Key takeaways
So what are point of sale terminals? A point-of-sale (POS) terminal is a hardware component that processes card payment transactions. Most modern POS terminals can process credit, debit, and gift card payments via swipe, dip, or tap, and process digital wallet payments from smart devices. The location and functionality of your point-of-sale terminal vary based on your industry and your POS hardware.
- Touch-screen cash register
- Easily expandable hardware
- Built-in credit card processing
- Specialized options for retail and restaurant businesses
Types of POS terminals
POS terminals may be freestanding payment reading devices or built into a POS display. This difference can lead to some confusion about what a POS terminal actually is. Think about a grocery store checkout lane. In most cases, the POS terminal is a pin-pad-enabled tap, dip, and swipe card reader that faces the customer. With this type of POS station configuration, it is obvious which component is the POS terminal.
Grocery stores and retail businesses tend to have dedicated checkout lanes with plenty of room for POS components. Restaurants, coffee shops, and other businesses with limited space typically prefer an all-in-one POS station with the POS terminal built into the POS display. In those businesses, the term “POS terminal” can appear to refer to the entire POS station.
Related: What is a POS system?
Cost of POS terminals
The cost of POS terminals varies widely depending on where you buy them. Some providers offer them as part of an all-in-one subscription plan, so you won’t pay for anything upfront. For instance, in the example above, IT Retail’s prebuilt plan that starts at $49/month and already includes the POS terminal.
However, if you end up having to purchase your POS terminal separately, the average costs would be as follows:
- Separate POS terminal with PIN pad: From $79–$600
- All-in-one POS station: From $199–$1,700
Find out: How much do POS systems cost?
POS terminal features
The POS terminals’ only major task is to process card and digital payments. As payment technology evolves, POS terminals need to process traditional swipe payments along with handling new payment technologies as they appear.
A POS terminal must handle all these types of payments:
Magstripe
Commonly known as “swipe” payments, magstripe payments work by scanning a magnetic strip on the back of a credit, debit, or gift card. Even with the growth of new payment technologies, most payment cards are still equipped with magstripe. Magstripes have been around for decades, which makes them both reliable and prone to payment fraud; fraudsters have had many years to design ways to read the information from magstripe cards.
And while magstripe readers on POS terminals may be the least secure way to process payments, they will likely be around for many years to come. Physical gift cards are unlikely to shift to a different method of recording payment information, and magstripes are inexpensive and reliable.
Chip
Embedded Europay, Mastercard, and Visa (EMV) chips in credit and debit cards are much more secure than magstripes. EMV chips are harder to counterfeit and less likely to be a source of fraudulent in-person payments. Most POS terminal EMV chip readers can process a chip card payment without the card leaving customers’ hands. Businesses that rely on EMV chip card payments typically see lower processing fees and fewer incidents of chargeback fees for fraudulent or contested transactions.
Contactless
Near field communication (NFC), or contactless payments, process payments from NFC-enabled cards and digital wallets on smart devices like phones or watches. As with EMV payments, NFC payments allow customers to pay without their payment method leaving their hand. It is also harder for potential fraudsters to strip card information from NFC payments than magstripe cards.
How much does it cost to accept payments at a POS terminal?
Swipe fees or interchange fees are the cost of accepting credit card payments from a POS terminal. Merchants pay anywhere between 2–4% per transaction for every magstripe, chip, or contactless transaction. Learn more: Complete guide to credit card processing fees.
Some POS terminals offer additional features beyond payment processing. Most of these features require a terminal equipped with a customer-facing display or touch screen.
Transaction display
Many modern POS terminals contain a screen that displays an itemized receipt for the customer. This ensures customers understand the full payment amount before paying. This can prevent unnecessary chargeback disputes by providing customers the opportunity to verify payment amounts.
Email collection
If your POS terminal has a customer-facing touch-screen display, you can typically use it to collect customer emails for marketing purposes or merely to send digital receipts and save on paper costs.
Loyalty enrollment
A touch-screen-enabled POS terminal can also typically be used to prompt customers to enroll in your loyalty program. With some POS systems, your terminal can also be used to process loyalty points as a payment method and show customers their loyalty points balance.
Related: Key POS features you need
How to choose a point-of-sale terminal
The best POS terminal for your business will depend on your business type and where you need to process payments. If you are in the market for a POS terminal, there are a few questions to ask yourself to ensure you make the best decision.
Who is your POS provider?
Your POS terminal options will be limited by which POS provider you choose. Some POS providers integrate with multiple payment processors, which typically expands your options for POS terminals. Increasingly, though, POS providers package their POS systems with built-in payment processing. So if you have specific POS terminal needs, be sure to consider each POS provider’s hardware options before signing a long-term contract.
Where do you process payments?
Your POS terminal needs will vary if you process payments at a central cash wrap, multiple checkout lanes, or remote locations like swap meets or private events. If you process payments in a brick-and-mortar location, a traditional POS terminal with multiple card readers and a customer-facing touch screen will likely be your best bet. If you need to accept payments on a sales floor or at remote locations, you’ll want a handheld solution with excellent connectivity. Ask your hardware vendor what connection types your POS terminal needs before you purchase so you know it will work for you.
Learn more: How to use a POS system
What payment types do your customers use?
If your customers typically use traditional credit and debit cards for payment, your POS terminal options are virtually endless. However, if your customers prefer to pay with digital wallets on their smartphones, you could lose sales if you can’t process those payments. If you are a new business, look at what POS terminals your competitors use to help you determine what payment types are popular with your target customers.
How concerned are you about chargebacks?
Chargeback disputes and “friendly fraud” — where customers dispute charges for legitimate purchases with their card provider — have continued to rise. A majority of merchants, 74%, reported an increase in friendly fraud in 2023, which was a 10% increase from 2022. Some industries are harder hit than others; businesses selling services tend to have higher chargeback rates than businesses that sell physical products.
If chargebacks are an issue for your industry, you should ensure that you have the most current POS terminal technology available. EMV chip card readers are a must, and you should partner with a POS provider that shares your chargeback concerns; they will be the most likely to adopt new POS terminal technology when it is available.
What is your processing volume?
Finally, you should consider your processing volume. If you process dozens of card and digital payments daily or hourly, you need a POS terminal that can withstand high-volume use. If you only process a few payments a week or a month, a less robust — and typically lower cost — POS terminal will be more your speed.
Related: Types of POS systems
POS terminal trends
POS terminals went through a massive overhaul between 2015 and 2020 with the rollout of chip card technology. With that development, liability for fraudulent transactions shifted from the payment processor to individual merchants. Merchants that did not have chip-enabled POS terminals suddenly found themselves losing numerous chargeback disputes with card carriers.
So it is important for small businesses to stay on top of payment trends and ensure they have the most current terminals for their POS.
Biometric payments
The next major payment shift is already underway, with some card companies supporting biometric data to authenticate consumer payments. Biometric data can be anything from a fingerprint to a palm or a full face scan. The technology is already popular in China. Stateside, Amazon has rolled out smart shopping carts in select Whole Foods stores equipped with Amazon One palm scanners to authenticate payments.
NASDAQ predicts that, globally, the biometric card market will grow from $370 million in 2024 to $18.4 billion by 2029; that’s a compound annual growth rate of more than 117%. So as soon as your POS provider rolls out biometric-enabled POS terminals, get one.
Mobile checkout apps
Mobile checkout apps are merchant apps that allow customers to scan and pay for their purchases via a linked credit card on their account. Big names like Walmart have their own mobile scan & go app that customers can use as they pick out products from the store. This comes in as mobile payments become a norm even with in-store transactions. In Marqueta’s 2024 State of Payment report, survey shows that 62% of consumers are confident in using their mobile phones to make purchases.
Amazon Just Walk Out technology
Another trend to watch is “Just Walk Out” payment technology. This innovation, developed by Amazon and leveraging the Amazon One palm reader, allows shoppers to simply walk out of a store with their selected items, and Amazon will automatically charge them for their purchases; no need to check out.
This technology operates similarly to a POS terminal, though with Just Walk Out, the terminal is remote and based on biometric data. Just Walk Out is currently used in several sports stadiums and grab-and-go marts. Just this October, CNBC reports that Amazon already has deals in place with over 200 stores around the country.
Amazon Dash Cart
Amazon’s new retail-focused cashierless technology project is the Dash Cart — a smart shopping cart that takes on the features of a mobile checkout app.
It comes with an interactive display where customers can sign in to their Amazon account, as well as a built-in barcode scanner + scale in the basket so customers can bag and weigh their produce as they go. The Amazon app then computes the total and charges the customer’s linked card, and a receipt will be sent to their email.
With a significantly easier setup and lower upfront cost, Amazon expects to attract small, independent stores. Already, Dash Cart is operational in 61 locations, replacing Just Walk Out technology in Whole Foods Market and Amazon Fresh.
Looking for the latest in POS solutions? Check out our Retail POS Solutions Buyer’s Guide.
Frequently asked questions (FAQs)
