A point-of-sale (POS) terminal is the heart of your retail business. It's where you process payments, build customer relationships, and gather insights that help your business grow.
Today's POS terminals do much more than ring up sales. The right system helps you understand your customers better, manage inventory across channels, and make smarter business decisions. But with so many options available, choosing the right one can feel overwhelming.
This guide breaks down everything you need to know about POS terminals—from essential features to real examples of how retailers use them to succeed.
What is a point-of-sale terminal?
A POS terminal is a hardware device used in retail businesses to process transactions. It serves as a central hub for accepting payments, managing inventory, and generating sales reports. POS terminals streamline the checkout process and provide a seamless customer experience.
The “point of sale” is both literally where the sale takes place and shorthand for this software and hardware combination. A POS terminal is also referred to as a POS system, or just a POS.
POS terminals are made up of several key components, including:
- A smart device, like a tablet or smartphone, that runs the POS software
- A barcode scanner, which can be paired to the terminal
- A payment terminal, also known as a card reader, that processes all kinds of payment methods, including credit and debit cards, gift cards, and mobile payment options
- POS software, which enables these tools to work together and performs all of the functions described below
Types of POS terminals
There are two main types of POS systems: countertop (or cash wrap) terminals, and mobile POS terminals. While countertop terminals are the long-established point-of-sale system, mobile POS terminals are gaining popularity. Many retailers are opting to use a combination of both at their stores.
Here’s an overview of the similarities and differences between countertop and mobile POS terminals.
Countertop terminals
A countertop terminal, or cash wrap terminal, is what we traditionally think of when we think of a POS at a checkout counter. The setup consists of a screen (often a tablet), a card reader, a barcode scanner, a cash drawer (though some businesses have phased this out), and a receipt printer.
Depending on its size, a store may have one or more cash wrap terminals. These terminals stay in one place.
Mobile terminals
This alternative to a stationary cash wrap is becoming increasingly popular among retailers and their customers. As the name implies, mobile POS systems usually run on small, handheld mobile devices for maximum convenience.
They have all the same features as a cash wrap terminal, but without a cash drawer. You can still collect cash payments with a mobile system if you have a cash register somewhere in your store. Mobile POS terminals let you help customers while they shop, give personalized recommendations, and look up inventory without interrupting the shopping experience.
What is a POS terminal used for?
A POS terminal streamlines the sales process for businesses. It allows them to process and manage transactions where a customer makes their purchase.
POS terminals vary in complexity and functionality, but their primary functions generally include:
Clienteling
Your POS system isn’t just for ringing up sales—it’s a powerful clienteling tool for creating meaningful connections with your customers. The best POS terminals unify customer data to personalize the shopping experience.
Shopify POS, for instance, offers innovative hardware with flexible clienteling features that let staff see customer preferences, past purchases, loyalty points, and more at checkout. With this data, store associates can recommend products customers actually want, follow up with personalized offers, keep interactions seamless across every channel, and drive sales.
Home furnishings retailer Jenni Kayne is proof that this strategy works. Its customers shop across multiple channels, often taking months to decide on big purchases. Migrating to Shopify helped the brand unify their customer profiles, giving retail associates access to detailed insights that help guide shoppers through the buying journey.
This allowed them to:
- Offer personalized omnichannel experiences
- Increase engagement with shoppers
- Build deeper relationships with their customers
- Empower employees to deliver better service
Payment processing
POS terminals can accept multiple payment methods including cash, credit cards, debit cards, contactless payments, like mobile wallet apps and Tap to Pay, and near-field communication (NFC)–based payment methods like Apple Pay and Google Pay. Plus, they communicate with the financial institutions involved to authorize and complete all digital transactions, ensuring that funds are transferred from the customer's bank account to your merchant account.
Babylist is just one retailer benefitting from Shopify’s reliable payment processing. As the brand grew, it needed a POS system that could integrate its disjointed inventory data before opening its first permanent retail location. Shopify POS’s unified commerce stack seamlessly connected Babylist’s online and in-store experiences while its payment processing allowed the retailer to take payments quickly and easily, giving customers a frictionless shopping experience.
Shopify POS is a very simple system and being so mobile and quickly taking payment is what guests are looking for. Additionally, being able to start guests' profiles and look up previous transactions is key in creating a seamless experience in the event of a guest returning or a gift receiver stopping in with an exchange or return. Today’s shoppers expect that type of functionality so it’s important to have.
Inventory management
A POS terminal stores your product catalog and automatically updates inventory quantities when a purchase is made. To check product availability, you can either scan the barcode on the product or search for the item using its name, SKU number, or a keyword.
Some advanced POS systems can automatically update inventory levels in real time as transactions occur. This helps you monitor stock levels and have enough stock to serve your customers.
Shopify POS, for example, helped Kick Game with its inventory management challenge. The premium sneaker retailer wanted to step from online-only into physical stores, but faced limitations with OpenCart's siloed system. Shopify’s unified system allowed the brand to unify its inventory across digital and physical channels. Now, every time a customer buys a pair in-store, the online inventory updates automatically, helping the brand maintain accurate stock levels across its retail footprint.
Thanks to the unified view of its store, customer data, and inventory, Kick Game scaled from £2 million to £50 million in annual revenue, maintains an impressive £265 average order value, and can deploy new store locations within 30 minutes.
Data and reporting
Reporting is another way POS terminals facilitate operations. The POS collects and keeps track of data about every transaction and product. It can learn a lot about your business, such as which products are the most popular, when the store is busiest, or which of your staff members makes the most sales.
Use these analytics for inventory management, sales analysis, generating reports for accounting, tax purposes, and to reach the right business decisions faster.
Printing or emailing receipts
POS terminals can print or send digital receipts to customers electronically via email or text upon completion of a transaction.
Employee scheduling
In addition to managing and monitoring inventory and finances, some POS terminals integrate with retail scheduling tools, which incorporate real-time sales data into the employee scheduling process. This way, retail store managers can accurately forecast busy periods and schedule staff accordingly.
Loyalty and rewards
A POS terminal with built-in loyalty software enables retailers to reward their best customers. Such systems simultaneously track information on customers’ shopping preferences, as well as data on purchases (e.g., who is buying what items and how frequently). With this data, retailers can design loyalty and rewards programs and ensure a loyal customer base.
Email carts
Adding items to a shopper’s cart is easy with a POS terminal. You can scan an item’s barcode or search for it in the POS system to add the item to an in-store order. After adding the item to the POS at checkout, the system will calculate the subtotal and total after applying fees, discounts, and tax.
Shopify POS, for instance, offers an Email cart feature, which lets a retailer create a cart and send the shopper an email with an itemization of what’s in their cart and a link to the store’s online checkout. This allows the shopper to complete their checkout online, after which the transaction appears as a completed order on the Orders page in Shopify.
Bared Footwear, for example, previously juggled multiple online and POS systems to sync inventory. This hampered the brand’s operations, forcing it to close its stores during online sales.
We had no way of making sure that we didn't oversell without shutting down a sales channel or reducing the amount of stock available to the online customer, which was really frustrating operationally. It was also a really negative customer experience—we wanted to be able to welcome our customers to our stores during sales.
Switching to Shopify POS solved the retailer’s critical operational challenges while enhancing the customer experience through email carts. Store associates can now send pre-loaded carts directly to customers' emails, allowing them to shop on their own terms while maintaining a connection between in-store interactions and online sales.
“These fulfillment options wouldn’t be possible if our store inventory, orders, and checkout wasn’t linked to our online store checkout like it is with Shopify,” says McNab. “It’s a much better experience for the customer and helps secure sales that may have otherwise been lost.”
How a point of sale terminal works
Checkout
A shopper selects an item to purchase and approaches the checkout counter or POS terminal location. Cashiers can scan the item’s barcode, or look up products in the POS system based on their category, name, or SKU number and manually enter the information into the terminal.
Payment collection
The POS terminal automatically calculates the total bill, including any fees or sales tax. The customer then chooses their payment method, which may be credit card, cash, mobile payment, etc. Depending on the method they choose, they can insert, swipe, or tap their card (or phone) on the POS terminal—or give their cash to the cashier.
Payment authorization
With any digital payment, the card reader captures information from the card or digital wallet and transmits it to the payment processor. Then, the POS terminal sends an authorization request to the acquiring bank (the merchant’s bank) through the payment gateway.
The acquiring bank forwards the request to the card network (e.g., Visa, MasterCard), which then sends it to the issuing bank (the customer’s bank) for verification.
The issuing bank checks the card or digital wallet details, verifies the availability of funds, and approves or declines the transaction. This decision is sent back through the card network to the acquiring bank, and finally, back to the POS terminal.
Completion of sale
If approved, the POS terminal prints or sends a receipt if requested, and the cash drawer (if used) opens for any cash back. If declined, the POS terminal displays an error message, the cashier will request another form of payment from the customer.
Behind the scenes, the software logs the transaction, deducts the item from the inventory, updates stock levels, and feeds the data into the system’s reporting and analytics.
Settlement
At the end of the day, the business performs a batch settlement. The POS system sends all approved transactions to the acquiring bank, which then processes the payments and transfers the funds to the merchant’s account.
Best POS terminals for retailers
| Provider | Costs | Processing Fees | Subscription |
|---|---|---|---|
| Shopify | $349 | 2.7% + $0 (Basic plan) 2.4% + $0 (Advanced and Plus plans) |
POS plans: From $5/month + processing fees Shopify monthly fee: From $32/month |
| Square | $799 | From 2.6% + $0.10 per transaction | None |
| Lightspeed | From $359 | From 2.6% + $0.10 | From $109 per month |
| Clover | $599–$799 | From 2.3% + $0.10 per transaction | No monthly fees |
| KORONA POS | Custom pricing | Depends on processor | From $59/month per terminal |
| Helcim | $329 | Interchange plus pricing Tap to Pay: $0.10 per transaction |
No monthly fees |
| PayPal Zettle | $199 (terminal only) | 2.29% + $0.09 per transaction 3.49% + $0.09 per manual-entry transaction |
No monthly or setup fees |
| Stripe Terminal | From $59 | From 2.7% + $0.05 | No monthly or setup fees |
Shopify POS
Shopify POS is a comprehensive POS system that works in-store and online, simplifying daily operations and helping you build customer relationships.
The Shopify POS terminal comes equipped with an array of robust features, including advanced inventory management, staff performance tracking, ecommerce integrations, built-in payment processing, and reporting and analytics tools.
You can capture customer data with each sale, and the terminal will update orders and stock levels. This makes it easier for you to build customer profiles, nurture lasting relationships, and create targeted and impactful marketing campaigns.
Shopify POS also lets you integrate your physical store sales with your online sales. You can also benefit from its omnichannel selling feature to sell everywhere, track sales, and get retail reports on your business’s performance. Not to mention, when everything is connected, you can easily leverage omnichannel opportunities, like allowing customers to pick up online orders in-store.
The best part? Shopify offers flexible payment options for quick and easy payment processing. This includes contactless and digital payment methods, like Tap to Pay, which turns your smartphone into a mobile POS terminal, bypassing the need for a cash register. You can check customer data, process transactions, and take contactless payments from a device you already own.
Popular features
- Omnichannel selling
- Intuitive and fast checkout
- Smart inventory management
- Complete customer profiles with order history
- Email capture
- Secure and reliable POS hardware
- Shopify Payments
- Tap to Pay with iPhone
- Staff management
- Ecommerce integrations
- Reporting and analytics tools
Price: $349
Square POS
Square POS is a cloud-based system that includes a built-in payment processor and ecommerce tools. The terminal’s ecosystem includes a wide range of features that let you scale your retail business easily.
Square also offers marketing, inventory and team management, and reporting tools in both the desktop and mobile POS. The terminal also includes Photo Studio—a free photo-taking and editing app for iPhone that lets you take photos for marketing or to improve the look of your online store.
Popular features
- Integrated marketing tools
- Square appointments
- Photo Studio
- Inventory and team management
Price: $299
Lightspeed
Lightspeed POS is a cloud-based commerce platform with inventory and analytics tools for retail and restaurant businesses. The terminal is easy to use and enables retailers to manage stores, teams, suppliers, and inventory from one place.
Lightspeed POS also comes with ecommerce functionalities, reporting capabilities, and integrations with popular business apps, like Xero, Gusto, BigCommerce, and Mailchimp.
Popular features
- Inventory tracking and automated reordering
- Built-in analytics and reporting
- Ecommerce integrations
- Supplier and team management
Price: From $359
Clover
Clover POS is an all-in-one terminal suitable for small businesses, such as retailers, service businesses, and restaurants. The terminal comes with the Clover Go app, which lets you manage your business from anywhere by creating orders, accepting payments, and texting receipts to your customers.
Popular features
- Customer loyalty programs
- Employee management tools
- Cloud-based reporting dashboard
Price: $599-$799
KORONA POS
KORONA POS is a cloud-based POS that’s desgined for businesses with special processing needs or those shopping around for the lowest rates.
It’s equipped with ID scanning for age verification and security, and loss prevention tools to minimize losses of any kind, including spoilage, shoplifting, supplier mistakes, and internal theft.
Popular features
- Offline functionality
- Inventory tracking
- Automated ordering and reordering
- Customizable reporting tools
Price: $69 per month
Helcim
Helcim POS is a standalone terminal that comes with a free POS. It combines payment processing, inventory management, and customer relationship tools in one system, which you can use through its Smart Terminal, credit card machine, or directly on a smartphone, giving you flexibility for various business needs. You can run your payments through a single device and benefit from low rates and no monthly fees or contracts.
Best features
- Real-time inventory management
- Customer purchase history tracking
- Fee Saver
- Integrations with accounting software
Price: $329.
PayPal Zettle
PayPal Zettle is a budget-friendly, portable POS terminal that lets you take card, digital, and other popular payment types with low processing fees. It might not have the fancy bells and whistles of bigger systems, but it can get you up and running quickly with essential features to track inventory, monitor staff productivity, track sales, and receive automatic reports.
Best features
- Built-in barcode scanner
- Staff management
- Sales tracking and reports
Price: $199 (POS terminal only)
Stripe Terminal
Stripe Terminal is a customizable POS with EMV-certified hardware options and features such as sales tracking, end-to-end encryption, and cloud-based device management. It works seamlessly with all payment methods from traditional cards to contactless options, enabling customers to pay how they want across 23 countries.
Best features
- Pre-certified hardware
- Developer-focused tools
- Cloud-based device management
Price: From $59
How to choose the best POS terminal
Which type of point-of-sale terminal is right for your business? Is it a countertop (cash wrap), a mobile POS, or a combination of both? The last thing you want is to get stuck with something that’s not the best fit for your business.
Apart from the industry-specific features, here are six factors to consider when shopping for a POS terminal for your business.
Payment methods
Select a POS terminal that lets you accept all major debit and credit cards, digital payments such as Google Pay and Apple Pay, and online or contactless payments, like Tap to Pay, to complete customer transactions. Most POS terminals accept several payment methods, but some allow users to pay with gift cards or even split the payment among multiple payment methods.
When you make it easy for shoppers to pay you, they tend to buy more, which can earn you more repeat business and improve cash flow.
Fees
POS terminals combine software and hardware, so the cost varies. Most POS terminals let you pay either a monthly or annual fee.
Your payment card processor will also charge a fee for each transaction, in hidden and monthly fees. In many cases, what you pay per transaction will vary based on the credit card the shopper uses.
Make sure your POS provider offers integrated payment processing. For instance, Shopify Payments is a standard feature in all Shopify POS plans and has no sign-up or setup fees.
Integrations
Managing separate systems for your retail store and website creates unnecessary complexity and can lead to poor customer experiences. The most effective solution is a POS terminal built on the same foundation as your other retail operations, where core functions like inventory, customer data, and payments naturally work together.
From this strong foundation, you can then add specialized tools to customize your business:
- Accounting apps for detailed financial reporting
- Advanced scheduling tools for staff management
- Industry-specific features for your unique needs
This approach ensures your essential retail operations run smoothly on one platform, while giving you the flexibility to add functionality as your business grows.
Hardware compatibility
A great POS system needs to sync with the right hardware, such as barcode scanners, card readers, receipt printers, and more. Some POS systems force retailers into expensive, proprietary setups, which limit flexibility. Shopify keeps things flexible by offering hardware compatibility that lets you choose the best tools for your business.
Flexibility
Some POS terminals have an offline mode and local data storage, which gives retailers flexibility and assurance of continued operations in the absence of an internet connection. Check whether the POS terminal you’re considering can work offline and has built-in security measures and back-up procedures to protect data during offline transactions.
Security
Retail businesses handle sensitive personal data and payment information.
Shortlist options that have the latest security features, such as end-to-end encryption, user authentication, and data tokenization, and are compliant with all laws and regulations, particularly the Payment Card Industry Data Security Standard (PCI DSS).
Safeguarding such sensitive data and information protects your business from security breaches, unauthorized access, and cyber threats, while reducing the risk of fraud.
Process in-store payments with your POS terminal
From mobile POS terminals to stationary cash wraps, and a la carte hardware setups to out-of-the box payment solutions, you have many options as a business owner. Whatever your business needs are, Shopify has a POS terminal solution for you.
What is a Point-of-Sale terminal FAQ
What is the difference between a POS machine and a POS terminal?
A POS machine and a POS terminal are basically the same thing. The terms are often used interchangeably, referring to the physical device that runs your POS software and processes payments at checkout.
How many types of POS terminals are there?
There are two main types of POS terminals:
- Traditional: Stationary systems with dedicated hardware, like cash registers and barcode scanners.
- Mobile: Portable devices like smartphones or tablets with cloud-based POS systems for processing sales anywhere with a WiFi connection.
What is an example of a point-of-sale terminal?
Shopify POS is a great example of a POS terminal that lets you sell wherever your customers shop. Its intuitive and unified platform lets you manage in-store and online sales seamlessly, keeping inventory, payments, and customer data in sync.
What is the primary function of a point-of-sale terminal?
The primary function of a POS terminal is to process transactions to complete a customer's purchase. Other functions include managing inventory and generating sales reports.
Which machine is best for POS?
The best POS machine fits your budget and business needs. Look at key factors like payment options, fees, integrations, hardware compatibility, and security. Shopify POS is a top choice for omnichannel retailers, unifying in-store and online sales with seamless payments, clienteling features, real-time inventory tracking, and powerful analytics.
