For payment processing to happen, the customer has to initiate a purchase at the “point of purchase”. This term can be misleading as it seems to refer to a specific place, but it’s when a customer makes a buying decision. Once the buying decision is made, it’s time for the customer to check out: the place where they check out is called the “point of sale”.
At the point of sale, there is a “point-of-sale system”, or “POS” system, that allows the merchant to take the customer’s payment using their chosen payment method (credit/debit card, cash, check, phone or smartwatch). A POS system not only takes payments, but also offers the merchant services like inventory tracking, payroll and other functions to help manage a business. Certain POS systems even integrate a payment gateway as a bundled service.