Ellen Cibula
Written by Ellen Cibula Payments, Finance, and AI Expert: Learn More

If you are a business owner looking to streamline your payment process, you have likely heard of point-of-sale (POS) systems. POS systems make the payment process easier and more efficient for businesses and customers.

POS systems are a combination of hardware and software that enable businesses to accept payments, manage inventory, track sales, analyze data, and much more.

in short

Point-of-sale systems offer businesses of all sizes an efficient way to process payments while also providing powerful tools for managing inventory, tracking sales data, and analyzing customer behavior patterns, depending on what type of solution you choose.

In this blog post, I discuss how POS systems work and the different types of POS systems available.

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What is Point-of-Sale?

Point of sale (POS) often refers to the actual location where a product or service is purchased and the entire checkout process. Most businesses typically locate the point of sale at the front of a retail establishment, which serves as the final stop for customers to make their purchases.

During the checkout process, a retail associate will scan items and may ring up coupons or loyalty points before the customer pays and completes the purchase transaction. Having all these functions in one area allows for an efficient checkout experience and for businesses to manage all their sales transactions from this strategic, central location.

POS systems are electronic machines that further facilitate transaction processing. For example, staff can register customer orders quickly, process payments, store inventory data, generate reports, and identify customer preferences. These functions make them indispensable tools in any modern business setting.

How Do Point-of-Sale Systems Work?

Point-of-sale systems connect hardware components such as scanners, printers, cash drawers, and barcode readers to a central computer. Once these components are connected, customers can use their preferred payment methods, including credit cards, debit cards, and cash.

The POS system calculates and adds the customer’s desired tip for restaurants. Restaurant and retail pos systems will also calculate the required sales tax.

Businesses can also track sales in real time using the system’s software. By tracking sales, companies can quickly adjust their stock levels and decide what products to prioritize.

A POS terminal can track and monitor customer payments in real time. POS systems offer several advantages:

  • streamline operations
  • increase accuracy by following sale item details
  • reduce the loss of shrinkage on merchandise that can occur due to excessive human error 
  • reduce the risk of fraud and chargebacks, using real-time monitoring of transactions, advanced fraud detection algorithms, and secure payment gateways

What’s more, your payments will go directly to your payment processor, making it faster and easier for everyone involved.

A POS system can quickly update customer records and inventory levels as sales happen. Through integrated payment processing features, you can even process orders quickly and electronically with attention to customer details that increase customer satisfaction.

Types of Payment Options

The payment options available on a point-of-sale system depend on the hardware used. For example, swipe terminals allow customers to swipe their credit or debit cards to make a purchase. EMV terminals allow customers to insert or tap their chip card onto the terminal instead of swiping it. And QR code terminals enable customers to scan an image with their smartphone to complete a purchase.

No matter your method, each transaction is securely processed, and funds are transferred directly into your account.

Point-of-Sale System Architectures

The four point-of-sale (POS) system architecture categories are legacy, cloud, hybrid, and mobile architectures. Each type of POS architecture has its unique set of advantages and disadvantages depending on the size of a business, the availability of technology resources, and the degree to which companies need to customize their systems.

Legacy POS architectures are best suited for smaller businesses with simple needs that may lack the technical expertise or resources to maintain complex systems.

Cloud-based POS architectures offer greater scalability and flexibility, making them ideal for larger businesses needing higher levels of customization or benefiting from integrated software solutions.

Hybrid POS architectures combine aspects of cloud and legacy systems to provide an optimal balance between customizability and scalability while still providing robust features.

Finally, mobile POS systems allow businesses to take advantage of powerful technology capabilities in a compact form, extending their operations into new sales channels such as online markets or retail outlets.

Legacy Point-of-Sale Systems

Legacy point-of-sale systems are traditional, local server-based systems that have been around for a long time. Also known as on-premise POS systems, these systems typically include:

  • Cash register with a receipt printer
  • Barcode scanner
  • Magnetic stripe reader (MSR) or chip reader
  • Credit card terminal/reader
  • Weight scale (for items sold by weight)
  • Signature capture device (for customer signatures on receipts)
  • Optional peripherals such as an RFID reader/writer or biometric scanner
  • Software that connects to a local, on-premise server

The POS software associated with legacy POS systems is usually installed on one or more computers connected to the various hardware components via cables or serial ports.

Legacy POS systems are the most costly; depending on your vendor, the POS hardware can be as much as $10,000, plus monthly fees. In addition, these are not DIY systems; they must be installed and maintained by your POS system provider.

Legacy POS systems have been instrumental in providing businesses with enhanced security solutions. This security is due to their ability to provide a secure, central database with multiple authentication levels. For example, many legacy POS systems feature a system user role that only allows certain users to access and make changes to the database.

Additionally, most of these POS systems offer robust encryption techniques which ensure all information is securely stored on the server and protected against unauthorized access or theft.

Finally, since these POS systems are primarily offline and not connected to any external networks, they do not present a point of weakness for hackers to exploit as modern computer network-based solutions can. Therefore, legacy POS systems bring heightened levels of security that help keep your data safe from malicious attacks or theft.

Examples of legacy POS systems are Aloha, Oracle MICROS, and Squirrel.

Cloud Point-of-Sale Systems

Cloud-based POS systems, also called modern POS systems, are web-based solutions hosted either by the provider or in the cloud by a third-party vendor. Cloud POS solutions often require less hardware than legacy POS systems since they don’t use physical servers; instead, they rely on cloud computing infrastructures like Amazon Web Services or Microsoft Azure to store data securely in the cloud. Because these systems digitize all data and processes, they are also called electronic point-of-sale (EPOS) systems.

While cloud POS solutions may still require some of the same hardware as legacy systems—such as a cash drawer, barcode scanners, MSRs, and credit card terminals—the support staff managing these devices can be located remotely rather than onsite at your business location(s).

Crucially, these systems do not store records locally, on a user’s desktop or laptop, but instead store all of the data remotely on the cloud. This cloud storage helps ensure that your records are backed up regularly and remain secure. Having data stored on the cloud also means you can access it from any device with an internet connection – making it perfect for businesses with multiple physical locations.

From online analytics tools to better managing stock levels, a cloud-based POS system offers a wide range of benefits in terms of security and convenience. These POS systems are also easy to setup and use.

Examples of cloud POS systems are Lightspeed HQ, Clover, and Square.

Hybrid Point-of-Sale Systems

Hybrid point-of-sale solutions combine elements from both cloud and mobile platforms into one integrated solution enabling businesses to accept payments anytime from any device while still being able to access customer data securely in the cloud.

Hybrid POS solutions provide additional functionality over traditional legacy POS systems. For instance, you can integrate your customer loyalty program into your existing payment processing platform, allowing customers to earn rewards points every time they purchase at your store(s). In addition, by integrating into your customer relationship management system, a hybrid POS also offers advanced analytics capabilities to gain valuable insights into customer behavior. This insight can help you better target promotions and marketing campaigns to drive more sales for your business.

A hybrid POS system combines physical and cloud-based solutions, enabling business transactions to occur anywhere, anytime. It offers the convenience of cloud-based POS solutions, with the added benefit of increased security levels from hosting data on physical devices.

A hybrid POS system is ideal for businesses that want to integrate a physical point-of-sale system with online sales. This cutting-edge technology allows companies to consolidate their customer data on a single platform, allowing them to track their customer activity and inventories more efficiently.

Additionally, the hybrid POS system can quickly process synchronized orders from both platforms without additional hardware investments or complicated setup procedures.

Ultimately, such features allow businesses the versatility they need to offer seamless omnichannel shopping experiences that keep customers coming back time and time again. With a hybrid POS system, companies add tremendous value to their operations while staying competitive in the changing market.

Finally, this system also provides businesses with advanced analytics capabilities. You can harness the data stored in physical and cloud-based forms to gain valuable insights into customer behavior and preferences. As a result, hybrid POS offers an ideal solution for any retail or restaurant setting that could benefit from improved efficiency and customer experience.

In summary, hybrid POS systems offer an unbeatable combination of security, scalability, and customer service that can provide long-term benefits to any business.

Examples of hybrid POS are TouchBistro, ePOS Hybrid, and Toast POS.

Mobile Point-of-Sale Systems

Mobile POS systems are for small businesses or those with limited resources who need an efficient way to process transactions when customers aren’t at your business location(s). A mobile POS system usually includes a mobile device such as a tablet or smartphone and accompanying payment processing applications. This system allows you to accept credit and debit cards anywhere you have a cellular signal or WiFI connection. With a mobile POS system, you can provide customers with convenient payment options without investing in expensive hardware and software upfront.

Examples of mobile POS are Zettle by PayPal, Square, and Clover.

Common Types of POS Systems

Within these architectures, there are some common types of POS systems. Which one you use will depend on your business model and strategy. Here are some of these types:

  • Smartphone with portable card readers
  • Tablet with portable card readers
  • Countertop registers with POS terminal
  • Online systems
  • Electronic cash drawers
  • Self-serve kiosks

Choosing a POS System

Choosing the suitable point-of-sale (POS) system for your business is essential. However, you should take the decision seriously; investing time and effort to evaluate the various options available properly can have long-term benefits that can exceed the initial investment.

When choosing a reliable POS system, one criteria to consider is integration with existing systems, such as eCommerce websites, customer relations management programs, inventory management systems, and more.

By connecting systems, you can benefit from improved data flow and managing resources more efficiently. Additionally, integrated systems are typically easier to maintain and allow you to access valuable real-time data- something you cannot accomplish with disconnected systems.

Think long-term when researching POS solutions: The right choice will pay dividends into the future by enabling you to streamline operations, reduce tedious manual tasks, and free up resources.


Point of Sale (POS) systems are digital solutions that streamline and simplify managing a business’s sales. They enable companies to check out customers quickly, track inventory, drive customer loyalty programs, and access valuable data analytics. POS systems use the latest technology to easily integrate with existing payment methods such as cash, credit cards, gift cards, and mobile wallets. With a POS system in place, businesses can save time uncovering opportunities for growth from actionable insights gleaned from sales data tracking. From attracting new customers to improving profitability and boosting efficiency, these powerful tools empower merchants to run their operations more smoothly than ever before.

A point-of-sale (POS) system is an electronic device used to process retail transactions and can incorporate different devices, such as a scanner, printer, and cash drawer. An example of a POS system is commonly seen in your local grocery store, where customers swipe their debit and credit cards for payment. Upon swiping their card, the customer receives a receipt that prints out from the printer or displays on the POS system’s monitor. The POS system then communicates with the financial institution that issued the card to ensure sufficient funds to cover the transaction amount. In addition to being convenient for customers, these systems also make it easy for businesses to track sales information and manage inventory.

These are the five types of POS systems:

  • Legacy POS systems
  • Mobile (including Tablet) POS systems
  • Hybrid POS systems
  • Online POS systems
  • Self-service kiosk POS systems

Point of Sale (POS) systems have become more prevalent in the retail sector, allowing seamless and efficient transactions. A POS system is an electronic cash register that lets users track the products they sell and their pricing and organize financial reports. Besides its retail applications, a POS system also allows businesses to improve customer service by offering contactless smartphone payments, increasing the speed and accuracy of checkout processes. Further benefits include improved tracking of inventory and staff management. In addition, POS systems are becoming increasingly sophisticated, with new features such as integrated CRM software and greater control over sales analytics for data-based decisions. With these capabilities combined, a POS system is integral to the success of any modern business.


Point of sale (POS) systems offer businesses of all sizes an efficient way to process payments while also providing powerful tools for managing inventory, tracking sales data, and analyzing customer behavior patterns.

POS systems help businesses streamline their payment process while providing customers multiple payment options, including swipe, EMV chip cards, and QR code payments from mobile phones.

Whether you need something for your physical store or that can be accessed remotely from anywhere in the world, a point-of-sale system will meet your needs. With its increased efficiency, accuracy, improved customer service, secure payments, and ability to track inventory instantly, it is no wonder why so many businesses rely on point-of-sale technology.

So if you’re looking for ways to improve your business’s bottom line without sacrificing customer satisfaction, then it might be time for you to invest in a point-of-sale system.

Ultimately choosing the right POS system is vital for any business looking for an effective way to manage payments efficiently while also getting valuable insights about their customer base over time. With today’s vast array of options, there is no reason why any business should be stuck using outdated technology that doesn’t meet their needs anymore.

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