What Exactly is a POS Terminal? Definition and Meaning Explained

The point-of-sale (POS) terminal is reshaping business transactions. The modern system has changed industry dynamics. It has now become an integral part of business operations. From cutting costs to streamlining business operations, the system has numerous benefits. But what are point-of-sale terminals, and how do they enhance business operations? We will do a detailed overview of the modern system. Find out what a POS terminal is, its key features, and how it streamlines business operations.

What is a POS Terminal?

A point-of-sale terminal is an electronic payment processing machine. Readily available at retail locations, the system ensures swift payment processing. Additionally, the method is safe and secure. Customers and retailers can utilize the system without worrying about security breaches.

The system houses different hardware and software components. All these carry out different functions. Collectively, they ensure swift and secure payments. Moreover, the terminal also provides reports and analysis.

POS Terminal Machines Components

System components can vary depending on several factors. For instance, model number, package, and specs. However, the following components are rather common in all systems.

Hardware Components

Card Reader - This is where customers enter their cards. Depending on machine type, cards can be inserted, tapped, or swiped. Both debit and credit cards go into this slot.

Receipt Printer - The system generates receipts for every transaction. It serves as proof of purchase. Additionally, it contains information about the sale. The printer in the machines provides this receipt.

Cash Drawer - Cash payments are common in stores. The point-of-sale machine caters to cash payments as well. The cash drawer provides a safe storage space for money.

Barcode Scanner - Products at retail outlets have barcodes. These ensure swift checkouts with instant price info. The system has a barcode scanner for this operation.

Display Screen - The system has a display screen. The entire process is displayed on this screen. Moreover, both the employee and the customer can see the details on the screen.

Software Components

POS Software - It is the most integral part of the setup. The system handles a range of operations. For instance, payment processing, sales tracking, and inventory management. Moreover, the system generates reports for helpful insights.

Payment Processing Software - Online payments are susceptible to cyber crimes. Fortunately, the payment processing software eliminates this risk. The system ensures safe payments to and from the bank.

POS Terminal Working

Terminal payments through POS systems are made in a series of steps. Listed below is the entire payment process.

Step 1 - Transaction Commencement

The cashier scans the selected items at the counter. Instantly, the barcode scanner displays the price and quantity of each item. Additionally, the screen shows any discounts in prices if applicable.

Step 2 - Payment Process

The customer opts for a payment mode. This can be debit, credit, or cash. In case of payment by card, the cashier swipes the card in the machine.

Step 3 - Authorization

The terminal gets in touch with the bank to authorize payment. The system checks the validity of the card. Additionally, it ensures the availability of sufficient funds.

Step 4 - Approval/Decline

The bank checks the requested details. Once checked, the system accepts or declines the payment based on that information.

Step 5 - Receipt Generation

The system generates a receipt after a successful transaction. It contains all the information about the sale.

Types of POS Terminals

Detailed below are the most common types of POS terminals.

Traditional POS Terminals

The traditional types are typically found in brick-and-mortar stores. These are stationary systems with a range of hardware and software components.

Mobile POS (mPOS) Terminals

MPOs are set on portable devices. For instance, mobile phones and tablets. These systems are ideal for restaurants and carts. Employees can freely take the machine anywhere to process payments.