Data from Mastercard shows that by the end of 2021, 83% of Spanish businesses accepted contactless payments through their point of sale (POS) terminals, marking a 21% rise over just four years. Additionally, by the end of the first half of 2023, there were already more than 4.2 million POS terminals in Spain.

Although these systems include several components—such as software and card readers—many people in Spain still assume banks are the sole providers of card terminals. In the past, the simplest way to get a card terminal for in-person transactions was through a bank. However, more and more businesses are now choosing bankless card terminals, sometimes called independent card terminals.

In this article, we explain bankless card terminals, how they function, and their benefits.

What’s in this article?

• What is a bankless card terminal?
  
• How does a bankless card terminal work?
  
• What to consider when choosing a bankless card terminal in Spain
  
• FAQs about bankless card terminals in Spain
  

What is a bankless card terminal?

A bankless card terminal is a card payment processing device. Unlike traditional card readers, they do not require contracts with banks, giving freelancers and businesses more flexibility.

How does a bankless card terminal work?

Bankless card terminals work similarly to those provided by banks. However, there are some key differences between them. Here’s a step-by-step overview of the payment process with these devices:

• Registering a bankless card terminal: The individual or business registers for the provider’s platform that offers the bankless card terminal. In addition to providing the business name and tax information, the business must also link their business bank account to receive customer payments.
  
• Accessing the internet: Bankless card terminals connect to the internet, usually via a wi-fi network. Some businesses might not prefer relying on the availability or stability of a wireless network. In that case, they can choose a bankless card terminal that offers subscriber identity module (SIM) card support. These allow businesses to connect to Spain’s 4G and 5G networks. Similarly, businesses can use mobile devices to accept contactless payments through Tap to Pay.
  
• Connecting to the payment platform: Bankless card terminals connect to payment providers’ platforms, allowing businesses to manage transactions. For example, Stripe Terminal’s contactless card terminals connect to the Stripe payment platform to process in-person transactions.
  
• Paying for the purchase: The customer selects their preferred payment method to complete the transaction, such as debit or credit cards or digital wallets.
  
• Communicating with the issuing bank: The bankless card terminal communicates with the payment platform to transmit the payment details to the customer card’s issuing bank, commonly known as the “issuer.” In mere seconds, the card reader encrypts the card data, requests payment authorization from the issuer, receives the authorization or rejection, and displays the appropriate message.
  
• Settling payment: If the issuer approves the payment, the transaction amount is credited to the business’s account. This usually happens by the end of the day.
  

What to consider when choosing a bankless card terminal in Spain

With so many different bankless card terminal models available, choosing the right one for your business can be a challenge. Here are some of the features to consider when choosing the right device:

Compatibility with payment methods

It’s a good idea to choose a bankless card terminal that supports the most common payment methods in your country. For example, in Spain, a contactless card terminal should accept payments from the most common card networks—such as Visa and Mastercard—and from digital wallets, such as Google Pay and Apple Pay.

POS

The POS system consists of a combination of software and devices—such as a barcode reader—in addition to the bankless card terminal. POS systems should have several key features:

• Unified payments: The POS system should allow you to view and manage both online and in-person payments from a single platform to provide a unified retail experience.
  
• Current legislation: It must comply with the antifraud law, which mandates that POS terminals be secure and traceable and prevent fraudulent accounting practices.
  
• Security: It must use security measures to protect payment data from being intercepted. For instance, the terminal should provide tools for encrypting or tokenizing payment data.
  

Transparent costs

Although there is no contractual relationship with a banking institution, bankless card terminals typically charge small commissions on payments processed through the device. It is important that the business providing the terminal is transparent and clearly outlines its fee structure. Here are some of the most common costs associated with a bankless card terminal:

• Initial payment when buying the terminal
  
• Payment processing fees
  
• Additional fees for other payment methods, such as charges for cards not issued within the European Economic Area (EEA)
  

FAQs about bankless card terminals in Spain

Is a bankless card terminal compatible with Spanish banks?

In general, the compatibility of a bankless card terminal depends on the payment platform to which it is connected. Although a bankless card terminal doesn’t require a contract with a bank, banks still play a role in the payment process. It is important to check that the connected payment platform is compatible with Spanish bank accounts and businesses.

Does a bankless card terminal need an internet connection?

It’s not important, but it is recommended. In Spain, there are bankless card terminals that support offline payments, such as the Stripe Reader S700 and the BBPOS WisePOS E. When these devices operate in offline mode, the transaction is not processed in real time; instead, the data is stored, and the payment is processed later when the device is reconnected to the internet.

It’s important to remember that the payment cannot be verified immediately, so there are risks involved. For example, the card might not have sufficient funds at that moment. However, there are also benefits, such as preventing business interruption during an internet service outage.

Can a bankless card terminal be used outside of Spain?

In general, bankless card terminals are mobile solutions that can be used in other countries. If a bankless card terminal is available in Spain, it is usually compliant with EU regulations. However, some providers restrict the geographical use of their terminals. It’s important to check the availability of your bankless card terminal in your location before signing up for the service.