Point of Sale (PoS) Terminals
To use smart cards/debit cards/credit cards for the purchase of an item or for payment of a service at a merchant's store, the card has to be swiped in a terminal (known as Point of Sale or POS terminal) kept at the merchant's store. As soon as the card is put on the terminal, the details of the card are transmitted through dial-up or leased lines to a host computer. On verification of the genuineness of the card, the transaction is authorised and concluded. It is thus a means to 'check out' whether the cardholder is authorized to make a transaction using the card. POS terminal is a relatively new concept.
A Point of Sale (PoS) terminal is an integrated PC-based device, with a monitor (CRT), PoS keyboard, PoS printer, Customer Display, Magnetic Swipe Reader and an electronic cash drawer all rolled into one. More generally, the POS terminal refers to the hardware and software used for checkouts.
In recent years, banks are making efforts to acquire Point of Sale (PoS) terminals at the premises of merchants across the country as a relatively new source of income. 'Acquiring' a POS terminal means installing a POS terminal at the merchant premises. The installer of thePoS terminals is the acquirer of the terminal and the merchants are required to hold an account (merchant account) with the acquirer bank. The acquirer bank levies each transaction with a charge, say 1% of the transaction value. This amount is payable by the merchant. Most merchants do not mind absorbing this cost, because such facilities expand their sales. Some
merchants, however, pass on the cost to the customer. This business is known as merchant acquisition business.
Banks are vying with one another for PoS machine acquisition, since it offers a huge opportunity to generate additional income by increasing the card base and encouraging card holders to use them for their merchant transactions. Leading banks--both in the public and private sectors are planning to install hundreds of thousands of these terminals across the country. Some banks are planning joint ventures with global companies who have experience and expertise in
this area.
PoS terminals are predominantly used for sale and purchase transactions. The PoS terminals have proved to be very effective in combating fraudulent transaction by on-line verification of cards. Also, the RBI is expected to permit cash withdrawal transactions to cardholders from PoS terminals installed with shopkeepers, mall stores, etc.
PoS terminals, having gained significant acceptance in metros, need to become more popular in tier-2 and tier-3 cities. Public sector banks appear to be more interested in targeting the smaller towns and cities where they have strong branch presence. The challenges of setting up a widespread PoS network will be primarily (a) operational costs and (b) viability in smaller towns and cities. Experts feel that once the technology stabilises and costs per unit comes down, PoS terminals will become popular all over India.
