POS Transaction Meaning—a Definitions, Examples, and More
Updated · Mar 06, 2023
For businesses, POS (point of sale) transactions provide a way to keep track of inventory and customers. For consumers, POS transactions offer convenience and security.
In this article, we'll explore POS transaction meaning, some of their finer points, the systems that make them possible, and the fees involved.
If you’re a seller, online or off, this information is vital, so join us as we discuss it.
What Is a POS Transaction?
A point of sale transaction is the exchange of goods or services for money between a buyer and a seller.
The term can refer to the physical location where the transaction takes place, such as a store or market, or it can refer to the electronic system used to process the transaction, such as a POS system.
In either case, the point of sale is the final step in a sales process that begins with marketing and customer outreach and ends with the completion of the POS transaction.
Point of Sale Systems
For the longest time, sales systems differed depending on whether a transaction was being done in a brick-and-mortar or ecommerce store.
However, the gap between online and offline transactions is beginning to close.
A basic point of sale would be a cash register. The shop attendant scans items and presents the total cost to the consumer, who then pays with cash, or by card. The shop attendant then hands over a receipt with the purchased items, and the POS purchase is complete.
eCommerce stores, on the other hand, use payment gateways. Aside from being completely digital, they work in the same way, with a receipt being emailed to users before their items are prepped for order fulfillment.
Of course, many physical stores now use payment gateway software at their registers, which are integrated with their respective online platforms. Not only is this more secure, but it also enables finer inventory management and allows stores to track metrics.
Next, we’ll discuss some standard POS terms.
POS Debit Meaning
POS debit means allowing customers to use their debit cards to pay for goods and services at the point of sale.
This type of payment is convenient for both consumers and businesses, as it eliminates the need for cash or check. The customer is spending money they already have, which makes sticking to a budget easier.
In addition, point-of-sale debit payments are typically processed quickly and securely, making them an attractive option for many types of transactions.
POS Credit Meaning
On the other hand, point-of-sale credit sees customers paying with credit provided by the seller or a third-party lender such as a bank.
Sellers can provide credit in exchange for trade-in goods or as reward points. As a seller, awarding reward points for affiliate marketing can be a great way to drum up business without having to spend money.
“Buy now, pay later” arrangements are another common form of credit sellers can extend. They’re basically point-of-sale installment loans offered by the seller themselves or a partnered financial institution.
This type of POS credit is becoming increasingly popular on social ecommerce offerings, such as those on TikTok.
What Is a POS Withdrawal
A point of sale withdrawal (known as “cash back” in some regions) is a type of transaction where the customer draws cash from a store’s point of sale.
These withdrawals can be convenient for customers who need cash quickly. They can also be cheaper than using an ATM.
However, they can also be costly for merchants, as they typically involve paying fees to the customer's bank. For this reason, many sellers require customers to spend a certain amount before being allowed to get cash back in order to protect profit margins.
Speaking of fees…
POS Transaction Charges
Unless customers are paying with physical cash, points of sale always carry transaction fees—fees taken by the payment gateway, the bank involved, or both.
There are a few different ways that sellers can choose to handle them.
First, the fees can simply be included in the cost of the items being sold. This means that the customer won't see an additional charge at checkout, but the seller will pass along the cost.
Alternatively, sellers can choose to charge POS transaction fees separately. This allows customers to see exactly how much they're paying in fees, but it also means that sellers run the risk of alienating potential buyers. From a psychological standpoint, which is a big part of pricing, buyers may be fine paying the same price elsewhere, with the fees being hidden.
Finally, some sellers set a minimum purchasing price in order to offset the cost of the transaction fees, making them back on balance. This ensures that sellers won't lose money on small purchases.
Now that the POS transaction meaning is clear and some of the particulars have been outlined, you are better equipped to sell.
However, it’s important to remember that anything involving fees, obscuring them, and credit is subject to national, federal, and local state laws.
Always make sure you’re familiar with the commerce law in your state and those governing online transactions.
Garan is a writer interested in how tech reshapes the environment, and how the environment reshapes tech. You'll usually find him inoculating against future shock and arguing with bots.