POS Software Development: what is it and how it works?

According to expert estimates, the global point of sale software market capitalization is USD 16.37 billion in 2025 and is expected to exceed USD 41.53 billion by 2034 with a CAGR of 10.90%. At the same time, given that PoS is an integral part of the operational chain of any business with offline points of sale, it requires a special approach to ensuring its reliability, security, and scalability. Below, as a seasoned PoS software development company, we’ll share our insights on how to create a PoS system.

What Is PoS Software Development?

Point of Sale (PoS) development is essentially the development of cash register software for stores, cafes, restaurants, and other offline retail outlets. This software helps salespeople accept payments (by card, cash, or smartphone), scan products, issue discounts and returns, monitor inventory levels, print receipts, and more.

 It's important to understand that developing such systems involves much more than creating an intuitive interface for cashiers. Essentially, the technical team must implement a comprehensive platform that is integrated with payment providers, can automatically generate and deliver all necessary documents and receipts to the tax office, knows what's in stock and how much it costs, and sends all transactional data to the back office.

 Given all these complexities, developers must ensure the security of cash flows, accurate inventory balances, smooth system operation (even if the internet connection is interrupted), and compliance with generally accepted card data security standards such as PCI DSS. 

In general, for a PoS system to function effectively, it must have:

• An intuitive cashier UX, with a design and logic that allows even novice employees to process orders quickly and without errors;
• Support for various payment types, including NFC, chips, and tokens, as well as the ability to return and cancel orders;
• Offline mode, so the system can operate without an internet connection and save all data in a special queue for sending to the back office when the internet connection is restored;
• Real-time inventory control;
• Reconciliation, to verify that the funds processed at the cash register exactly match the funds credited to the bank. 

Ultimately, truly high-quality PoS systems can make life easier for cashiers, customers, and business owners themselves, through achieving legal and financial transparency.

Types of PoS Software Systems

Although the goals of implementing PoS systems are generally the same, they can still differ in their architecture. Let's look at the most popular ones.

P.S. It's worth noting that custom solutions are often delivered in a hybrid format, combining the characteristics of several architectures, for example, a cloud backend with a local resilient agent.

How Does a PoS System Work?

To understand how to create a point of sale system, let's define how it works, from the product scanning stage to the crediting of the corresponding amount to the account of the business that owns it.

Transaction initiation and reservation

When a cashier scans items or a customer scans them themselves through a kiosk, the system must create a virtual shopping cart directly on the PoS terminal. Here, developers have to implement a local checkout and reserve, ensuring that the system both checks whether an item is in stock and instantly creates a temporary reserve for the item a specific customer wants to buy. Essentially, this is necessary to avoid a situation where the same last item is sold at two different points of sale simultaneously – this way, the system can guarantee that the item will remain available until the purchase is completed.

Authorization and debit

After selecting a payment option, the PoS system must initiate the payment authorization process. This is typically accomplished by sending a request to the appropriate bank via a payment gateway for a certain amount of money on the customer's card. If the response is positive, the bank automatically reserves the required amount while the funds are still on the customer's card. This is needed to ensure the flexibility of the PoS software, as at this stage, the system must perform delayed confirmation – it’s a critical feature for restaurants, where a specific amount of money (for the meal) must first be authorized, while the actual debit must be made later, after the customer adds a tip and confirms the bill.

Error management and transaction confirmation

After the payment gateway returns a response, the PoS system must follow a clearly defined scenario: if the transaction is successful, it must finally confirm the receipt and change the inventory status to "Sold" (this is the stage at which the electronic receipt is generated). If an error occurs (for example, insufficient funds or a connection failure), it must send a corresponding error notification and offer a fallback scenario, such as the option to try a different payment method, implement split payment, or conduct the transaction offline.

Synchronization and reporting

After the sale is completed, the system begins asynchronous synchronization with the backend. It's important to note that many advanced solutions often use schemes like Event Sourcing, with recording each action as an immutable event, and a message queue. This means that information about each purchase is instantly transferred to the central accounting system, becoming part of the business's general ledger on the backend. Finally, daily (and sometimes more frequently), the system automatically reconciles sales data with data sent by the payment provider and bank. This ensures that there are no discrepancies between the funds recorded directly at the register and the funds actually deposited into the business's bank account.

Eliminating double charges and ensuring offline security

In the event of failures or connection issues, the system must ensure that the customer isn’t charged twice. Therefore, at this stage, PoS system developers adhere to the idempotency keys principle by implementing a unique code generator assigned to each new request to the payment provider. This ensures that if a PoS terminal mistakenly sends the same request to the same provider twice, the gateway will recognize this key and process it only once. As for the situations, when there’s no internet connection, development teams typically implement a write-ahead log, which records all actions and transactions locally and, when this connection is restored, uses retry automation and compensation logic to resend or cancel pending transactions.

Data security

Since storing complete bank card data always carries unnecessary risks and legal obligations (as required by PCI DSS), modern PoS systems have to use tokenization. This means that instead of the customer's 16-digit card number, the system stores a secure token, so this approach significantly reduces PCI scope. For the processing of the most sensitive data, such as cryptographic keys, PoS software developers typically create dedicated hardware security modules.

Scaling and optimizing transactions

As security, commission savings, and transaction speed are all critical for large retail chains, developers often resort to dynamic transaction routing when creating such systems. This enables such PoS systems to independently decide which acquiring bank will process a specific payment more efficiently and quickly, thereby reducing merchant fees and increasing approval rates.

Key Features of Modern POS Systems

Modern PoS software should consolidate payments, inventory control, CRM data, analytics, loyalty programs, and integrations with external services. At the same time, despite its extensive capabilities, there’s a must-have set of features that are inherent to every such solution.

Payment processing

The cash register must accept payments in any way convenient for the customer, while ensuring cost efficiency and security for the business itself. Specifically, the system must accept both cash and bank cards (for example, via chip or NFC), as well as more modern methods such as QR codes, e-wallets like Apple Pay/Google Pay, BNPL schemes, and cryptocurrency (optional). It must also be equipped with multi-acquiring capabilities to ensure the business isn't dependent on just one partner bank, and implement intelligent routing so that when a bank card is placed at the terminal, the system automatically decides which bank or provider to process the payment through (taking into account potential fees and reliability). Finally, the system must be reliably protected from failures – in particular, through the aforementioned idempotency keys and the ability to retry payment attempts in the event of an internet connection failure or a short-term local outage.

Inventory management

The system must accurately monitor the inventory levels in warehouses, not just once a day, but every second. That's why development teams often implement a live inventory model within them, representing dynamically updated lists with up-to-date information on all products. Thus, every sale, return, or receipt of goods is instantly recorded in the warehouse and at all points of sale. Another important point is that the system must understand how many units of a particular product are in stock. This eliminates both overstocking, when excess purchases occur and money is stored in unnecessary goods, and stockouts, when needed items run out, so customers switch to competitors. Finally, when inventory reaches a critical level, the PoS system has to automatically initiate an order from the supplier. Modern ones often implement this through machine learning algorithms that independently predict consumer demand based on the season and specific holidays.

Customer loyalty programs

The system should be designed to be used as a strategic tool for building long-term relationships with customers. This is most often achieved through integration with loyalty programs, which not only offer discounts but also analyze the purchases of each individual customer, offering them what they truly need. Moreover, many systems can apply coupons or award additional bonuses based on external factors. Finally, such solutions almost always support CRM integration, becoming a fully-fledged channel for collecting customer behavior data.

Analytics and reports

In a properly designed PoS system, sales data should instantly turn into valuable insights for decision-making. This is why it's essential to implement dashboards with real-time metrics such as average check, total revenue, sales totals for each individual cashier, and so on. It's also worth noting that many advanced systems, in addition to reports, can also alert managers about problems – for example, when the average service time at a particular checkout has increased, or the terminal's refusal rate has exceeded acceptable limits.

Mobile and cloud integration

The system must be operational from any location, even where the internet connection isn’t always stable. To achieve this, developers often base it on a cloud architecture, where all data is stored in a secure cloud (instead of hard drives at physical points of sale). This allows businesses to receive instant updates on inventory levels at all points of sale, as well as achieve centralized management of all stores and warehouses from a single location, easy scalability, mobility (as cashiers can use a tablet or smartphone to process customers’ orders directly on the sales floor, skipping the line), and, of course, the ability to continue operations even without internet access (with a cloud deployment, all data is automatically synchronized with the cloud when the connection is restored).

What Are the Advantages of POS Software and Why Businesses Use It?

Below, we invite you to analyze the main business benefits that determine the value of investing in custom PoS development.

Flexibility and industry adaptation

Our experience in developing custom PoS solutions suggests that they shouldn't be one-size-fits-all. Their true strength comes when they're tailored not only to a specific industry but also to the business model of a particular company. For example, PoS systems for restaurants must consider kitchen processes and order separation, while retail PoS systems must take into account SKUs and barcodes, and PoS solutions for pharmacies must check serial numbers and expiration dates. This development approach significantly reduces the cost of changes and accelerates the opening of new offline retail outlets; furthermore, such systems rarely become legacy and can evolve with a particular company's business model.

Scaling with the business

A well-designed PoS system always evolves along with the retail chain – in particular, when opening new retail locations, adding warehouses, or launching a franchise, such a system automatically scales with minimal developer effort. Therefore, the vast majority of modern PoS solutions support a microservices structure, database clustering, and automatic sharding across locations – all of this ensures that a business can quickly scale without the risk of performance degradation.

Integration with any third-party systems

Modern PoS systems are part of the business ecosystem and can be integrated with CRM/ERP systems, accounting software, payment gateways, marketing platforms, warehousing solutions, tax services, and more. To achieve this, developers enrich them with open APIs and event-driven architecture, ultimately enabling businesses to become independent of specific vendors and quickly integrate new services.

Better data security management

The best PoS solutions are capable of securely processing even the most sensitive data. This explains why protection of payment, personal, and tax data is typically built into their architecture from the outset, rather than added as separate functionality. This typically involves implementing encryption of all data in transit and at rest, card tokenization, role-based access control, log auditing, and PCI DSS certification. 

Operational efficiency and strategic insight

Good PoS systems provide businesses with both high-speed customer service and transparency across all payment transactions. Moreover, they can become comprehensive sources of truth, allowing business owners to monitor actual profits at their locations, operators to evaluate shift productivity, and marketing departments to improve the effectiveness of promotions. In practice, all of this is achievable through integrated analytics and automation of standard operations, including returns, discounts, reporting, and more.

Challenges and Future of POS Software

The main challenges associated with developing PoS systems primarily relate to their security and resilience to changes. Specifically, this concerns ensuring data security and compliance with PCI DSS, GDPR, and regional requirements. It's worth noting that since vulnerabilities most often arise at the POS-server level, their incidence can be minimized through a zero-trust architecture, service isolation in network microsegments, and mandatory TLS 1.3 encryption (at least, this is how we overcome this challenge).

Another typical challenge is multiple integrations, since the more systems that must operate simultaneously, the higher the risk of synchronization errors and data duplication. This is also a solvable problem – for example, we address it through event-driven queues and the development of a middleware bus.

Finally, it's worth noting the potential lack of interface flexibility and employee resistance – which is why PoS systems must be user-friendly to minimize employee onboarding time.

In our projects, we achieve intuitiveness in such solutions through well-thought-out UX design developed with end users and phased implementation.

As for PoS development innovations, they are primarily focused on "smart sales". For example, this approach can be implemented through:

• Strengthening the customer experience with its inherent personalization (it’s often achieved through the implementation of AI algorithms);
• Integration with blockchain (here, we’re talking about the creation of smart contracts that can ensure transaction transparency and automate returns);
• ML analysis (it may be used for predictive analytics that enables sales forecasting, fraudulent transaction detection, and inventory optimization);
• Omnichannel capabilities (they are needed to create environments where physical cash registers and online stores share a single core, allowing businesses to build a unified customer interaction chain and manage all sales from a single hub).

If you would like to easily overcome the above challenges and implement trends in your PoS solution, feel free to contact us.

FAQ