EVALUATION OF POINT-OF-SALE SERVICES:

PROBLEMS AND PROSPECTS FOR RETAILING

William A. "Stapl.es, Univers-ity' of Houston at Clear Lake City

Robert A. Swerdlow, Lamar University

Abstract TABLE 1
Retailer Evaluation Fram-ework
A recent development called electronic funds transfer for Point-of-Sale Banking
(EFT) may move the-· banking community a step closer to
a checkless society. EFT refers to a technological Range of Services Available
and organizational network that enables transactions check· authorization/guarantee
to be initiate& and executed with electronic impulses check cashing
and machine comprehensible data. ·With these charact- direct debit transactions
eristics, EFT is seen as an alternative to the current cash withdrawal· from checking or saving accounts
paper based methods of cash and check payments. The- overdraft privileges
purpose of this paper is to analyze the possible adop- account balance verification
tion of point-of-sale (POS) terminals by retailers. Implementation Cost Considerations
hardware costs
software costs
Retailer Evaluation of degree of cost sharing
Point-of-Sale Services personnel required
break~even point in transactions
Any proposed evaluation system should include a con- break-even point in time required
sideration of available services and their accompany- consumer education costs
ing costs and benefits. Table I presents a retail promotional costs
evaluation framework for point-of-sale banking. An Potential Benefits
initial area for review is the range of POS services reductions of bad debts expense
available. Key factors to consider are the capabil- access to larger consumer base
:tties of each proposed POS system. While a number of increased in-store customer traffic
options are usually available, the retailer should · security of the system
carefully consider the complete.ness of the services reliability of the system
offered. Specifically, services for the retailer to improved management reporting capability
consider include check authorization and guarantee faster checkout of customers
plus direct debit transactions. These two services Other Considerations
are the most common in POS banking. Other service legal environment in state of operation
opt:!,ons include check cashing, cash wi.thdrawal, over- degree of competitor adoption of POS
draft privileges, and account balance verification. availability of POS services from financial firms
proposed hours of operation of the system
Besides the range of available services, retailers ease-of customer use
must pay particular attention to the. costs result-ing projected rates of consumer usage
from implementation of any POS system. The principal
costs are with the computer-related hardware, software
requirements, and costs of shared services. In this Conclusion
regard, the retailer needs to analyze alternative sys-
tems and their possible hookup to existing retail store A retailer is continuously confronted with a changing
equ:!,pment. Due to the high implementation costs, every business environment. Retail institut1ons must be
retailer should determine the degree of cost sharing ever aware of service innovations that will enable
proposed by each financial institution. The afterna:.. them to further satisfy the consumer. The challenge
tives range from total financial institution backing of maintaining or increasing ~~rket ·share is never
to little or none. Other cost factors to consider cen- ending. Similar to the introduction of other products
ter on the increased number of personnel required and and services in retail outlets, the eventual success
the further training for existing personnel. or failure of point-of-sale banking will depend on the
extent of consumer acceptance.
Retailers will also want to estimate the potential ben-
efits of POS services. The most publicized benefit has
been the reductions in bad debts expenses. Along with
this significant factor, retailers also want to deter-
mine if access to a greater number of consumers will
be provided. This is crucial since a single financial
institution may severely limit consumer access as com-
pared to a cooperative arrangement between a number of
financial institutions. Store operation benefits that
may accrue to the retailer include increased in-store
customer traffic, security and reliability of the funds
transfer system, and an improved management information
reporting capability. This last benefit with respect
to management information is of paramount imp0rtance
due to the increasing size of retail operations. Ad-
vanced POS terminals can aid the retailer in monitor-
ing inventory, automating the sales audit, and speed-
ing up the checkout process.