A point-of-sale (POS) system is more than a tool for collecting payment. It’s a key part of the customer experience.

For small businesses with finite resources (e.g., limited staff, tight budgets, manual inventory tracking), modern POS systems provide automated solutions that reduce inefficiencies and control revenue losses. They facilitate transactions, accept various payment methods, track inventory, and generate sales reports. The global market is estimated to increase from almost $45 billion USD in 2026 to over $138 billion USD in 2034, which demonstrates the need for efficient POS systems.

In this article, we explain what businesses need to know about POS systems, including how they work, what they cost, and how they can help small businesses.

Key takeaways

• A point-of-sale (POS) system is a centralized hardware and software solution that processes payments, manages inventory, and generates activity reports. It’s a useful management tool for retailers.
  
• POS systems are built around core components, including software, payment equipment, internet connections, and payment accounts. Retailers can add modules specific to each industry or integrate ecommerce channels, marketplaces, or digital meal vouchers.
  
• Several types of POS systems exist to meet different needs. These include traditional fixed installations, mobile tablet or smartphone solutions, cloud systems, self-service kiosks, and omnichannel platforms.
  
• These systems target all businesses that accept payments in store or online (e.g., retail, restaurants, hospitality, service providers, healthcare), with features that meet each industry’s requirements.
  
• POS systems make payment faster, reduce human error, and provide real-time visibility into inventory and transactions. They also offer unified customer experiences across different sales channels.
  

What is a POS system?

A point-of-sale (POS) system centralizes a business’s collection processes and management. Businesses use POS systems to process transactions. In these systems, software and hardware (e.g., cash registers, card readers, barcode scanners, printers) work together to manage sales, inventory, customer data, and reports.

To facilitate payments, POS systems typically integrate with payment processors, such as Stripe. The payment processor communicates with three parties:

• Customer’s payment method: Customer payment information (e.g., credit card number) is transmitted to the POS system when a customer inserts a bank card into a terminal or taps for contactless payment.
  
• Customer’s bank (or other financial institution): The POS system electronically communicates with the customer’s financial institution to verify available funds equal to the transaction amount.
  
• Business’s payment processor: The POS system also communicates electronically with the business’s payment processor. This is often the same entity providing the POS hardware and software, as is the case with Stripe.
  

What are the components of a POS system?

A POS system consists of two main components: software and hardware (e.g., cash registers, payment terminals). It can also be enhanced with optional add-ons (e.g., industry-specific modules) and connectivity and integration options (e.g., ecommerce, marketplace).

Standard components

• POS software: Within a POS system, software manages sales, inventory, and customer data.
  
• POS hardware: Hardware interacts with the system to process transactions. This includes computers or tablets to run the software, cash registers to store currency, printers for customer receipts, barcode readers to scan products, and terminals to accept card payments and contactless payments.
  
• Dependable internet connection: Businesses need stable internet connections to operate cloud-based POS systems and process card transactions.
  
• Payment processing account: Businesses also need merchant accounts or payment gateways to process card transactions. These typically require a contract with a payment processor and can include transaction fees.
  
• Security measures: Businesses must also implement security practices to protect customer data and prevent unauthorized access. These can include using secure passwords, limiting customer access, and ensuring compliance with data protection standards, such as the Payment Card Industry Data Security Standard (PCI DSS).
  

Industry-specific modules

In addition to standard features for all businesses, every industry has its own operational and regulatory requirements. To address these, POS manufacturers offer modules designed to match the real-world practices of each specific industry, including the following:

• Restaurants: POS systems can provide visual seating plans for occupancy tracking, tableside ordering with tablets, automatic routing to the kitchen printer or a kitchen display system (KDS) screen, and split-bill management for customers.
  
• Fashion boutiques: POS systems can provide size and color management matrices, track inventory transfers between stores within the same network, print compliant price labels, and manage seasonal sales and markdowns.
  
• Local food businesses: These include businesses such as supermarkets and bakeries. POS systems can track product expiration dates, automatically calculate price by weight using connected scales, and track profit margins per item.
  
• Pharmacies: POS systems can track France’s Ségur digital health program, manage narcotics using the mandatory registry, connect to France’s shared medical records system, process third-party payments, and electronically transmit data to health insurance agencies.
  

Connectivity and integration

Integration features have become important for online businesses and retail networks. They allow businesses to avoid double entry and inventory errors. Here are some examples of integration features for POS systems:

• Ecommerce: Synchronization between inventory and catalogs on online platforms ensures that a product sold in store is immediately removed from a business’s website and vice-versa.
  
• Marketplaces: Marketplace connectors allow businesses to upload product catalogs and retrieve orders within the same interface.
  
• Digital meal vouchers: To comply with regulations, POS systems are programmed to accept various meal voucher cards popular in France (e.g., Swile, Edenred, Pluxee) and manage automatic daily caps, as well as Sunday and holiday restrictions.
  
• Alternative payments: POS systems accept digital wallet payments, such as Wero, buy now, pay later (BNPL), and text message payment links.
  

Types of POS systems

There are several types of POS systems, and each targets a specific industry and business model. They include traditional, mobile, cloud-based, self-service, kiosk, and omnichannel POS systems.

Below, we explain the main types of POS systems:

• Traditional POS
  Traditional POS systems involve fixed installations, including computers, cash registers, barcode readers, printers for receipts, and card readers. They often require an onsite server and are typically part of an integrated network. Physical stores generally use this type of POS system.
  
• Mobile POS
  Mobile POS systems use tablets or smartphones as collection terminals. They are flexible, portable, and often cloud-based systems. Businesses can use them to conduct transactions from anywhere. This type of POS system is popular with small businesses, food trucks, pop-up stores, and outdoor events.
  
• Cloud-based POS
  These are software-as-a-service (SaaS) POS systems. They use the internet to store data in the cloud and offer easy access and high levels of flexibility. They typically have the lowest installation costs, which is ideal for small and medium-sized enterprises (SMEs).
  
• Self-service POS
  These systems are popular in supermarkets and fast food restaurants and allow customers to scan and pay for items independently. Self-service POS systems can reduce labor costs and speed up the checkout process.
  
• Kiosk POS
  These POS systems are similar to self-service systems. Kiosks are autonomous units that customers use to submit orders or make purchases. These systems are popular in restaurants, movie theaters, and airports.
  
• Omnichannel POS
  These systems are used for in-store and online sales. Businesses use them to manage inventory, customer data, and sales across all channels. They are helpful for businesses that have both physical and online stores.
  

How POS systems work

POS systems manage transactions from end to end. They identify items sold, calculate totals with taxes, process payments, communicate with banks for payment authorization, and record transactions in accounting and inventory systems. The entire process takes place within several seconds and is transparent for the customer and business.

Here is the typical process when using a POS system:

• Enter items for purchase
  When the customer checks out, the business communicates the item being purchased and its price to the POS system. If the customer buys physical goods in a store, an employee can scan barcodes to display items on a POS-connected device. If the customer pays for a service (e.g., therapy session, landscaping), the business can choose that service from the POS smartphone software menu or manually enter the price, along with notes about the service provided.
  
• Calculate subtotals
  The POS software calculates subtotals. This is the total amount of a customer’s purchases before additional costs—such as tax—are included.
  
• Determine taxes, shipping, and total cost
  The POS software calculates the total cost, including the price of the item, taxes, and shipping.
  
• Invite customers to add tips (when applicable)
  Tipping is not applicable to all transactions, but most payment flows include an option that prompts customers to tip. This can happen by choosing from several options (e.g., predefined percentages or amounts) or by entering a custom amount.
  
• Accept payment
  Once the POS system calculates the total cost of the transaction, the customer pays. Depending on the POS software and hardware being used, many payment methods are available, such as credit and debit cards, digital wallets, gift cards, reward points, and cash.
  
• Communicate with acquiring and issuing banks
  If a customer uses a payment method attached to an external account (e.g., credit or debit card, digital wallet), the payment processor transmits transaction details to the business’s bank. The acquiring bank communicates with the customer’s bank to authorize the transaction. This operation typically takes several seconds.
  
• Finalize transactions
  Once the bank approves the transaction and accepts payment, the customer can typically choose to receive a printed or emailed receipt or no receipt.
  
• Update inventory
  Some POS systems also update inventory based on sales, providing businesses with real-time visibility into their merchandise. This is important for replenishing inventory and preventing chargebacks.
  

What industries use POS systems?

POS systems are useful for any business that accepts payment in store or online, including those in the retail, restaurant, hospitality, service, and healthcare industries. Each industry has its own regulatory, operational, and logistical requirements, so software manufacturers offer specialized solutions.

Below, we explain how POS systems adapt to various industries.

Retail

POS systems for the retail industry focus on facilitating quick checkout processes, barcode scanning, and inventory management. These systems help businesses manage product variants, process returns and exchanges, and generate detailed sales reports. Retail businesses typically take payments at their counters, but some use POS systems to accept payments throughout the store.

Restaurants

Restaurant POS systems handle order taking, kitchen communication, table management, and payment processing with a single system. Certain features—such as menu customization, order modification, bill splitting, and tip tracking—simplify workflows between the front of house and back of house.

Restaurants operating out of food trucks or pop-up sites often use POS systems with Tap to Pay to accept contactless payments and maximize sales volumes.

Hotels and resorts

POS systems in hotels and resorts integrate with hospitality management systems to enhance customer experiences. They also ensure that payment can take place at reception and in restaurants, bars, or hotel boutiques. Features of these systems often include inventory tracking, staff management, and detailed reporting.

Service providers

POS systems have become an important tool for service providers, such as consultants, freelancers, and repair technicians. These systems are designed to manage appointments and invoicing. They often include the ability to process mobile payments, manage customer profiles, and integrate with scheduling tools.

Healthcare

POS systems in healthcare establishments are designed to manage administrative tasks and patient-related activities. These systems address payment processing, insurance billing, co-pay collection, and detailed patient record management in clinics and other medical practices.

Advantages of POS systems

POS systems transform registers into helpful management tools. They can also speed up collection, improve accounting accuracy, automate inventory management, and centralize customer data. In addition to saving time on a daily basis, these systems provide real-time visibility into business performance and reduce low-value administrative tasks.

Here are some details about the advantages of POS systems:

• Faster, simplified collections
  POS systems execute collection within a few seconds, providing product scanning, contactless payment, and email or text receipts. During peaks in activity, this quick processing can reduce checkout lines and directly improve the customer experience.
  
• Fewer human errors
  POS systems eliminate most cash register errors because they provide automatic calculations, apply promotions at the right time, and block restricted transactions (e.g., sale of alcohol to minors, exceeding meal voucher spending limits).
  
• Accurate, automated accounting
  All transactions are automatically recorded and exported to accounting software, minimizing data reentry and reducing unexplained register discrepancies. POS systems also calculate value-added tax (VAT) in real time, making tax filings secure and simplifying accountant workloads.
  
• Real-time inventory management
  POS systems automatically update inventory after each sale. They can send low-stock alerts, suggest reorders, and identify less popular items. Retailers that manage hundreds of items can lower weekly working hours and reduce capital tied up in inventory.
  
• Real-time management of business operations
  Retailers and business owners can access key indicators from their phones, including daily sales figures, average cart sizes, top-selling products, sales performance per employee, and peak traffic hours. This data makes it possible to quickly adjust supplier orders, team schedules, and promotional campaigns, which can result in faster, more deliberate decision-making.
  
• Customer retention
  POS systems centralize each customer’s purchase history, average cart size, and visit frequency. This data can feed information into loyalty programs, targeted text or email marketing campaigns, and personalized recommendations at checkout. Use of this data is one of the most direct ways to increase average cart size and repurchase rates.
  
• Unified omnichannel shopping
  For retailers that sell in store and online, POS systems can synchronize inventory, product catalogs, and customer profiles across all channels. Products sold in store instantly disappear from the business’s website. Customers can order online and pick up their orders in store or return online purchases to a physical location. This results in a simplified customer experience.
  
• Regulatory compliance
  Certified POS software ensures compliance with General Tax Code (CGI) requirements, including data immutability, security, preservation, and archiving. In addition, updates typically include regulatory changes related to VAT and mandatory electronic invoicing.
  

How much does a POS system cost?

The cost of a POS system depends on its software, features, hardware, installation, and maintenance. It’s important to choose a solution that corresponds to the business’s actual needs and its industry.

The main costs for a POS system include the following:

• Software
  Many POS systems offer a monthly subscription model. Others require a one-time purchase, but this cost can vary depending on its features and updates. Additional costs can be applied for supplementary features, including loyalty programs, advanced analytics, and integration with other software.
  
• Hardware
  Retailers can purchase basic cash registers, full-featured payment terminals, or midrange equipment, depending on their needs. They might also need accessories, such as barcode readers, receipt printers, card readers, cash drawers, or tablets and smartphones for mobile POS systems.
  
• Additional costs
  All businesses must budget for initial installation and staff training, depending on the POS system’s complexity. They must also consider costs for ongoing technical support and maintenance. If the POS system includes payment processing, transaction fees can apply. These correspond to a percentage of a transaction’s value plus a set fee.
  

How Stripe can help

Stripe Terminal allows businesses to grow revenue with unified payments across in-person and online channels. It supports new ways to pay, simple hardware logistics, global coverage, and hundreds of POS and commerce integrations to design your ideal payments stack.

Stripe powers unified commerce for brands like Hertz, URBN, Lands’ End, Shopify, Lightspeed, and Mindbody.

Stripe Terminal can help you:

• Unify commerce: Manage online and in-person payments on a global platform with unified payments data.

• Expand globally: Scale to 24 countries with a single set of integrations and popular payment methods.

• Integrate your way: Develop your own custom POS app or connect with your existing tech stack using third-party POS and commerce integrations.

• Simplify hardware logistics: Easily order, manage, and monitor Stripe-supported readers, wherever they are.

Learn more about Stripe Terminal, or get started today.