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Apayment terminal, also known as apoint of sale (POS) terminal,card machine,credit card machine,card reader,PIN pad,EFTPOS terminal (or by the older term asPDQ terminal which stands for "Process Data Quickly"[1]), is a device which interfaces withpayment cards to makeelectronic funds transfers. The terminal typically consists of a secure keypad (called aPINpad) for enteringPIN, a screen, a means of capturing information from payments cards and a network connection to access thepayment network for authorization.
A payment terminal allows amerchant to capture requiredcredit anddebit card information and to transmit this data to themerchant services provider orbank for authorization and finally, to transfer funds to the merchant. The terminal allows the merchant or their client to swipe, insert or hold a card near the device to capture the information.
Card machines are often connected topoint of sale systems so that payment amounts and confirmation of payment can be transferred automatically to the merchant's retail management system. Terminals can also be used in stand alone mode, where the merchant keys the amount into the terminal before the customer present their card andpersonal identification number (PIN).
The majority of card terminals today transmit data overcellular network connections andWi-Fi. Legacy terminals communicate overstandard telephone line or Ethernet connections. Some also have the ability tocache transactional data to be transmitted to thepayment processor when a connection becomes available; the major drawback to this is that immediate authorization is not available at the time the card was processed, which can subsequently result in failed payments. Wireless terminals transmit card data usingBluetooth,Wi-Fi,cellular,[2][promotional source?] or evensatellite networks in remote areas and onboard airplanes.
Prior to the development of payment terminals, merchants would capture card information manually usingZipZap machines.[citation needed] The development of payment terminals was led by the advantage of efficiency by decreased transaction processing times and immediate authorisation[3] of payments. In terms of security, terminals provide end to end card dataencryption and auditing functions. Nevertheless, there have been some cases of POS pin pad malware.[4] There have also been incidence ofskimming at card terminals and this led to the move away from using the magnetic strip to instead capturing information usingEMV standards.[3]
Prior to the development of payment terminals, merchants would usemanual imprinters (also known as ZipZap machines) to capture the information from the embossed information on a credit card onto a paper slip with carbon-paper copies. These paper slips had to be taken to the bank for processing. This was a cumbersome and time-consuming process.
Point of sale terminals emerged in 1979, when Visa introduced a bulky electronic data capturing terminal which was the first payment terminal. In the same yearmagnetic stripes were added to credit cards for the first time. This allowed card information to be captured electronically and led to the development of payment terminals.
One of the first companies to produce dedicated payment terminals wasVerifone. It started in 1981 in Hawaii as a small electronic company. In 1983 they introduced the ZON terminal series, which would become the standard for modern payment terminals.
Hungarian-born George Wallner inSydney,Australia, founded rivalHypercom in 1978 and in 1982 started producing dedicated payment terminals. It went on to dominate theOceania region. The company signed a deal withAmerican Express to provide its terminals to them in the US. To consolidate the deal,Hypercom moved its head office from Australia toArizona in the US. It then faced head-to-head competition withVeriFone on its home market.[5][promotional source?]
Over a decade later in 1994, Lipman Electronic Engineering was established in Israel. Lipman manufactured the Nurit line of processing terminals. Because of Verifone's already firm place in the payment processing industry when Lipman was established, Lipman targeted an untapped niche in the processing industry. While, Lipman held about a 10% share in wired credit card terminals, they were the undisputed leader, with more than 95% share in wireless processing terminals in the late 1990s.
Verifone would later acquire both of these major rivals, acquiring Lipman in 2006 and the payment part of the Hypercom business including its brand in 2011.
In 1980, Jean-Jacques Poutrel and Michel Malhouitre establishedIngenico in France and developed their first payment terminal in 1984. Its Barcelona-based R&D unit would lead the development of payment terminals for the next decade. Ingenico, through a number of acquisitions, would dominate the European market for payment terminals for a number of years. They acquired French basedBull and UK basedDe La Rue payment terminal activity as well as German Epos in 2001.[6][promotional source?]
Initially, information was captured from the magnetic strip on the back of the card, by swiping the card through the terminal. In the late 1990s, this started to be replaced bysmart cards where an electronic chip was embedded in the card. This was done for added security and required the card to be inserted into the credit card terminal. In the late 1990s and early 2000scontactless payment systems were introduced and the payment terminals were updated to include the ability to read these cards usingnear field communication (NFC) technology.
Likeautomated teller machines, many payment terminals are also equipped with raised tactile buttons and anearphone jack which allow the blind to audibly finish the payment process.[7][promotional source?][8][promotional source?]
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There are three main global players who offer both a wide range of payment terminals, sell worldwide, and continue to develop to the latest international payment industry standards.[9] In most countries terminals are provided to merchants via a multitude of distributors that support and pre-configure devices to operate with localpayment networks orfinancial institutions.
A merchant can replace the functionality of dedicated credit card terminal hardware using aterminal application running on aPC ormobile device, such as asmartphone. The payment acceptance applications are also called tap-on-phone or softwarepoint of sale. They usually work with dedicatedhardware readers that can transfermagnetic stripe data to the application, while there are also some that also work withsmart cards (using technology such asEMV), although this is rarely seen on smartphone readers.
In case the necessary hardware is unavailable, these applications usually support manual entry of the card number and other data. In addition, more and more devices are beginning to offer built-inRFID orNFC technology to accommodatecontactless ormobile device payment methods, often without requiring additional external hardware.[10]
Somepayment processors offervirtual terminals for processing payments without the card being present, for example when taking payments over the phone.[11][promotional source?]
Mobile payment systems such as those based onQR code payments bypass the need for payment terminals altogether, relying onsmartphones and a printed QR code.