The History of Point of Sale Systems

Articles starting with “The History of…” usually aren’t the most intriguing.

But when it comes to point of sale and payments, you’ll be surprised at the evolution of the systems that we now utilize today – where your phone, tablet or even watch act as a payment device hundreds of times a year.

The main driving force behind the development of point of sale was security. With PCI-DSS and other security standards on everyone’s mind, providing secure ways for merchants to transact remains a core component of POS and payments.

POS solutions have evolved from their humble beginnings into robust data powerhouses that store a wealth of information and power business decisions for operators. With an increased focus on omnichannel capabilities, integrations and customer service, POS has become the central hub of a business, with all the data from the POS flowing into other systems for analysis.

POS terminals are fundamentally calculators – and that’s where they started.

Most people associate the invention of POS with the development of electronic cash registers (ECRs). However, the patent for the first cash register was filed by James Ritty, in Dayton, Ohio, 1883, and it was naturally far less complex than the ECRs and POSes of today.

The problem James Ritty was trying to solve? He was getting ripped off by some of his employees – an unfortunate challenge that operators still face today.

Here’s how it worked:

1. 1.Metal taps with denominations were pressed to indicate a sale amount.
2. 2.There was a bell to ring up the sales. A sound we’re all very familiar with – the CHA-CHING of a cash drawer.
3. 3.A total is generated using the sum of all the cash values of the key presses during the day.

It evolved quickly after that. Printed receipts were able to be created, and employee customizations to the cash drawers allowed for different bells to signal different staff members. The company was subsequently renamed National Cash Register (NCR), a company that still exists today.

Electronic cash registers began to change the game in the later 1900s, with automatic cash drawers that popped open and more comprehensive receipt capabilities. However, these worked independently from one another, making it difficult for merchants with more than one to effectively manage multiple tills and reconcile at the end of the day.

In 1973, IBM released a POS “system”, which allowed for up to 128 IBM cash registers to support a local area network connection that linked the devices together. Soon enough, McDonald’s and other large brands jumped on board with POS.

Surprisingly enough, there are still many businesses in the US that operate without a POS solution – a shocking 56% of single store retailers, in fact. Usually, this is due to the fact that new technology can be intimidating, overwhelming, and can also have costs associated that operators are reluctant to incur.

Because of how unique the POS needs of different industries have become, POS companies are largely verticalized to support their customers effectively. For example, it’s difficult to effectively run a food service business that requires printers, menu boards, kiosks and other tools if you are utilizing a retail POS.

A big driver of POS development was the evolution of payment methods. Payment has a long evolutionary history, as well, far before POS. So, how did payments evolve?

1. 1.Bartering: This eccentric method of payment involved exchanging goods and services for other goods and services. We can call this “The original payment method”.
2. 2.Coins: Humans have discovered examples of extremely old coins dating back to as early as 680 BC. This new, non-perishable payment method allowed for wealth to begin to be accumulated.
3. 3.Paper money: Paper money took over coins as coins were heavy to carry around. In 812, their use became official.
4. 4.Checks & bills of exchange: These were documents that guaranteed payment from one person to another in a commercial document, in addition to the regular checks that we all know. Checks are originally linked to the British Crown.
5. 5.Cards: Although Visa introduced the first credit card in 1979, the first cards were more like modern day loyalty cards, powered by Western Union and offered to exclusive customers. These cards originally provided access to a line of credit without surcharges, and modernized into the variety of credit and debit cards that we know today. Cards began to make it possible to pay without checks or physical cash.
6. 6.Digital payments: E-wallets, one-click payments, cryptocurrencies – the world of digital payments is evolving at lightning speed. You can now pay with your mobile wallet that is on your watch, phone, or other digital device, and carrying cash seems like a thing of the past.

Particularly driven by the pandemic, point of sale for hospitality is changing quickly. However, even with mobile and online ordering, self-serve kiosks and other new ways to order, security remains at the heart of all POS – something that James Ritty would surely be happy to know.