Cloud vs. Traditional POSWhich Point-of-Sale System is Right for Your Business?

August 2, 2022 | 9 min read

Cloud vs. Traditional POS

In a Nutshell

Should you invest in a cloud-based POS? This article will compare the different point-of-sale systems. It will discuss the benefits of cloud-based transaction processing and highlight some of the challenges merchants should anticipate.

What are the Virtues of a Cloud-Based POS Versus a Traditional System?

If you’re reading this, you’re probably considering whether you should update your existing point-of-sale (POS) system. You might be searching for the most logical option for your business. If so, it may interest you to know that many of your peers are moving to Cloud-based POS systems.

In a recent article, we explained what a cloud-based POS system is and how to find the best service provider for the job. What we didn’t touch on in as much detail: why look for a cloud-based option in the first place?

What’s the difference between a cloud-based POS and a traditional POS? What benefits and drawbacks do Cloud POS systems pose? And, most importantly, do the pros outweigh the cons? Let's find out.

What is Traditional POS Technology?

A traditional POS works by connecting your payment terminal to a POS server. This allows you to quickly capture and catalog payment details, transaction information, and other data to store later. However, the system relies on an extensive network of other devices to connect the pieces.

That can lead to a few problems. For example, it requires a considerable amount of hardware. Also, the more complex a system becomes, the more vulnerable it can be to malfunctions, errors, or even criminal attacks.

By comparison, a Cloud POS system is a web-hosted point of sale solution. Traditional POS technology connects your payment terminal to an onsite server via a closed internal network. A cloud-based POS operates as a SaaS platform and stores data on remote servers.

Problems With Traditional POS Systems

When you boil the issue down to brass tacks, the key difference between these two systems is hardware. It’s the physical architecture of the machine paired with its functionality.

On a legacy POS system, data is stored locally on a physical device that is usually inaccessible outside that server’s location. A business owner or manager must be present and in contact with the physical server to access files or adjust the system settings.

20 years ago, these point-of-sale systems were cutting-edge technology. They simplified and streamlined day-to-day operations. However, the world has become increasingly digital in the last decade. Stationary systems like this are outdated, inconvenient, and often ill-equipped to meet the demands of modern commerce. These traditional POS systems suffer from:

Vintage Databases

In previous decades, point-of-sale selections were minimal. Merchants had just a few options from which to choose, and each of them was costly and time-consuming to adopt. Most POS companies utilized databases built on Delphi, C++, or Visual Basic, and built their entire systems around that. While this worked well at the time, these databases cannot transmit and receive data at the rate that modern consumers require.

Non-Dynamic Programming

By the same token as an outdated database, the programming language associated with each is outmoded. Data streams are parent-specific, unable to be accessed from multiple source points, and incapable of broadcasting data to numerous source points. The system cannot be (legitimately) accessed from outside the actual physical device and isn’t programmed to be customizable or upgradeable.

Outdated Operating Systems

Most traditional POS systems ran strictly on Windows OS and could not pair with non-Windows-originated software. Things are different now; there is a much broader range of operating systems in play. Sticking to a traditional POS could limit options for interoperability.

On the other hand, cloud point-of-sale systems have evolved very differently and feature much more sophisticated software. Cloud POS systems carry the internal architecture to store data on a hosted server in a remote location that can then be accessed via an internet connection. As you may have guessed, this is a huge advantage over legacy POS systems.

Traditional point-of-sale systems are a “tried and true” option for many brick-and-mortar merchants. Still, they simply cannot keep up with the versatility and connectivity of the Cloud POS systems. Since most businesses these days feature some online component, cloud systems are more practical and customizable. When you factor versatility and affordability into the equation, it’s easy to see why these systems are swiftly taking over.

Contrasting Cloud POS & Traditional Systems

Accessibility and mobility are likely the driving forces behind the merchant migration to the cloud. Additionally, taking credit and debit card payments via a web-based POS system lets you avoid expensive and bulky legacy hardware that requires an upfront software license. By extension, you can also avoid annual maintenance and support fees.

With a Cloud POS, the software is updated through a supporting application that can be accessed anywhere with an internet connection. This eliminates the need to periodically shut down the entire system for updates.

Convenience aside, the frequency and instant accessibility of updates can provide an adequate safeguard against fraud. It can keep your system clear of bugs and other complications that can interrupt business.

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The chart below illustrates the differences between Cloud and legacy POS systems, according to basic functionality:

Cloud POS Traditional POS
Hardware and Software Many companies feature low, or even no up-front costs for equipment and software; scales according to need No. The system is static and must be manually updated and calibrated for each device.
Instant Updates Yes. Cloud systems can be instantly updated manually or automatically through a supporting application. Fixed set of rules including geolocation and device information
Universal Access Yes. Merchants can access their Cloud-stored data from any mobile device. No. Legacy systems are stationary.
All-In-One Solution Yes. Cloud systems feature fully integratable POS software, hardware, and analytics. No. Hardware must be purchased or rented, and you may need to secure a separate merchant account.
Omnichannel Yes. Most Cloud POS systems seamlessly integrate with online stores like WooCommerce and Wix. No
Work Offline Yes Yes
Mobile Payments Yes Not unless specified by the manufacturer.

Plainly, a Cloud POS offers more features and functions than a legacy POS. To further illustrate the points outlined above, let’s talk about some additional features you might find useful.

Benefits of a Cloud POS Platform

Cloud-based systems provide the tools and versatility to remain competitive in today’s increasingly digital landscape.

If you’re considering switching from a legacy POS to a web system, odds are you are looking to diversify your revenue streams. In that case, cloud POS systems are designed to perform with digital commerce in mind, from simple “mom-and-pop” shops to growing omnichannel operations. The key benefits of a cloud-based system include:

Cost

Retail cloud POS is a SaaS (software-as-a-service) solution. Rather than paying to buy hardware, license POS software, and cover terminal fees, support, and regular updates, most cloud POS users pay a simple monthly subscription fee.

Simplicity

No need to maintain in-store servers, networks, and equipment. A cloud POS only requires a simple download and you’re ready to accept orders. Whenever updates are needed, your SaaS provider can simply push them to your device.

Flexibility

As mentioned above, accessibility and mobility are likely key factors in the drive toward web-based POS systems. You can process payments, access data, and receive and respond to reports from anywhere, and incorporate new payment options and technologies, all of which are spectacular motivators.

Security

Rather than storing sensitive payment information on an internal system, a cloud POS backs up the data to a remote server in real-time. This makes data more secure, protecting your customers and your business.

There are a lot of misconceptions out there about cloud technology. For example, fears that it is unsecured—a “digital no-man’s land”—have no basis in reality. In fact, a cloud-based POS is generally more secure than traditional POS systems.

Worries about internet connectivity are unfounded, too. Even if you lose connectivity, a good system will store transaction data on an internal system, then upload it to the cloud once you reestablish connectivity.

That said, Cloud POS systems do have legitimate drawbacks.

Drawbacks of Cloud POS Systems

We’ve spent a good portion of this article singing the praises of Cloud systems. Now, though, we need to talk a bit about some of the things a cloud POS can’t do for your business.

Some experts have raised concerns about the ownership of data stored within cloud systems. Cloud service providers are aware of the legal gray area and have taken steps to address it. However, the data ownership issue can still create uncertainty. This is especially true as consumer data rights are fleshed out by legislation like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

While a cloud system is more secure than a traditional POS, that doesn’t mean it’s impervious to fraud. Bots, hackers, and other cyber threats can still breach a cloud system and steal transaction and cardholder data.

A cloud POS system also can’t do anything to defend against friendly fraud. This is a post-transactional issue that affects 65% of the merchants surveyed in our 2022 Chargeback Field Report. However, because it’s a first-party threat, there’s nothing you can do from a cybersecurity standpoint.

The Bottom Line

The benefits of a Cloud POS system outweigh the downsides in almost every way. Most businesses would improve their internal practices by switching, including streamlining payment processing and daily data handling. Ease of use and versatility are crucial in today’s commercial climate.

Remember, though: a cloud system can’t save your business from every incident of fraud or prevent friendly fraud chargebacks. No matter how you take payments, you will still need a comprehensive fraud prevention and chargeback management plan.

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