Consumer payment preferences have dramatically changed over the last 10 years – driven by both convenience and necessity.
Online shopping and the ability to have purchases delivered to your doorstop had already gained popularity in 2020. Then Covid exploded and in many cases, consumers were forced into the online realm – whether they liked it or not.
Now, the global market for digital payment solutions is expected to grow at a CAGR of 15.20% from 2023 to 2030, surging in market value to $24.31 trillion by 2030.
The growing adoption of smartphones, wider internet penetration, increased Ecommerce activities and innovative payment technologies are driving digital payments.
Digital payments encompass everything from credit card transactions, ACH transfers, digital wallet payments, peer to peer (P2P) payments and more.
And many of these payments extend across channels, meaning they can be used online, on a mobile device and at the point of sale (POS).
While Covid put online and mobile commerce in the driver’s seat, there has been a return to shopping in the physical environment and paying in-store at the POS. This “return” to retail and dining is propelling the market for payment terminals, up to $152 billion by 2029, a CAGR of 8.68%.
Companies considering an embedded payment strategy or seeking to expand on an existing payment installation must understand the nuances between POS and online payments – from both a consumer and partnership standpoint.
What are Point of Sale Payments?
Point of sale (POS) payments refer to electronic payments (not cash) made in a physical environment – whether retail or restaurant. Here, goods or services are typically purchased through a POS payment terminal, although in some cases, mobile to mobile payments may be exchanged. POS payments have evolved significantly from the days of swiping a credit or debit card in a payment terminal, incorporating advanced technologies to enhance security and convenience.
POS Terminal Payments
A POS terminal is a device that facilitates the transaction process by capturing payment information and processing the transaction. Modern POS terminals are equipped with various functionalities, including the ability to read magnetic stripes, EMV (Europay, MasterCard, and Visa) chips and contactless payment methods.
EMV Technology
EMV technology has become standard for card payments across the world, ensuring enhanced security through chip card technology. Unlike magnetic stripe cards, EMV cards generate a unique transaction code for each purchase, significantly reducing the risk of fraud.
Contactless Payments
Contactless payments allow consumers to complete transactions by simply tapping their card or mobile device at the POS terminal. Utilizing near-field communication (NFC) technology, contactless payments offer speed and convenience, making them increasingly popular in busy retail environments.
What Are Online Payments?
Online payments refer to transactions conducted over the internet, encompassing purchases made through computers and mobile devices. This method has seen exponential growth, driven by the rise of Ecommerce and the increasing use of smartphones.
Payments Made with a Computer
Online payments via computers typically involve entering card details onto a website’s payment page. This process includes multiple layers of security, such as encryption and tokenization, to protect sensitive information. Payment providers act as intermediaries, authorizing transactions and ensuring funds are transferred securely from the customer to the seller.
Payments Through Mobile Phones
Mobile payments have perhaps had the biggest effect on how consumers pay today. With the advent of mobile wallets like Apple Pay, Google Wallet and Samsung Pay, users can store their card information securely on their devices and in many cases, use biometric authentication (such as fingerprints or facial recognition) to authorize transactions. Additionally, mobile payment apps often support other payment methods, such as direct bank transfers and P2P payments.
How Do Point of Sale Payments and Online Payments Work Together?
The integration of POS and online payment systems is the foundation of an effective omnichannel payment strategy, enabling organizations to provide a seamless shopping experience across different platforms.
POS and online payments complement each other by catering to different consumer preferences and shopping contexts. For example, a customer might browse products online, make a purchase through a mobile app and pick up the item in-store, where they might also buy additional items using a POS terminal. This synergy not only enhances customer convenience, but also increases sales opportunities.
Unified Payment Systems
Many businesses are adopting unified payment systems that integrate POS and online payment processing. This approach provides a cohesive view of transactions across all sales channels, facilitating better inventory management, streamlined accounting and improved customer service. Unified systems also support features like cross-channel returns and exchanges, further enhancing the consumer experience.
Security Considerations
Both POS and online payment systems must adhere to stringent security standards to protect against fraud and data breaches. Technologies such as encryption, tokenization and multi-factor authentication are employed to secure transactions across all channels. By maintaining robust security measures, businesses can build trust with their customers and safeguard sensitive information.
Get Multi-Channel Embedded Payments with Payfactory
The continued evolution of payment technologies, from EMV and contactless payments at POS terminals to secure online transactions via computers and mobile devices, highlights the importance of a comprehensive multi-channel payment strategy.
At Payfactory, we leverage the strength of both payment models to enhance the customer experience and drive sales. Our embedded payment facilitation platform offers both POS and online payment options, backed by encryption and tokenization across all payment channels. Low to no-code development ensures quick and simple partner deployment through software platforms and gateways. Coupled with a seamless merchant experience and fast onboarding, ISVs, resellers and gateways can begin generating revenue in days – not months. Contact Payfactory to learn more about our multi-channel payment solutions