The State of the POS Terminal Market: Trends, Challenges, and Opportunities

(Point of Sale, or POS, terminals are electronic devices used by merchants to process payments from customers. They can take various forms, from countertop machines to mobile gadgets, and are a critical piece of infrastructure for any business that accepts card payments. The POS terminal market has been growing rapidly in recent years, but it also faces numerous obstacles and uncertainties. This blog post will provide a comprehensive overview of the POS terminal market, including its size, segmentation, growth drivers, competitive landscape, regulatory environment, and future outlook.)

Introduction

The increasing digitization of commerce, the rise of e-commerce, and the growing importance of contactless and mobile payments are some of the key factors that have contributed to the growth of the POS terminal market. According to a recent report by Allied Market Research, the global POS terminal market was valued at $62.34 billion in 2019 and is projected to reach $144.76 billion by 2027, growing at a CAGR of 11.5% from 2020 to 2027. This growth is driven by the need for faster, more secure, and more convenient payment processing, as well as the emergence of new payment methods and technologies (such as QR codes, NFC, biometrics, and blockchain) that require POS terminals to be updated or replaced.

Segmentation

The POS terminal market can be segmented by several criteria, such as type, component, application, and geography. By type, there are four main categories of POS terminals: fixed (or countertop), mobile, integrated (or all-in-one), and self-service (such as kiosks or vending machines). Fixed POS terminals are typically used in brick-and-mortar stores, while mobile POS terminals are suited for on-the-go or outdoor merchants, such as food trucks or pop-up shops. Integrated POS terminals combine multiple functions (such as payment processing, inventory management, or CRM) into a single device, while self-service POS terminals allow customers to complete their own transactions. Each type of POS terminal has distinct advantages and limitations, depending on the business model, size, and target customers.

By component, POS terminals consist of hardware (such as screens, readers, printers, and sensors) and software (such as operating systems, applications, and security features). The choice of components affects the reliability, speed, versatility, and cost of the POS terminal, as well as its compatibility with other systems and standards.

By application, POS terminals can be used for several purposes beyond payment processing, such as inventory management, customer data analysis, employee tracking, or marketing. The flexibility and customization of POS software allow businesses to tailor their POS terminals to their specific needs and goals.

By geography, the POS terminal market is segmented into North America, Europe, Asia-Pacific, Latin America, and Middle East & Africa. Each region has its own market dynamics, such as the level of technological adoption, regulatory frameworks, or consumer preferences.

Growth drivers

Several factors are expected to drive the growth of the POS terminal market in the next years. One of them is the increasing adoption of contactless and mobile payments, which are more hygienic, secure, and faster than traditional cash or cards. According to a report by Business Insider Intelligence, the number of proximity mobile payment users in the US is expected to reach 101.2 million by 2021, up from 65.8 million in 2019. This trend is fueled by the ubiquity of smartphones, the convenience of digital wallets, and the emergence of new players in the mobile payment ecosystem, such as Apple Pay, Google Pay, or PayPal.

Another growth driver is the demand for POS terminals with more advanced features, such as biometric authentication, real-time data analytics, or omnichannel integration. As businesses seek to improve their customer experience, reduce their operational costs, and stay competitive, they are willing to invest in POS technology that allows them to gather and analyze customer data, personalize their offerings, and streamline their workflows. For instance, a restaurant may use a POS terminal that lets customers order and pay online or via a mobile app, while a retailer may use a POS terminal that generates sales reports and recommends product bundles based on customer habits.

Challenges

Despite its favorable prospects, the POS terminal market faces several challenges that may hinder its growth or disrupt its landscape. One of them is the competition from alternative payment solutions that bypass the need for POS terminals altogether, such as peer-to-peer (P2P) payments, cryptocurrency, or decentralized finance. Although these solutions are still in their infancy and face regulatory and technical hurdles, they represent a potential threat to the dominance of POS terminals in the payment industry. For instance, a customer may use a P2P app like Venmo or Cash App to transfer funds directly to a merchant's bank account, or a customer may use a cryptocurrency wallet to pay for goods or services without involving an intermediary.

Another challenge is the security and privacy risks associated with POS terminals, which are prime targets for fraudsters, hackers, or data breaches. A compromised POS terminal can leak sensitive information such as card numbers, PINs, or biometrics, as well as infect the system with malware that can steal or corrupt data. To mitigate these risks, businesses need to adopt rigorous security measures, such as encryption, tokenization, multi-factor authentication, and compliance with PCI DSS standards. However, these measures come with additional costs and complexity, and may deter small or low-margin businesses from upgrading their POS technology.

Regulatory environment

The POS terminal market is subject to a complex and evolving regulatory framework, which varies by country, sector, and payment network. Some of the key regulations that affect the POS terminal market are:

Payment Card Industry Data Security Standard (PCI DSS): a set of security standards developed by major payment networks (such as Visa, Mastercard, or American Express) to protect cardholder data and prevent fraud. Businesses that handle card payments are required to comply with these standards and undergo periodic audits and assessments.

General Data Protection Regulation (GDPR): a privacy regulation of the European Union that sets rules for the collection, processing, storage, and sharing of personal data. Businesses that operate in the EU or collect data from EU citizens need to comply with these rules or face hefty fines and legal sanctions.

Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) laws: a set of laws and regulations that aim to prevent money laundering, fraud, and terrorist financing. Businesses that handle large or suspicious transactions need to report them to the authorities and implement adequate controls and procedures.

Interchange fees and rules: a set of fees and rules that apply to the transactions between merchants, cardholders, and card issuers. These fees and rules affect the pricing and profitability of POS terminals, as well as the rewards and incentives for cardholders.

Future outlook

The future of the POS terminal market is both promising and uncertain. On the one hand, the market is expected to continue growing in the next years, driven by the increasing adoption of contactless and mobile payments, the demand for omnichannel and personalized experiences, and the emergence of new technologies and payment methods. On the other hand, the market faces several challenges and risks, such as the competition from alternative payment solutions, the security and privacy threats associated with POS terminals, and the regulatory burden of compliance and certification. To succeed in the POS terminal market, businesses need to stay abreast of the latest trends and innovations, anticipate the evolving needs and preferences of their customers, and balance the costs and benefits of their POS technology.