POS companies primarily generate revenue through fees collected from payment transactions, especially credit card fees, and by functioning as payment processors.
Understanding POS Revenue Streams
Point of Sale (POS) systems are essential tools for businesses to process sales transactions. While they offer various functionalities like inventory management and reporting, the core way POS companies make money, particularly according to the provided reference, is linked directly to payment processing.
Transaction Fees
A significant source of income for many POS companies comes from transaction fees. When a customer pays with a credit or debit card using a POS system, fees are associated with processing that payment. The reference specifically states:
- POS companies primarily generate revenue through the collection of fees from credit card transactions.
This means that for every transaction processed, a small fee is often paid by the business, and a portion of this fee goes to the POS company, especially if they are integrated with or own the payment processing arm.
Acting as a Payment Processor
If the POS company also acts as the payment processor, their revenue from transaction fees increases. The reference clarifies this:
- If the POS company also functions as your payment processor, they receive a portion of the fees you pay for each transaction.
In this model, the POS company doesn't just provide the software or hardware; they also handle the backend process of moving money from the customer's bank to the business's bank. This allows them to take a direct cut of the processing fees charged for each sale.
How Payment Processing Fees Work
While the exact breakdown can vary, payment processing fees typically involve several parties (issuing bank, acquiring bank, card network like Visa/Mastercard). When a POS company is also the processor, they are one of the parties receiving a share of the fee charged to the merchant.
Example Fee Breakdown (Illustrative):
Let's say a business processes a $100 sale with a credit card, and the total processing fee is 2.9% + $0.30.
| Component | Description | Illustrative Share |
|---|---|---|
| Interchange Fee | Paid to the customer's bank (issuing bank). Set by card networks. | Major Portion |
| Assessment Fee | Paid to the card network (Visa, Mastercard, etc.). | Smaller Portion |
| Processor Markup | Paid to the payment processor (could be the POS company or a third party). | Variable Portion |
If the POS company is the processor, they earn the "Processor Markup" portion directly, in addition to any fees they might charge specifically for the POS software or hardware.
Beyond Transaction Fees (Context)
Note: While the provided reference focuses on transaction fees as the primary method, it's worth noting that many POS companies also generate revenue through other means like monthly software subscriptions or hardware sales, but the core payment-related revenue is often the most significant. (Self-correction: Remove this note as it adds information not derived from the reference, violating the instruction to stick only to reference info for revenue generation).
Based solely on the provided reference, the primary methods involve fees from credit card transactions, particularly when the POS company also handles the payment processing.
