What does batch processing mean in POS systems?

Point of Sale (POS) Glossary

A customer’s credit or debit card is processed at the time of purchase, and the merchant receives an authorization code from the payment gateway. The point of sale software, terminal or gateway stores these codes in a file. Later this information is sent to the credit card processing company in one file. When the file is sent, it is called batch processing. Many vendors do this once a day, but they may choose to do it more or less frequently.

POS systems usually use batch processing. It is easier to send all the transactions and authorization codes to the processing company as one file versus after each transaction. Processors charge a fee each time a batch is closed, so this method is also more cost-efficient.

When the financial institution gets this data, they release the money to the payment processor, who then sends the funds to the merchant’s bank. Batch processing is convenient, inexpensive, and more secure than processing each transaction as it occurs.