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How a credit card machine went from simple to complex: the technology inside the reader

ByDave Stopher

Sep 21, 2021

The words “card reader” describe the technology used to detect the account number, cardholder information and authorisation code on a credit card. A card machine as a device can decode the information stored on the magnetic strip or microchip of a credit or debit card reader. The card payment machine is a convenient option for both online and offline cash transactions. The device allows users to borrow money to make purchases. As a result, when you pay with your credit card, the money comes from a pre-approved loan rather than your bank account. One of its exclusive features is its ability to convert high-end purchases into manageable equated monthly installments (EMIs) to be repaid over a period of time. But what is a POS system and in what way has this technology evolved? Keep reading below to find out!

What is a Point-of-Sale such as myPOS?

POS is an important component of a point of purchase. It is the location where a client makes a payment for goods or services as well as where sales taxes may be due. It could be a physical store with POS terminals and systems processing card payments or a virtual sales point like a computer or mobile device.

Consumers prefer to make purchasing decisions on high-margin items or services at these critical locations. Businesses have traditionally placed POS devices near store entrances to improve the percentage of spontaneous purchases as customers leave.

This increase in credit card use can be related to technological advances that have made non-cash payments more convenient. Various technological advancements such as the EMV chip, near-field communication (NFC) technology, and application program interfaces (APIs) have made credit cards and digital payments a preferred means of payment for individuals during the last six decades.

However, it has also made credit card readers a bit complex for most people.

Technological Advancements

Magnetic strips

IBM was the first to apply a magnetic strip to the back of a plastic card. Each of the three magnetic tracks on the magstripe held distinct bits of information such as a customer’s name, credit card number and card expiration date. Customers could also use the magstripe card as a secure and convenient means to withdraw money whenever they needed it, especially outside of banking hours. Banks sought a way to provide these services without hiring new staff due to the growing popularity of all-night convenience stores and customers’ expectations of being able to access their money on weekends.

EMV chips

Because the EMV chip has more processing power than a magnetic-strip card, it enables speedier payments. In order to authorise the transaction on the card machine, the consumer is normally required to provide a unique personal identification number (PIN). A microcircuit on the chip saves the card and customer information in an encrypted format. For each payment made on the card, the chip creates a unique transaction code. A chip credit card is difficult to duplicate due to the dynamic nature of the information on the card, as opposed to the static information contained on a magstripe.

POS systems

The myPOS systems are the forerunners of today’s credit card processing devices. This equipment was previously large and used electronic data collection. However, digital machines replaced manual imprinters by digitally recording information from a customer’s credit or debit card. They dramatically accelerated the transaction process and made card payments more convenient for customers. Some point-of-sale systems could also interact with other business processes, such as inventory management and personnel schedules. This mobility allows retailers to collect payments from anywhere in their store, opening up new business opportunities such as setting up a pop-up shop.