A POS system refers to the combination of hardware and software required to accept and process different forms of digital payments. The hardware includes a card acceptance machine and the software handles the remaining payment methods, processing and other peripheral value added services. 

The POS terminals have gradually emerged to be at the core of business operations, especially for retailers. The first POS terminal ever introduced was simply used to accept card payments. Over time, POS devices were further enhanced to take into account other modes of contactless payments like mobile wallets. Today, technological advancements have led us to ePOS, a payments acceptance software that runs on a smartphone and can be used to accept a limited number of digital payments without a physical card swipe machine.

Today, modern POS systems come in various shapes and sizes, and are equipped to accept all forms of payments including:

There are three ways in which a POS terminal can accept card payments:

The data required for the transaction is transmitted in encrypted form over radio waves that establish the connection making the transactions fast and secure. This eliminates the need to swipe or insert the card or even handing over the card to the merchant.

When a payment is initiated in a POS terminal:

POS terminals come in various shapes and sizes and provide businesses of all types the capability to accept payments. The POS devices range from small, sleek and simple card acceptance devices to a full range Android Smart POS. Each digital POS system has some specific features and can be used by businesses depending on their use cases. These include:

A GPRS POS terminal is one of the oldest versions of a POS. Originally, it used to be a wired device worked by connecting with a standard telephone line. These days it uses GPRS SIM cards for data connectivity.

GPRS POS were bulky and did not provide any freedom of mobility. Hence, there was a need for sleek and handy POS devices that are wireless and can be carried anywhere. 

With increased pressure on customer experience, arose the need for a seamless and perfect payment experience and that’s how Android POS came into being.

Payment service providers are trying to find innovative low-cost solutions for brick and mortar retail merchants to allow payment acceptance without the overhead of device costs. In this direction, POS devices are further evolving to an ePOS (electronic POS).

With the rising need for the ePOS segment, technologies like Pin on Glass, Pin on COTS (Consumer-Off-The-Shelf Devices) and Tap on Phone will further revolutionize the payment industry.

To further expand the capabilities of the POS system, additional peripheral solutions are provided as services by payment providers. These can transform a simple POS terminal into a complete payment solution. These are meant to enhance business efficiency and act as great tools beyond just payment acceptance. These include:

Let’s take a look at some critical benefits of digital POS solutions that directly help businesses and government organisations as well. 

Providing consumers with a payment mode of their choice and ability to accept payment anywhere can help merchants enhance the overall experience for the customer. 

Automated processes and interconnected systems can significantly lower the hassles during the payment process. 

The customer can be provided with superior experience by circumventing checkout queues and fast-track transactions. For example, for the customers purchasing only one or two items, a self-checkout option can be provided.

In the current scenario, every business needs an edge over competition in order to sustain its growth. A point of sale experience can make or break a sale.

A digital POS with technology-backed payment platform which has all-in-one payment acceptance and value-added services allows the merchants to focus on their core business taking away the headache of the payments and related experience across their touchpoints. 

A robust POS tailored to your business needs only aids business growth by giving you the necessary tools to scale your business.

New-age POS solutions come with an option of integration. The device or solution is integrated with the existing backend systems: ERP, billing and other systems, into one interconnected system.

Instead of disintegrated processes with different systems running on multiple payment methods, all types of payments are accepted via a single solution and connected at the backend to a single server.

This is done across all touchpoints, which means a swift checkout process can be achieved while providing a seamless payment experience.

Manual processes of capturing payments are inefficient and provide limited options. This results in delay in the payment processing and reconciliation.

A digital POS system can help in streamlining the operations through end-to-end payment processing and automated daily settlement, reconciliation and reporting, automated reporting.

This increases the overall efficiency by removing manual errors and reducing the time spent in total payment processing.

With new technologies being introduced in the payments segment, the present customer has many payment options. Customer payment preference has largely shifted from cash to digital modes of payments like mobile wallets, and now contactless such as UPI, QR etc.

To help the merchants in meeting the evolving customer expectations, digital POS systems provide the ease of accepting multiple payment methods.

A digital POS solution is the answer to streamline some of the key business processes related to payments and customer satisfaction. However, you must keep some of these key elements in mind while choosing the right option:

There are various types of digital POS devices available in the market and you should choose the right one according to your specific payment needs.

For example, for a business where payment is accepted at the customers’ doorstep, a light device would be preferred. The device should be small enough for the delivery person to easily carry around and be able to function on mobile data. Similarly, smart Android machines are perfect for in-store queue busting experiences, as you can accept payments anywhere.

While opting for a digital POS machine, you must ensure that it is upgraded with the latest technology and accepts all forms of payments –debit and credit cards– magnetic stripe cards, chip cards as well as UPI, QR codes etc.

Customer’s data is of the utmost importance and it is equally crucial to ensure its security. Hence, you must ensure that the digital POS system has robust encryption for transactional data and the device should be PCI-DSS (Payment Card Industry Data Security Standard) and EMV-compliant. 

Connectivity is another critical factor that must be considered to ensure a superior customer experience.

A digital POS device with multiple connectivity options via Bluetooth, Wi-Fi or 4G/3G can make payments considerably easy and quick. The device should be such that it works seamlessly in your specific environment. 

Traditionally, after the transaction is complete, only paper-based receipts could be printed for the customer. This makes record-keeping a severe overhead in addition to the environmental impact. While selecting the right POS machine, you can choose capabilities of digital slips that are secure and easier to maintain.

There has been an even greater need for digital receipts since the onset of the Covid-19 pandemic as people have started following social distancing and avoiding direct contact wherever possible.

Before choosing a digital POS machine, you must ensure it accepts a wide range of cards. It would be futile to buy a POS machine that restricts your payment acceptance from only a few banks and networks.

In order to provide customers the best payment experience, it is imperative that the POS machine processes payments with all bank or network cards like Mastercard, Visa, American Express, and RuPay cards. 

Providing customers simplified affordability solutions is crucial for businesses with high-ticket items.

In the present age, POS devices are equipped with monthly instalment (EMI) solutions that allow conversion of any transaction into instant EMIs through banks, brand offers and non-banking financial companies (NBFC) schemes. This way, the purchasing power of the customers can be increased.

The modern-day digital POS terminals are smarter and offer tailored payment experiences that can meet the needs of various organizations. The new age POS systems result in valuable saving of time and efforts while minimizing errors. Through additional ancillary services, digital POS systems become more robust and provide easier access to data and insights, thereby, helping in the overall growth of your business.

Byas Nambisan is the CEO of Ezetap, a universal payments platform. In his previous roles, Nambisan has served as the financial controller of Intel, India and has held leadership positions at Intel, USA. He has an MBA from the Tepper School of Business (Carnegie Mellon University) and a Masters in Science in Mechanical Engineering from Marquette University.

Armaan is the India Deputy Editor for Forbes Advisor. He has more than a decade’s experience working with media and publishing companies to help them build expert-led content and establish editorial teams. At Forbes Advisor, he is determined to help readers declutter complex financial jargons and do his bit for India's financial literacy.