Estimated reading time: 3 minutes
Although POS systems are vital, understanding the drawbacks of different types is important when choosing the solution that’s right for your business. Point-of-sale (POS) systems have become a vital component of the online and in-person shopping experience. POS systems allow your business to track various types of sales and receive payments from customers. Today’s POS systems are now entirely digital, meaning that vendors can accept payments from customers from virtually any location. All they need is a POS app and a device that’s connected to the internet, such as a tablet or mobile phone.
What are vendors looking for in a capable POS system? In the North American market, retailers want a POS system that includes omnichannel integration (59%), makes improvements to their current POS (52%), offers a simple and unified digital platform (44%) and has mobile POS features (44%).
What Is a POS System?
A point-of-sale system is a bank of terminals that allow customers to make cash, credit, or debit card payments when they’re shopping, dining out, or acquiring services. There are currently two main types of systems in the offline and online retail industries: Software-based systems that accompany cash registers and other compatible hardware, and web-based services used on e-commerce websites.
Although both systems offer many advantages to retail merchants, they also have some disadvantages.
Disadvantages of Software-Based POS Systems
1. Expensive Software Upgrades
In 2021, the POS software market value reached $10.4 billion, and it’s projected to reach $19.6 billion by 2028. However, unlike web-based systems that provide free upgrades, software-based upgrades typically incur additional charges for vendors. Every time an upgrade is made, vendors are required to pay for new operational licenses or software. This can make software-based payment processing services expensive and inconvenient.
2. Less Convenience
Software-based payment processing systems are less convenient than web-based systems. Only compatible hardware can connect physical terminals to the internet. This hardware must be used to access inventory counts, reports, analytics and related sales data.
3. Problems Caused by Hardware
Repairing hardware issues in physical POS systems can be difficult and expensive. When problems arise, vendors must contact the manufacturer to troubleshoot the problem. However, issues may still require a costly, time-consuming visit from a specialized service technician to fix the problem.
Disadvantages of Web-Based POS Systems
1. Connection Reliability
A reliable internet service provider and online connection are required to operate a web-based POS payment processing system. If an internet outage occurs, you will lose access to the POS system. That means you will be unable to run or verify customers’ credit or debit cards, accept payments and more. Even with fail-safe protocols, vendors must still wait for an online connection to access certain features.
2. Security Risk Fees
With web-based POS systems, vendors will likely be required to pay a monthly subscription fee to ensure data security and digital protection protocols. This added cost will lower your ROI over time. Be sure to include this monthly expense when considering the total cost of purchasing a web-based POS system.
3. Security Risks
Most importantly, customers who use credit or debit cards when making purchases risk exposing their personal information when data breaches occur. Most POS system providers have taken precautions, but digital payments always carry some risk.
Dive Deeper Into Merchant Services 101
Unsure of the best way for your business to accept credit card payments? National Processing’s eBook, “Merchant Services 101,” will answer some of the most common questions about payment processing, provide tips on obtaining a merchant account and more.
This free guide covers:
- High-risk industries
- Cash discounts
- Pricing programs
- PCI compliance
- Payment gateways
- Credit card and ACH processing