Point of Sale (POS) systems are the devices that are used by retailers, restaurants and other merchants to carry out a credit card or cash transaction. Till the early 1990's, the term Point of Sale system referred largely to the Electronic Cash Registers used by cashiers at checkout counters and payment kiosks to conduct transactions. Over the past two decades or so, POS systems have evolved considerably and are no longer just standalone payment terminals. Most POS systems in use by retailers and other merchants these days are network connected and capable of carrying out secure payment card transactions in milliseconds. Modern POS systems are full-fledged Windows or Linux-based computers featuring their own processing and storage capabilities, networking support and user-friendly interfaces for carrying out transactions.

Almost all modern POS systems are also Web-enabled and can be remotely accessed, administered and managed. They also integrate considerably more functionality than previous generation cash registers. With few exceptions, POS systems these days can handle not just payment transactions, but also refunds, exchanges, promotional sales transactions and transactions involving cash, checks or gift cards.

POS systems are generally considered just the high-speed 'front-end' of the payment chain. When a payment card is swiped through a POS system, it reads the cardholder data, such as account number, cardholder name and other details, from the magnetic stripe on the back of each card. That information is then sent to a backend system which in turn forwards it over a high-speed network to a payment processor. The payment processor then verifies the transaction with the cardholder's issuing bank and either approves or declines the transaction. Till recently, many POS systems routinely stored cardholder and transaction data for handling issues such as refunds and charge backs. However major credit card companies such as MasterCard, American Express and Visa have now prohibited merchants from storing any credit card data on POS because of fears the data could be stolen and misused by computer hackers. The same fears have also prompted new credit card rules that require all POS systems in future to support functions for encrypting card holder data before it is transmitted to back-end systems.

Though most POS systems provide more or less the same functions, the devices are often configured differently for different environments. For instance, POS terminals used by restaurants are almost always touch-screen or wireless-enabled. Most restaurants and fast-food chains often customize their POS systems in order to be able to relay orders to the kitchen, in addition to handing payment transactions. Many POS systems are also unattended. Examples of such systems include POS terminaks at parking garages and gas station pumps.

Almost all POS systems that are currently in use in the U.S. work only with magnetic stripe cards. However, POS systems in many other regions in the world also support a relatively new type of technology called Chip and PIN. The term Chip and PIN refers to a new generation of credit cards that use an integrated microprocessor, rather than a magnetic stripe, for storing cardholder data. The technology is considered relatively more secure that magnetic stripe technology, but requires specialized POS terminals that are capable of reading data from chips rather than magnetic stripes. Moving to the technology in the U.S would require merchants to either upgrade or replace all their existing POS systems with new ones.