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Published: March 5, 2020

8 Fascinating Questions to Ask About Payment Terminals

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Merchants old and new usually have a one-track mind when it comes to their business, and that is to generate profit. One key component is to equip yourself with the capability to accept payments how, when and where your clients need.

With the rapid expansion of payment technology, it’s easy to get lost in the buzzwords and terms you hear like NFC, Mobile Wallets, Encryption, etc. But with a little research you can find the solution that works best for your unique business. To set yourself up for success, we’ve broken down these 8 questions that should help you gain more understanding of the hardware you need to future-proof your business. 

1.) So, what is a payment terminal?

Payment terminals are more commonly known as point of sale or POS terminals. By its simplest definition, a payment terminal is a device that merchants and their clients use to swipe, insert, or tap their cards to process a sale. It is the payment terminal that captures the required card information, combines it with the relevant transaction data, and transmits this data to the banks so they can authorize the sale and transfer the funds to the merchant.

read information off a customer’s card

check sufficiency of funds in a customer’s card account

transfer funds from the customer’s account to the merchant’s account

record transactions and print receipts

Payment terminals can either be a standalone device or connected to POS systems. When integrated into a POS they serve to automatically confirm and transfer payments to their retail management system  and simplify their day-to-day business operations.

The origin of the payment terminal can be traced back to 1879 when Ohio native and saloon owner James Ritty invented the first cash register as a way to prevent his employees from stealing money from his business. From then on, more improvements and features were added until Gene Mosher’s touchscreen interface in the late 1980s paved the way for the ‘mechanical’ cash register to evolve into the first POS systems that we are using now. Advancements in retail technology further emerged in the early 1990s when Martin Goodwin and Bob Henry’s first POS system started running on Microsoft’s Windows platform.

2.) What are the features in a payment terminal?

Payment terminals come in different forms and sizes, but they come with the following basic components:

The card reader that captures information contained on the credit card. Depending on the type of the card reader, it may read information from the magnetic stripe, the chip, or the RFID on a tap card.

allow printers, pin pads, smart card readers, and other peripherals to be attached so the terminals could work seamlessly.

The phone jack connects the terminal to a phone line so it can communicate with the processors through a dial-up network and process the transaction.

An ethernet port connects the terminal to the ethernet port on the wireless adapter. This allows terminals to set up a wireless network for processing transactions.

Soft keys are programmed keys that perform specific functions essential to the terminal such as programming, batching, returning, and voiding, among others.

The display shows both merchants and customers the transaction information that is currently being processed or the function currently operating.

The keypad, which allows merchants and customers to manually key in the necessary transaction and cardholder information, as well as complete some functions.

The printer prints the transaction receipts. It uses printer paper, which also comes in different types depending on the printer used. Heat produces the receipt image for thermal paper. Impact paper uses carbon to create receipt images while an ink printer uses ink ribbons or cartridges.

The power plug connects the terminal to the power sources. In some cases this may be replaced with a charging base if the device has an internal battery.

Near Field Communication (NFC) is an internal feature that allows a payment terminal to perform wireless data transfers in close proximity. NFC technology usually powers contactless payments via mobile wallets like Apple Pay, Google Pay, and Android Pay, as well as contactless cards.

3.) How does a payment terminal work?

Like all devices that involve payment processing, it all starts with the end users or cardholders. They purchase a product at the point of sale where your terminal is, you enter the transaction information, collect the card information by swiping, inserting, tapping or manually entering the card data, and the payment terminal prints the receipt confirming the sale.

While this is a more straightforward way of seeing how payment terminals work, the entire process contains a series of complicated steps that involve many players.


Once cardholders provide the necessary information, the payment terminal transmits this information along with the transaction details to your (the merchant’s) payment processor and acquiring bank.

The transaction details are then transmitted to the cardholder’s issuing bank.

The authorization is processed between the issuing bank and your acquiring bank through the card networks (Visa, Mastercard, etc.) to check if the transaction is valid and if the cardholders have sufficient credit or funds.

Once cardholders provide the necessary information, the payment terminal then transmits this information along with the transaction details to your (the merchant) payment processor and acquiring bank.

4.) Why are payment terminals important?

Because of the way they function, payment terminals have become indispensable to merchants. As part of the POS infrastructure, the terminal serves as the conduit to capture the card data and process transactions.

The global market for payment terminals already reached $62.34 billion in 2018, with experts predicting that it will grow at a compound annual growth rate of 7.8% from 2019 to 2025---as revealed by Grand View Research. The research firm further adds that in the POS market, hardware continues to be the largest segment and is estimated to hit $66.30 billion before the end of 2025.

A 2018 survey also reveals how 80% of US customers prefer using cards over cash when making payments. Of the 80%, 54% prefer debit cards while the remaining 26% use credit cards. If you consider the purchasing habits of your customers—which, as a merchant, you really should—it is no surprise why terminals remain relevant to your business success as they are the only hardware capable of processing card transactions.

Upgraded payment terminals benefit your business since your customers now have more payment options. Which is a great way of sending out a message that you are paying attention to their needs and are providing all possible means to make their shopping experience more convenient and efficient. You also help position yourself as a forward-thinking business if your customers can use cash or go cashless by using digital wallets or cards when making purchases.

Most importantly, modern payment terminals are equipped with NFC technology, magnetic stripes, and encrypted chips, which ensure data privacy and security. This is very handy for customers who prefer card transactions, since these additional secured technology prevents the likelihood of stolen sensitive information and fraud.

Also read: Mitigating Fraud with EMV Technology

5.) How do you set up a payment terminal?

Before purchasing and installing hardware, you will need to make sure you have an active merchant account.

There are two ways of acquiring a merchant account:

  • Establish a direct relationship with an acquiring bank
  • Work with a merchant services provider or MSP that takes care of everything for you

Both will also set you up with a payment processor, which is another integral aspect of the entire payment processing infrastructure.

Once that is established, you can start shopping for the actual payment terminals. This may be something that is supplied as part of your service agreement, or you may be required to purchase equipment based on your MSP and your needs. When ordered through your service provider, the terminal would normally arrive preconfigured with the necessary software and should be plug and play. Meaning connecting the device to a power source and either a phone line, internet line, or wifi connection if the device supports it. Instructions should be supplied with your device or provided by your service provider.


Another helpful read: How to Set Up a Payment Terminal (The Technicals)

6.)  What are the different kinds of payment terminals?

Aside from allowing you to accept card payments, payment terminals help you improve customer experience and streamline your operations, especially on how your money flows. The significance of the payment terminal’s contribution to your business is so important that choosing the best one for your needs should be a priority. 

There are different types of payment terminals so when making the best choice for your business, you need to get a more complete grasp on what is currently offered by the market. By doing so, you will know what their pros and cons are, how much they cost, and which is best suited to fit your needs.

To help guide you in the selection, we have provided a quick run-down of each terminal type, their average pricing, and their advantages and disadvantages:

  • can process multiple payments
  • More stable with a wired connection
  • supports card not present transactions
  • have limited mobility


The traditional or countertop payment terminal is perhaps the most commonly used payment terminal. It is mostly used by retail merchants or those that have a dedicated spot for processing and accepting payments. 

A traditional payment terminal may cost from $100 to $350 or above depending on the model, brand, and its features.

Traditional payment terminals are called as such because they require a physical connection to a dial-up connection or internet to process payments. Because of this, they have to be set up on a desk or countertop and should remain stationary.

  • completely portable payment acceptance solution
  • lower Interchange costs;
  • fully encrypted card swipe that prevents identity theft
  • fast network speeds for quick transaction processing
  • signature capture virtually eliminates merchant risk
  • reliant on location’s network signal


There are now several products that allow merchants to use their smartphone or tablet as a payment terminal. After obtaining a merchant account, you can easily download the app, which is usually free. After putting in a few fields of information, you are now ready to process transactions. These apps are usually accompanied by a card reader that you can attach to your phone and read full track data from your customer’s card.

Read: 5 Amazing Things You Probably Didn’t Know About Mobile Payments

Because of its nature, a wireless terminal will be the best fit for business who are always on the move such as on-site service providers, food trucks, or events management services. 

By what the name suggests, an integrated payment terminal means that both the hardware and software communicate with each other in a seamless fashion. These range from smart terminals with added features like inventory management, time clocks, etc. to a terminal that fully integrates with a full function POS., They are among the more expensive units out there, ranging from $400 to $1,000+.

  • payment acceptance and processing is relatively more efficient
  • reduces human error
  • transaction reconciliation and other tasks are easier to handle
  • bound to the payment processor integrated in the terminal
  • rates and terms of agreement are decided by the POS
  • difficult to switch payment processors 

Integrated smart payment terminals would be a great fit for businesses that are still starting out and do not have their entire payment processing structure figured out and are less of an investment than a full POS. If you already have a payment processor on hand, you will need to consult with them to know which devices are compatible on their platform..  

The good thing with an integrated system into your payment terminal though is that all transaction information will now smoothly flow from your processor to your point of sale software. This means, you do not need to manually key in the amounts, which is a huge plus.

The virtual terminal is the most versatile type of payment terminal out there because there is no physical terminal required. Since the terminal is virtual, payment is now processed electronically through secure web pages that allow you to enter payment information into application. This makes the virtual terminal an ideal type for card-not-present transactions.

Compared to the other payment terminal types, you pay virtual payment terminals based on the terms you agreed with the service provider. Payment terms are usually in the form of a subscription or percentage fee. Since virtual terminals mostly deal with card-not-present transactions, the processing costs may be higher as card not present transactions are considered riskier than a card present transactions..

  • enable card-not-present transactions
  • can accept payments online or over the phones
  • reduce paper waste
  • lower upfront costs with no hardware required
  • inefficient for face-to-face transactions
  • transaction information have be entered manually
  • cannot accept cash

With the way virtual terminals are built, they are best suited for merchants business-to-business services, online businesses, freelancing, medical billing companies, and e-commerce sites since their transactions can be processed remotely.

7.) What should you look for in choosing a payment terminal?

Once you’ve finally pinned down what payment terminal would best suit you, the next step would be to choose the best brand or provider for you. Making that choice is one of the most crucial steps with your business, since this is a device that you will likely be sticking with for a while.

To help you with these choices, here is a rundown of what you need to consider when making that all-important choice:

Purchasing a payment terminal is a big investment to make for your business so you have to make sure that it works with the existing system that you have especially if you already have cash drawers and barcode scanners purchased, among other things. If you want to accept mobile payments, make sure that any apps or equipment ares compatible with your phone.

When we say usability, it does not only mean that the payment terminal is easy to set up, install, and operate. It should also mean that it will make the purchasing experience of your customer more convenient. Nobody wants to wait in line that long for a purchase because of all these processes that your store has to input. Having a payment terminal with NFC reading capability for electronic wallets such as Apple Pay or Google Pay is also a good thing to have.

Not all devices will work perfectly all the time, and you need to ensure that your provider will be able to address your concerns ASAP in case you encounter a technical glitch or your terminal is in need of some repairs. You also needed someone to help you with addressing disputes. Remember, the longer it takes to get resolved, the more money you potentially lose, so time is of the essence here.

You also have to consider this: can your payment terminal support your business growth? Can you easily integrate technological upgrades so you can accept other payment types? What other services does the provider offer that will help make my business more sustainable?

This is non-negotiable: avoid payment terminals that only accept magnetic stripes at all costs. Your payment terminal should have a card reader that accepts EMV cards since this reduces your fraud liability. This will help you avoid unnecessary liability from the EMV liability shift, which we’ll be discussing next. Aside from this, also look for a provider who can help you with your PCI compliance as well as ensuring safe payments.

8.) What is the EMV liability shift all about?

If you are a merchant, it is in your best interest to know more about the EMV liability shift, especially on how this affects your business. 

In payment processing, data security is always a priority, and this is why many card associations have taken many steps to prevent fraudulent transactions. One of which was the creation of EMV chips for cards so the occurrence of fraud from card-present transactions can be prevented. This type of fraud often leads to chargebacks that hurt merchants.

To further minimize fraud risk and encourage the industry to adopt the EMV payment technology, the EMV liability shift was enacted starting October 2015. As what the name implies, the liability for fraud has now shifted from the card issuer to the merchants when a chip card is processed with a magnetic stripe.


The EMV liability shift can be further explained in these following scenarios:

A customer uses a magnetic stripe card to make a purchase, and it is swiped by a magnetic stripe only terminal. The purchase turns out to be a counterfeit transaction. Who is liable? Generally, NOT the merchant.

A customer uses an EMV chip card to make a purchase, and it is swiped on a magnetic stripe only terminal. The purchase turns out to be a fraudulent transaction. Who is liable? This time, it is the merchant since his payment terminal did not support EMV-enabled payments when the issuer already made the investment to make cards more secure.

A customer uses an EMV chip card to an EMV-enabled terminal that has been activated by the merchant. The purchase turns out to be a counterfeit transaction. Who is responsible? Not the merchant, but the card issuer holds the primary liability this time.

The main takeaway from these three scenarios is that as merchants, it is now your responsibility to upgrade your terminals that support EMV cards so you will not be held liable. To protect your business from the consequences of the EMV liability shift, always partner with a provider that can equip you with EMV certified payment terminals.

In closing:

Our market is so complex and dynamic that you may have a harder time choosing what’s best for you with so many options available. With all the options available you’re sure to find a solution that works for you.  

When making that choice, always consider your internal operational processes, the nature of business, the investment you have budgeted, and the technology required to fully run your business. Then, make sure that all these requirements you’ve listed out can be sufficiently provided by the MSP of your choice.

At Agapay, we are value our relationships with our clients, and we believe in helping them make sound investments to fully realize their business goals. To learn more about our services, including our free payment terminals, and how we could bring your business to new heights, contact us here or call Agapay at 800 644 3909.

AGAPAY - Transactions that give

Agapay was founded on the idea that payment processing should be ethical and give back to the community. In pricing, structure and service, we will always do our best to give the most value and maximize service.
Agapay is a Registered Partner/ISO of Elavon, Inc. Georgia [a wholly owned subsidiary of U.S. Bancorp, Minneapolis, MN]
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