The Evolution of POS Terminals

June 2021

Fintech & Payments

Juniper Research

Analyst House

The way in which payments are made has been changing for some time. The number and success of online retailers has been growing, and in many parts of the world, cash transactions are representing a smaller percentage of payments year-on-year.

These economic changes have a stark implication for POS terminal vendors, who risk their products being marginalised, as customers stay away from bricks-and-mortar retailers, or may lack the functional capabilities to process contactless payments.

This evolution to payment interactions has only been hastened by the COVID-19 pandemic. With pandemic control measures and public wariness, the migration to online retailers has been accelerated, and non-contact forms of payment are becoming even more popular. It should be clear then that POS terminal vendors have to adapt to meet modern demands. An upscaling in the contactless payment facilitation of terminals has been ongoing for a while, but a fast response and new directions are required in response to the heavy impact of the pandemic.

In our view, there are six distinct forms of POS that can be considered individually. These are dedicated, mobile (also known as mPOS), contactless, smart, biometric and soft POS. Each form suits different user needs for payment processing. Dedicated POS is the most traditional one, as it is the most common form of POS and is broadly applicable to a variety of retail environments, especially in shops and restaurants.
Mobile POS (which uses a mobile POS terminal for payment processing), soft POS (software that, once acquired, converts an alternative electronic deivce into a functional POS terminal), and other modern forms of payment processing are the biggest threats to dedicated POS, as they could circumnavigate the need for a fixed terminal.

Contactless POS refers to a subgroup of POS terminals capable of taking payment in a contactless manner, without needing the user to enter a pin code to enact payment, or to sign for the purchase following magstripe swiping. Biometric POS uses yet another alternative form of trigger to initiate payment processing – the biometric print of the user. This typically involves an in-built fingerprint scanner to the POS terminal. This can either be satisfactory to act as the sole precursor to initiate payment processing, or as an extra form of security confirmation, paired with another more traditional trigger. Biometric POS is a solution to some of the restrictive factors limiting the inclusivity of a cashless society through biometric access in POS terminals. The virtue of everyone having a unique biosignature enables greater inclusivity of biometrics as a payment authenticator than other cashless methods. Individuals who may not have access to authentication papers, contactless cards or other documentation can use their fingerprints typically in biometric POS to identify themselves.

Finally, smart POS are terminals defined by their extra-functional capabilities in addition to payment processing. Accordingly, a smart POS terminal may be dedicated or mobile, but in either case, it has additional features included. Supplementary capabilities of POS terminals extend to inventory management, AI assistance, data analysis, incorporated cameras and beyond.