That tiny handheld device that is used for swiping cards at retail and business establishments is what we call a POS device. However, that is just a basic explanation to get you up to speed with the topic. In this article, we will understand what is POS terminal, the way they work, and the benefits of using such a system in brief detail.
What is a POS Terminal?
It’s a mix of hardware and software, where the POS device is the hardware that’s used to swipe the cards or collect payments via QR codes (in the case of modern machines), and the software functions from the cloud, helping communicate transaction information and verifying and authenticating the transaction for the payments to go through.
In simple terms, every time you swipe a card on the machine, the software communicates all transaction-related data between banking and card networks to make the payments happen.
Now that you have a basic understanding of (what is POS terminal?), let’s look at how they work.
How does a POS Terminal Work?
Even though we may not realize but a lot is happening behind the scenes, and the entire process happens so fast that we hardly realize the complexity of the process. However, for the sake of keeping things simple to understand, here’s how it works!
- The customer swipes their card on the POS device
- The card information is captured by the POS device and relayed to the payment processor
- The payment processor relays this information with the banking/card networks which authenticate the transaction
- The banking/card network checks the customer account for adequate funds and depending on the availability of funds, either approves/disapproves the transaction
- This information is shared with the payment processor
- If adequate funds are available, the customer account is debited and the business account of the merchant is credited with the requested funds
- The transaction is now complete
All of this happens in mere seconds, and we hardly ever realize that so much has happened between the time the card was swiped and a receipt is generated.
Benefits of Using a POS Terminal
If you are a business owner, and still haven’t deployed a POS terminal to collect payments, it’s time you do so because of the numerous benefits it offers.
Faster and Secure Transactions
Cash-based payments take significantly longer to close. That’s because all of that money needs to be counted and the balance needs to be returned. This makes the entire transaction process cumbersome, and prone to human errors. However, when a POS device is used, there is no manual process involved, and the transactions only take a few seconds to go through. This makes for more sales within a shorter period. Moreover, all information is encrypted so that there is no risk of a data leak, while cash is prone to theft.
Reduced Overhead Costs
Automated payments digital payments collection means that there is no need to hire additional staff to count, store, and transport the money to a bank for deposit. All transactions that take place through a POS terminal are direct bank transfers helping you reduce the overhead costs.
Better Customer Experience
The entire system results in reduced queues, and minimum waiting time for customers to settle their bills. E.g., restaurants can allow customers to settle their bills sitting at the tables without having to walk up to the counter, and retail outlets can expect the queues to be significantly reduced as processing bills becomes much faster thanks to the smart POS terminal. This saves customers time, which results in a satisfying checkout experience giving them an overall better customer experience.
POS terminals have gotten more affordable over time, and are no longer as expensive as they used to be back in the day. Investment is minimal, making them affordable for even the smallest of business owners.
So, in case you have been lacking on the digital payments collection front, it’s time to invest in a POS terminal to increase both your sales and brand value!