the card and detect and decline counterfeit cards. These systems wirelessly accept and authorize payment from a contactless card or payment data stored on a smartphone, and this technology ensures the card data isn’t stored in the merchant’s system.
Warning
The Federal Trade Commission recorded $2.09 billion in bank transfers and payments fraud in 2024.
Advantages of Using POS Software
Electronic POS systems streamline retail by automating tasks and tracking sales data. Basic systems include an electronic cash register and software to coordinate data collected from daily purchases. Retailers increase functionality by installing a network of data-capture devices, including card readers and barcode scanners.
Retailers can track pricing, inventory, revenue, and sales patterns based on software features. Integrated technology helps retailers catch pricing errors or cash flow issues to prevent profit loss. POS systems that monitor inventory and buying trends can help retailers avoid customer service issues, such as out-of-stock sales, and tailor purchasing and marketing to consumer behavior.
$33.41 billion
The estimated value of the global point of sale market in 2024.
Innovations in Marketing With POS Systems
Consumers use POS terminals when they check out with purchases. However, points of sale (POSs) are an important focus for marketers because customers tend to make impulsive purchasing decisions on items placed near the register. Items near the checkout counter are usually enticing, convenient, and eye-catching for shoppers.
Different POS locations let retailers micromarket and influence consumers earlier in the sales process. For example, department stores often have POSs for individual product groups, such as appliances, electronics, and apparel. Many retailers use POS systems to manage membership programs that award points to frequent buyers and issue discounts on future purchases.
POS systems use cloud tech to lower upfront costs for multiple businesses. With location-based technology, these POS systems can process transactions at customer locations. Amazon’s “Just Walk Out” allows customers to pay by leaving Fresh grocery stores. “Dash Carts” let customers scan items as they place them into their shopping cart and then leave the store without queuing at checkouts.
What Was the First Point of Sale (POS) System?
The first point of sale (POS) system was the cash register invented in 1879 by James Ritty, a saloon owner in Ohio. Users recorded transactions on the register, allowing for better bookkeeping and capital management. Ritty sold his invention to National Cash Register (NCR) Corp. five years later.
How Do Retailers Help Prevent Fraud at POS?
Businesses commonly require customer verification. In-store debit card purchases usually require customers to input a PIN. Online or telephone orders commonly require customers to input the CVV code on the back of their payment card.
How Can Consumers Report POS Fraud Suspicions?
The Federal Trade Commission’s Consumer Sentinel Network website is a database that receives reports directly from consumers, federal, state, and local law enforcement agencies, the Better Business Bureau, industry members, and nonprofit organizations.
The Bottom Line
Point of sale (POS) systems have a dual nature, being used in both physical and online retail environments, with receipts generated in print or electronically.
POS systems are versatile in processing various payment methods, including cash, cards, and digital wallets. They help prevent fraudulent transactions by using technologies like EMV chips and NFC.
In addition to handling payments and recording transactions, other functions of POS software include tracking inventory, marketing data, pricing accuracy, and sales patterns—all providing crucial advantages for retailers.
Point of sale systems are important for retailers in enhancing customer service, optimizing sales strategies, and supporting membership programs. Their innovations, like contactless payment and cloud-based systems, reduce costs and enhance convenience for consumers and retailers.
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