Point of Sale (PoS) System

With the advent of technology, more and more people have started accepting digital payments. This means that corporations have to provide their customers the option to make payments using a wide variety of payment methods. Some of these payment methods are electronic whereas others are not. Commercial banks have identified the possibility of providing good services to their clients by providing an automated point of sale system which helps these corporations provide more convenience to their customers.

In this article, we will have a closer look at what point-of-sale systems are and how commercial banks utilize them to provide value-added services to their customers.

What is a Point-of-Sale System?

A point-of-sale system is a combination of hardware and software which allows any merchant to take payments from their customers. The point-of-sale system has been created to accept payments from a wide variety of payment methods. This can include traditional methods such as checks and cash. On the other hand, it generally includes more modern methods such as credit cards with magnetic stripes, credit cards with integrated chips, mobile wallets, and digital payments using the quick response (QR) code.

A point-of-sale system is a set of hardware and software which communicates with other banks and payment processors in order to make digital and contactless payments possible. Since most of the sales in the developed world are done using electronic payment methods, a point-of-sale system becomes very important.

Commercial banks provide their customers with this point-of-sale service in return for a fee. Commercial banks charge the customer's account, provide settlement data at the end of the day and transfer the cash to the bank account of the merchant without any significant delay.

Why is a Point-of-Sale System Important?

Point of sale systems are very important for corporations across the world. This is because a lot of purchases made by the modern consumer are impulse purchases made instantaneously. Hence, businesses want to have a point-of-sale system that allows consumers to have as many payment methods as possible, and also the payment should be processed as quickly as possible. Businesses across the world have the need for a high-tech point of sale system which they can strategically utilize in order to grow their business. Commercial banks have the capability to provide these services to these business houses.

How Banks Make Money from POS Systems

Commercial banks charge a transaction fee when funds are routed through their systems. Hence, if a merchant receives $100 via a point-of-sale system, they may receive only $98 after deducting a commission. The percentage of commission being taken becomes smaller and smaller as the volume of transactions increases.

Large-scale retailers pay a very small percentage of their revenues to commercial banks. Revenue from point-of-sale systems is a significant contributor to the overall revenue being generated by commercial banks.

Nowadays, banks have started facing some competition from newer more technologically advanced fintech companies. However, even to date, the business of point-of-sale systems is almost completely controlled by commercial banks.

Point of Sale

Benefits of a POS Systems

There are many benefits provided by point-of-sale software systems which make them very popular amongst businesses. The details of these benefits have been mentioned below:

  • Increased Sales: As mentioned above, the modern consumer buys a lot of products based on impulse decisions. Hence, if the point of sale systems can enable fast transactions and can provide credit to the customer, there is a good chance that the overall sales of the business will be increased by an effective system. It is for this reason that having a good point of sale system can become a unique selling point for a commercial bank. The corporations may begin their banking relationship only to utilize the point-of-sale system. This relationship can then be quickly extended to other areas.

  • Better Cash Flow Management: A good point of sale system enables better cash flow management for the business. This is because the money is transferred to the bank at the end of the same business day. In some cases, the payment is received after a couple of days. Also, since the payments happen electronically, they are easier to account for and reconcile. A large part of the reconciliation process can be automated and this can drastically lower costs for corporations.

  • Lower Chances of Theft: There are many retail businesses that are prone to theft. It is common for gun-wielding criminals to target stores for robberies. A good point of sale system reduces the need to have physical cash at the store. Since the money is transmitted electronically, the robber does not have any incentive to commit theft. Many businesses have observed that their security-related expenses have also gone down considerably due to effective point-of-sale systems.

  • Customer Convenience: Point-of-sale systems are strategically important for businesses since they offer unparalleled customer convenience. As a result, customers often end up spending more money than they originally intended to. Facilities such as no-cost easy monthly instalments are offered at point-of-sale systems. Hence, the revenue and the profitability of the company are directly impacted as a result of the features offered by point-of-sale systems.

The bottom line is that point-of-sale systems are a very important commercial banking service that is offered to corporate clients. Point of sale systems has moved beyond being transactional devices to becoming strategic marketing devices.

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Commercial Banking