There was a time when a POS (Point of Sale) system was a hardware-only concept commonly found at checkout counters. Since then, POS systems have emerged as a comprehensive solution and transitioned into a software as a service (SaaS) model.
A POS system helps retail businesses ensure that their operations work in unison. From updating inventory records for your local and online stores to generating periodic sales data, a POS system can deliver valuable solutions for any retail business.
POS System Market in 2021
The pandemic and the adaptation of digital payments, particularly in the Asia Pacific, has contributed positively to the growing use of a POS system. The POS software demand in the Asia Pacific is expected to clock in at over 11% during the 2021-2028 period.
The 2020 worldwide POS software market valuation of $9.26 billion confirms that the POS system market’s growth is in an upward trajectory. The growth is set to breach the mid-teens during the 2021-2026 period with an estimated 15.6% CAGR.
Several factors are responsible for the marked increase in demand for POS systems. This article covers those factors and what the future of POS systems looks like.
1. Advanced Hardware
POS hardware devices are capitalizing on modern technology at a brisk pace. Many barcode-connected POS systems now come with additional Customer Relationship Management (CRM) functionalities that allow retail businesses to interact and nurture their relationship with customers.
Retail businesses can use the data collected by their POS system to analyze customer spending patterns. The data is extracted from the barcode scans in the POS. Currently, most barcode scanners are laser-based because it is capable of reading black and white space reflectance on barcodes.
2. Adaptation of Fixed POS Terminals
The increased preference for electronic methods of payment among buyers worldwide has compelled businesses to install a fixed POS terminal.
The emergence of cloud-based POS terminals has facilitated the growth in the adaptation of EMV-compliant POS terminals. The pandemic, too, made a considerable contribution to the adaptation.
The Fixed POS Terminal Terminal Market – Global Outlook and Forecast 2021–2026 report revealed that even though the pandemic shut retail stores worldwide and caused revenues to decline, there was significant recovery beginning Q2, 2020 as lockdown restrictions eased.
The EMV (Europay, Mastercard, Visa) market, in particular, has witnessed a sharp increase over the past few years, discloses the report.
Structural regulatory reforms in markets such as India have promoted the use of EMV terminals. The increased EMV compliance adoption is likely to help the market clock in double-digit growth between 2021–2026.
3. Better Customer Service and Increased Sales
The hospitality industry, especially restaurants, is likely to drive the growth of POS systems moving forward. An increased preference of customers for digital payment methods is encouraging the hospitality industry to adapt quickly.
Restaurant chains are investing in top-notch restaurant POS systems to enhance their transaction capabilities and preserve their competitive strength in the industry.
Hotels and resorts, on the other hand, are deploying POS systems across customer touchpoints to cater to a growing customer base that prefers contactless payments.
4. Traditional POS Systems Offer Better Security
Even though biometric technology has been around for quite some time, they make a POS system vulnerable to security threats. It’s not just the hardware, though. Even the software component in biometric POS systems may have bugs that criminals can use for malicious activities.
In comparison, the physical touchpads on traditional POS systems used for punching in the PIN or password are safer. They assure businesses and customers that their data is safe from security breaches and will remain confidential.
The preference of businesses for traditional POS systems because of security concerns will likely help boost their demand to a greater extent than their more advanced, though less security, biometric counterparts.
5. POS Systems with a Linux OS
Linux adds security to POS terminals. Over the next few years, more POS systems could leverage Linux’s efficiency in terms of security and performance. In fact, the market for POS terminals with Linux OS is expected to grow at 12% CAGR over the next six years.
Linux-based POS systems support contact chip card readers, Magnetic Stripe Readers (MSRs), and NFC readers. What’s more, Linux-based POS systems are cost-effective, stable, and offer the benefit of an open-source code.
The simplicity, ease of configuration, and high customizability help businesses process complex data more efficiently.
6. Regulatory Reforms Favoring Digital Payments
The Asia Pacific, including some of the world’s most densely populated areas, is witnessing a structural regulatory shift towards digital payments. This shift will significantly drive the POS market’s revenue growth over the next few years.
Mobile wallets, debit cards, and country-specific initiatives like India’s UPI (Unified Payment Interface) are witnessing massive acceptance.
Countries throughout the APAC are making efforts in this direction. Japan, for instance, aims to achieve a 40% digital payments share among all transactions, from 20% a year ago. Emerging economies like India are proactively striving to bring payments online with large-scale exercises like demonetization.
Plus, the rise in digital payments during the pandemic, either as a result of lockdowns or people’s preference for safer, contactless transactions will also help the growth of the POS systems market.
What Will Help POS Systems Future-Ready?
A POS system is no longer something that brick-and-mortar stores can afford to overlook. The digital revolution is perhaps the biggest disruptor retail has ever seen. The disruption, though, has only just begun.
Over the next decade, POS systems manufacturers will need to incorporate a range of technological elements into their products to stay relevant. Following are some of those elements that will keep POS system vendors on their toes.
1. Artificial Intelligence
Artificial Technology (AI) is already profoundly impacting the retail sector. A survey from CMO by Adobe reveals that 15% of retail businesses have already deployed AI-powered POS systems, with an additional 31% of businesses about to join the league in a year.
The retail sector’s affinity towards AI isn’t without reason. AI can offer order fulfillment and stock replenishment reminders, help businesses identify and understand customer buying patterns, keep businesses apprised of new trends in the industry, and help study trends in sales.
That’s a lot of benefits from a single POS interface. These benefits further offer ancillary benefits.
For instance, identifying customer patterns helps optimize a retail store’s inventory portfolio. This frees up cash tied into slow-moving products and allows the business to minimize the working capital’s opportunity cost.
On the other hand, staying on top of new market trends allows businesses to improve their topline, which ultimately translates to higher profitability. This profitability, in most cases, can far outweigh the costs associated with the implementation of an AI-powered POS system.
2. Cloud Technology
The need to keep data accessible has never been greater. Having location-agnostic access to data is critical for retailers, especially those who have multiple locations across a wide region. This is where cloud-based POS solutions come into the picture.
A cloud-based POS allows access to the software and data in real-time, regardless of the location. However, there’s more. Users can even upgrade the software across locations remotely at the same time.
Cloud POS systems are offered as a service, which means users also benefit from the introduction of new features as and when the technology keeps maturing.
3. Smart Decisions Using Data
POS systems have evolved to collect data while it operates on a day-to-day basis. The data is then synthesized and displayed on a dashboard. The visualization of data helps retail business owners make smarter decisions.
Data helps business owners understand their customers on a more meaningful level, allowing them to improve customer experience through personalization.
Data for revenues and transactions is no more adequate. Retail businesses need more granular data that can help them make effective decisions. For instance, during which hours does the footfall peak in the store? Knowing this helps the retail business make decisions on staffing appropriately.
Inventory is one of the largest current assets on a retailer’s balance sheet. Knowing which goods are slow-moving and which ones sell quickly can help optimize inventory holding accordingly and free up some valuable working capital, thereby saving the business potential interest expense on a line of credit.
Onward and Upward
As POS systems mature and become more pocket-friendly, smarter, and engrossed in a retail business’s operations, retail business owners will be able to create an immersive environment. This will enable businesses to not only focus on customer-centric products, but also an improved customer experience.
The promising future of POS systems, combined with the factors that are currently driving the POS systems into the future, will change the retail landscape as the world currently knows.
Cash counters may become a thing of the past, customers will have easier ways to make payments, and businesses will have ample opportunities to gain a deeper understanding of their customers.
Collectively, these developments will help the POS systems market sustain double-digit growth over the next decade, and perhaps beyond.
Author Bio: Arjun Ruparelia (Email – email@example.com)
An accountant turned writer, Arjun writes financial blog posts and research reports for clients across the globe. Arjun has five years of financial writing experience across verticals. He is a CMA and CA (Intermediate) by qualification.