EFTPOS (Electronic Funds Transfer Point of Sale) is a device by which sales transactions can be directly debited to the customer's bank account at the point of sale, through the use of a debit card (generally the same card used with Automatic Teller Machines). Merchants using EFTPOS can also offer cashout facilities to customers, where a customer can withdraw cash along with their purchase. EFTPOS are sometime also called POS Terminal or Payment Terminal and must not be confused with traditional Point of sale.
The customer's card is swiped through a card reader or inserted into chip reader and the merchant usually enters the amount of the transaction before the customer enters their account and PIN. There is usually a short delay while the EFTPOS terminal contacts the server (over a phone line or mobile connection) before a message of Accepted or Declined is returned. Often, at peak shopping times (for example the last shopping day before Christmas), the system can become overloaded and the delay will become extended or even time out.
Transaction Types Over POS Terminal
Basic Transaction Types
- Sale: Customer pays for stuff or service from his/her account.
- Void: Before end of day (Settlement), merchant can cancel the sale and give the money back.
- Refund: After end of day (Settlement), merchant can cancel the sale and give the money back.
- Pre-authorization: Merchant can block some amount of money from the customer's account for a specific time. It is usually used in hotels. Merchant guarantees to get money for the services.
- Completion: It is used to transfer the money blocked with the pre-authorization.
- Cash Advance: Customer can use POS to get money from the account. Merchant will give the money to customer instead of stuff or service. Like using POS as ATM to get the money from the account.
- Cash Back: Customer can use POS to get money from the account while buying something. Merchant asks the customer if cash back is needed while customer buys something. Customer can also ask.
- Offline: It is same with sale but it is offline. In this transaction, POS doesn't connect to the server. If the amount is small or if there is a connection problem with the server, merchant can choose offline transaction. It is faster than the online sale transaction but it is not secure. To make it secure, POS can have black list. For most of the bank, the black list is so big and difficult to implement. They usually don't use black list.
It is a transaction with chip card. Merchant choose the sale transaction from the POS terminal and insert the card into the chip reader instead of swiping it. EMV is a new technology in POS payment systems. It is fully secure for forgery. EMV transactions use cryptology to prevent fraud. Secret keys are in a black box in the chips which is not readable from outside but readable from inside by the chip itself. Merchant should use EMV if it is already available. In an EMV transaction, chip card decides to go online or offline according to the parameters and the history. Refund, void, pre-authorization, completion, cash Advance and cash back can also be EMV.
Ubiquity in some countries
EFTPOS could be seen a major driver of a cashless society in these countries. EFTPOS is so wide-spread and so commonly used that it is necessary to advertise "cash only - no EFTPOS" for events or locations where it is not available. Mobile EFTPOS is now used by certain taxi companies, pizza delivery outlets and stall holders at festivals, allowing EFTPOS transactions to be carried over the mobile network.
EFTPOS in particular countries
In some countries, banks tend to levy a small fee of around 25 to 50 cents per debit card transaction. Although bank accounts without these fees are becoming more common, these charges mean it is wise to limit EFTPOS usage. There are, however, many people in New Zealand and Australia who routinely use EFTPOS for all transactions, no matter how small. In other jurisdictions, EFTPOS transaction fees are charged to the retailer/merchant, rather than the customer. This has resulted in some retailers refusing to accept EFTPOS as payment for small transactions, where paying the transaction fee would absorb the profit margin on the sale, making the transaction uneconomic for the retailer.
In the UK integrated EFTPOS (usually referred to as debit cards) are an established part of the retail market. Cards commonly in circulation include Maestro (previously Switch), Solo, Visa Delta and Visa Electron. Banks do not charge customers for EFTPOS transactions in the UK, but some retailers make small charges, particularly where the transaction amount in question is small. The UK is in the process of converting all debit cards in circulation to Chip and PIN, based on the EMV standard, to increase transaction security. This is expected to be complete by August.
The EFTPOS system is highly popular in New Zealand. Virtually all retail outlets have EFTPOS terminals, particularly supermarkets, dairies, service stations, and bars. Increasingly Taxi operators and even businesses operating from stands at events have mobile EFTPOS terminals.
New Zealanders use EFTPOS for both small and large transactions. It would not be unusual for a New Zealander to use an EFTPOS card to pay for an amount as small as $1 NZD. Because EFTPOS is such an integral part of spending in New Zealand, occasional network failures cause tremendous delays, inconvenience and lost income to businesses who must resort to swipe machines to process EFTPOS transactions until the network returns to service.
The Bank of New Zealand introduced EFTPOS to New Zealand in 1985 through a pilot scheme with petrol stations. New Zealand now has more EFTPOS terminals per head of population than any other country.
In Australia, EFTPOS-enabled cards are accepted at almost all swipe terminals able to accept credit cards, regardless of the bank that issued the card, including Maestro cards issued by foreign banks, with most high turnover businesses accepting them, with 144,513 Point Of Sale terminals. EFTPOS cards can also be used to deposit and withdraw cash over the counter at Australia Post outlets participating in giroPost, just as if the transaction was conducted at a bank branch, even if the bank branch is closed. Although EFTPOS terminals are now commonplace, many merchants still retain manual credit card terminals as their sole method of accepting cashless payment.
- Main article: Interac
Canada has a nation-wide EFTPOS system, called Interac Direct Payment. Since being introduced in 1994, IDP has become the most popular payment method in the country, surpassing even regular cash payments in 2001.
Over recent years, in Germany EFTPOS has gained tremendously in acceptance. Facilities already existed before EFTPOS became popular with the Eurocheque card (Eurocheque was originally a system of paper cheques. In addition to the actual cheques, customers were issued a card, which needed to be shown along side the cheque as security measure. Those cards could and can also be used on ATM Terminals and at EFTPOS, which is nowadays their only function, since the Eurocheque system (along with the name, but they're still referred to as Eurocheque cards by most people) was abandoned in 2002 during the transition from Deutsche Mark to the Euro). In 2005, one must actively search for a store or petrol station without EFTPOS facilities. Processing fees are deducted from businesses, and because of this, some business owners refuse EFTPOS-sales for totals below a certain amount, usually 5 or 10 Euros.
Around 2000, an alternative method for EFTPOS payment was introduced, dubbed "Geldkarte" ("money card"). It uses a smart card chip on the front of a standard issue Eurocheque card (which still had the magnetic stripe on the back). This chip can be loaded with up to 200 Euros, and is advertised as means for medium to very small payments, down to the low euro or even cent range, as no processing fees are deducted by banks. It has not gained the popularity its inventors have hoped for, however this could change when this chip will be used as means of age verification at cigarette vending machines, which will become mandatory in 2007.
Chile has an EFTPOS system called Redcompra (Purchase Network) which is currently used in at least 23,000 establishments throughout the country. Goods may be purchased using this system at most supermarkets, retail stores, pubs and restaurants in major urban centers.
Some EFT/POS Manufacturers
- The Logic Group
- OSSI Customized POS/Organization Solutions