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Point of sale systems and payment terminals both refer to a collection of hardware devices that let merchants accept and process card transactions. However, they’re not the same.

Other than the commonality of card payment acceptance, these two solutions are distinct from each other in terms of functionality and costs. Merchants can choose to employ payment terminals as a standalone solution or integrate them with POS software to constitute a complete POS system for payment processing and operations management. Whether you use POS or terminals, you can gain huge advantages as long as they suit your business use cases.

As a result, understanding the differences between POS vs terminals is vital to making the right choices for your business improvement and cost optimization. Nevertheless, some merchants, especially new business owners, might get lost in the abundance of available information and struggle to find what’s best for them.

If that is the case, keep reading on to learn more about POS systems and terminals for proper decision-making.

What are the differences between a POS system vs payment terminal?

The table below draws a distinction between POS vs terminals in terms of definition, components, key functions, pros, cons, and other important information.

POS systems
Payment terminals
Definition
A POS system is a combination of software and hardware devices to accept customer payments of all types and simplify business operations. 
Payment terminals are hardware devices specifically manufactured to accept and process card transactions such as EMV chip cards, credit, and debit cards. 
Components
  • POS hardware: Card readers, barcode scanners, receipt printers, cash drawers, connected devices like tablets, laptops, desktops. We can see that POS hardware can include some types of terminal devices.
  • POS software, which often includes inventory, purchasing, customer management, reporting, can be installed on multiple devices like laptops, tablets, mobiles. Integrating POS software with payment processors helps retailers process transactions seamlessly and securely.
  • Different types of devices, including mobile, countertop, or EMV payment terminals
Key functions
  • Payment processing: Support many payment types like credit, debit cards, mobile payments
  • Inventory management: Update, transfer, adjust, and forecast inventory, manage purchase order
  • Customer management: Provide customer loyalty programs and sync customer data between channels 
  • Order management: Offer omnichannel order fulfillment like click and collect, sync order data, support refunds, returns, and exchanges
  • Reporting: Create various types of reports for insights on sales, products, and customers
  • Payment processing: Support many payment types like credit, debit cards, mobile payments, EMV cards, unify payment data across channels
  • Can support void sales, digital receipts, refunds, and discount codes
    Role in payment process
    • Capture customer card data via payment terminals
    • Transfer the card data to the payment processors
    • Store payment and sales data for other business tasks like updating inventory or offering customer loyalty programs
    • Directly receive payment details from customers when they swipe, tap, dip their cards or mobile wallets or enter their card details at the terminals
    • Communicate the card data to the POS and the business’s payment processors
    Pros
    • Many added functionalities to simplify business management
    • Scalability and customizability
    • High safety and security
    • Easy to use
    • Money savings
    Cons
    • Higher prices
    • Need some technical expertise to execute integration work
    • Lack additional features for complete business control like advanced inventory management, loyalty programs, and detailed reports 
    Cost
    Depend on the available features, business scale, customer support, and pricing plans of POS providers
    Subject to POS terminal types  and pricing schemes of manufacturers
    Complexity
    • Consist of many components
    • Integrate with different POS devices and 3rd-party services
    • Straightforward and simple to use
    Use case
    Businesses with multiple sales channels and locations that need to manage various aspects besides processing sales 
    Small businesses with a focus on handling card payments in stores

    Whether I need a POS system, a payment terminal, or both?

    whether-i-need-a-pos-system-a-payment-terminal-or-both

    The answer depends on how well you understand the differences between POS vs terminals and your business situation. Before reaching the final decision, you should analyze your business types, scales, and objectives thoroughly to see what you need. Besides, a comprehensive POS system has higher prices than a payment terminal. Therefore, you’d better balance your requirements and financial resources to ensure you make suitable investments in what works best for your business.

    For example, small merchants with tight budgets use payment terminals independently to accept card payments. Nevertheless, retailers with more complex workflows or expansion plans prefer a POS system as it offers more features to aid business management.

    Using a POS system with card readers is also an ideal choice if you want to facilitate card payments from customers while still running your business effectively. Besides, you should also check whether POS and terminals can work smoothly with each other. The compatibility of the two solutions removes unnecessary conflicts and errors, thus producing enormous benefits for your business.

    Key takeaways

    • POS systems consist of both POS hardware and POS software.

    POS hardware includes card readers, barcode scanners, receipt printers, cash drawers, tablets, laptops, or desktops.
    POS software integrates with payment processors to handle card and mobile payments.

    • Popular types of payment terminals comprise card readers, countertop terminals, EMV payment terminals. Thus payment terminals are a component of POS hardware.
    • At checkout, customers swipe, tap, or dip their cards or mobile wallets at the payment terminals. The integrated POS software then encrypts and transmits the payment details to the payment processors for authorization.
    • Using payment terminals independently is suitable for small businesses that simply need to handle in-store payments.
    • A more established business will need a complete POS system with POS hardware and POS software to process payments and manage other operations such as inventory, customer, order fulfillment, and reporting.

    FAQs

    What is the difference between a POS and a card reader machine?

    A POS includes POS software and hardware. It helps process payments and streamline business operations. Otherwise, a card reader is an electronic device that can work as a standalone payment solution or as part of a complete POS system. It collects and transmits customer card data to and receives responses from specific payment processors.

    What makes a POS system different from a payment gateway?

    A POS system supports inventory management, employee tracking, and more. On the contrary, a payment gateway is an intermediary platform that primarily facilitates online payments. Its main function is to securely transfer transaction data between businesses and payment service providers.

    What is the difference between a POS terminal and an EDC terminal?

    A point of sale terminal accepts payments from different card types, including magnetic stripe, EMV chip, and contactless cards while EDC or electronic data capture terminals support magnetic stripe cards only.

    What is the difference between a POS and a virtual terminal?

    POS systems handle payments and execute other business management activities. Unlike POS, a virtual point of sale terminal is a web-based app that allows merchants to take payments from customers via phone, email, or fax. Merchants only need to use Internet-connected laptops, tablets, or smartphones to process payments.

    Is POS the same as a payment processor?

    No, they’re not the same. POS solutions have plenty of functions to help simplify business operations, whereas payment processors coordinate the payment processing flow between customers, businesses, and relevant financial institutions. Payment processors transmit transaction data to customers’ issuing banks for verification and authorization. They also ensure the transfer of funds between the customers’ issuing banks and the merchant’s acquiring banks.

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    Author Katie N.

    Katie is a seasoned content editor at Magestore with over 4 years of experiences in researching retail industry and producing retail-related content. She has been staying ahead of the curve to craft engaging and informative content that enables retailers understand basic retail terms and market trends, and empower them with actionable strategies to boost sales.

    More posts by Katie N.

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