The Complete Guide To Understanding A POS System’s Offline Mode & Credit Card Processing

Take it from someone who used to work as a cashier at a gas station: There are few things as terrifying as a storewide internet outage that kills your ability to accept credit card payments. The ever-growing line of customers, the huff as some dissatisfied patrons realize that they can’t use their cards to make a payment and storm out of the building, the awkwardness of having to apologize over and over for something you have zero control over. (Here’s a gentle reminder to please be kind to retail workers, folks.)

Not every business that accepts credit cards will screech to a halt if the internet goes down. But any business where the vast majority of customers prefer to use their cards knows this fear very well. Fortunately, these days, most small businesses with any semblance of a modern POS system have a workaround: a POS offline mode, which allows your business to keep operating — and in some cases, even keep accepting credit card payments — without an internet connection.

As an internet-dependent millennial, I am fascinated by the idea of a fallback for the dreaded internet outage. As a former gas station employee, I am also exceedingly jealous. At the time I was working there, our options were to switch to cash-only payments and pray the network would come back up soon or haul out the old knuckle-buster, a manual credit card machine. And it was a hulking beast of a machine that earned its nickname with every terrifying slide. Both situations led to a lot of unhappy customers and frantic cashiers — not to mention a grouchy manager who then had to do the follow-up work on each of those manual credit transactions.

Enough nostalgic melodrama, though. If you’re here, you’re probably pretty concerned about what happens when the internet goes out at your business and want to know what your options are. So let me explain offline POS mode, how it works, what the limitations are, and what you need to ask a prospective POS provider before you commit to a contract.

Understanding The Difference Between Cloud-Based & Locally-Installed POS Systems

You can try to categorize POS systems in many different ways — whether they’re meant for retailers or restaurants, what operating system they run on, and whether they cater to small businesses, franchises, or mega-box stores, for starters. But for our purposes here, it’s important to understand how POS systems can store and access data, such as transactions, inventory, or customer databases.

Most POS systems can be classified as a cloud-based POS system, meaning all the data is stored online in a cloud storage platform and requires an internet connection to access, or as a locally-installed system, where all of the data is stored in an on-site server that does not require an internet connection. More recently, some POS software companies have developed hybrid systems that combine the best of both worlds, albeit with some limitations. Let’s take a quick look at how each of them works and then see what that means for a prospective “offline mode.”

Cloud-Based POS Systems

A cloud-based POS system stores all of its data online, meaning any device with the POS software installed also requires an internet connection to be able to access that data. While that does mean a fancy computer is about as effective as a brick during an internet outage (if it doesn’t have an offline mode, that is), a cloud POS system also makes it possible to log in and run the software from anywhere with an internet connection. A cloud POS system also means that users will get frequent upgrades and updates to the software as improvements are available.

The advantages to a cloud POS system are fairly numerous — it’s safe to say cloud POS systems aren’t going away any time soon. Here are the highlights any business owner should be aware of:

• All Devices Access The Same Information As Long As They Are All Synced To The Cloud: Added a bunch of new inventory? With a cloud POS, the software will automatically update your inventory lists on every device as long as it’s connected to the web.
• Access Reports & Data From Anywhere: Business owners can check sales reports from home (or anywhere else) just by logging in, with no need to wait for a manager to run a report and email it over.
• Sell Anywhere, Any Time: Trying to raise awareness of your business at a trendy pop-up event? Are you hitting the road for a convention or trade show? With a cloud POS, you can take the same POS software you use in the store on the road and have access to the same inventories, pricing information, and customer data.
• Low Upfront Costs: Typically, cloud POS systems work on a Software as a Subscription (SaaS) model. That means the business owner will pay a monthly subscription fee instead of a one-time licensing fee. Many (but not all) systems are designed to run in web browsers and on tablets rather than expensive proprietary hardware, further lowering the costs.

Locally-Installed POS Systems

Locally-installed POS systems are sometimes called legacy systems because they predate the cloud. A locally-installed system can run without an internet connection because all of the data and information it needs is stored on the computer (or for larger systems, a server on-site).

• Requires Local Server & Networking Equipment: All information is stored on a local network and server, allowing data to be shared across multiple devices and allowing hardline connections to peripherals, such as printers. However, that does mean you may require some technical expertise to maintain the system, particularly with large networks.
• Restricted Access: Because all devices run on a local network, it restricts access to information. That’s not to say that cloud systems aren’t secure (they absolutely are) — but for some businesses, there may be an appeal to limiting access to information to those who are only on-premises.
• One-Time Cost: For the most part, a locally-installed system comes with a one-time license fee, potentially with a small monthly add-on for technical support and the costs associated with maintaining your internal network. However, these license fees can add up to several thousand dollars, depending on how many devices you need.
• No Free Software Updates Or Improvements: Whereas SaaS companies roll out software updates for free and often on a continuous basis, locally-installed POS systems don’t usually come with free software updates unless it’s a pretty serious flaw. You can expect to pay an upgrade fee.

What Does “Offline Mode” Really Mean?

The tricky thing about a POS system with an offline mode is that the term itself has pretty varied usage. Not all “offline modes” are created equal, so you need to be aware of what the system is capable of handling when the internet goes down. Of course, that also depends on what setup you have configured — receipt printers, printer driven cash drawers, kitchen printers, etc. If you have a full-service restaurant with a patio, your needs for offline mode are going to be vastly different than a pop-up shop running a lightweight mobile POS system.

There are two ways an offline mode can function:

• A cloud-based POS system that can function without any internet connection. Any peripherals (such as a printer) use a Bluetooth connection to the computer or tablet. This is how Square POS and Shopify POS work with their respective offline modes.
• A hybrid POS system combines the best of cloud-based and locally-installed POS systems. The system is primarily cloud-based, but a local server runs in the background so that in the event of an internet outage, the POS continues to function and stores data on the local server until access is restored. This also allows printers and other handheld devices on the network to maintain some level of operation. Toast POS is a great example of a hybrid system with an offline mode.

Common Features Of Offline POS Systems

At a bare minimum, an offline POS mode should allow you to remain logged in and still keep processing cash payments. Other standard features for offline mode include:

• Receipt printing
• Automatic cash drawer opening (if connected to a receipt printer)
• Automatic data syncing when internet activity resumes

Other features for offline functionality that are less common but still available include:

• Peripheral hardware functionality (barcode scanners, barcode printers, scales, kitchen printers, etc.)
• Credit card processing
• Add a credit card or cash tip to bills

There are a couple of important issues to note with POS offline modes. First, if there’s an internet outage, logging out of the POS system or, worse, deleting and attempting to reinstall the app would prevent you from being able to use the POS app. Deleting the app would also delete any information that has been stored in the system, meaning potentially lost transactions.

Second, offline mode access may depend on the device you use. At the time of writing this, Shopify POS doesn’t support offline mode for Android devices, only iOS devices (iPhones and iPads). If your POS system doesn’t require proprietary hardware, you should double-check which devices will function with offline mode and which ones won’t.

Also, you’ll probably see limited to non-existent support for various features, such as the creation of new items, clocking in or out of shifts, receiving online orders, support for alternative payment methods such as gift cards, or access to stored customer data profiles or loyalty points. Any kitchen display system will likely become non-operational, and the system will default to a backup kitchen printer if it’s available.

How Does Offline Credit Card Processing Work?

Support for credit card processing in a POS offline mode depends on several factors. It’s not a guaranteed feature of every POS system with an offline mode, but for those who do have it, offline credit card processing can be a huge benefit.

A major consideration for small businesses that are setting up their POS system and credit card processing is whether to use an integrated setup or keep the two as standalone services. While there are still a fair number of businesses that use standalone credit card processing and another POS system, integrated payments and POS software allow for better data collection and less work managing transaction information overall.

If your POS and payment processing are not integrated, but your POS system supports offline mode, you will need to make sure that your credit card processing setup also functions offline. Otherwise, you will be restricted to cash and any other POS-supported payment types.

If you do have an integrated setup for your credit card processing and POS, you’ll need to make sure that the offline mode features include support for card payments. Additionally, you’ll need to verify which types of card payments (and which card readers or credit card machines) are supported. Square, for example, which has one of the most advanced offline payment features, only supports magstripe credit card payments. Square POS’ offline mode doesn’t support chip payments with its contactless + chip reader or manually entered credit card numbers.

Is It Safe To Run An Offline Payment?

Being able to accept credit card payments without an internet connection is a must-have for some businesses and highly sought after by many others. But running an offline credit card payment does come with some risks and drawbacks.

First, there’s no way to verify whether an offline payment will go through when the system comes back online. When a credit card is swiped, dipped, or even tapped at a credit card terminal with an internet connection, the payment information is routed in real-time directly to the customer’s bank, which gives a quick approval (or decline, if funds aren’t available). It releases the funds later, which are eventually deposited in the merchant’s bank account a couple of days later.

With an offline transaction, that initial approval request isn’t sent until the internet connection is restored. That means a merchant could run an offline transaction, allow the customer to leave, and find out later the transaction has been declined for any number of reasons. While declined transactions typically do not cost anything to process, it does mean the merchant is out the cost of those goods or services unless they have a means of contacting the customer to let them know the payment failed. POS systems and credit card processing companies that support offline payments make no guarantees or offer any sort of insurance or protection against this loss, so if you intend to run offline payments, be aware that you are accepting the risk.

You can mitigate this risk by capping the allowable amount per offline transaction — Square POS, for example, has a feature where you can specify the maximum allowable amount, so a cashier doesn’t unknowingly (or even deliberately) exceed that threshold.

The second concern is whether it’s even safe to store credit card information in an offline transaction. The good news is that as long as you are following PCI compliance guidelines, processing an offline credit card payment does not in any way compromise your customers’ card information. The credit card reader or terminal reads the card data and encrypts it immediately. That information can only be decrypted when it is sent on to the credit card processing company. So even though the information from an offline transaction is stored in the POS system during an outage, no POS user (not even the admin) can view the cardholder data, such as the full credit card number.

How To Shop For A POS System With Offline Mode

Choosing a POS system, in general, is no simple task. That’s especially true as POS software becomes more powerful and starts to act more like a centralized business hub. There are many aspects to consider, from sales reporting to employee management to back-of-house features for restaurants. If you are certain you need offline capabilities, here’s what you need to know about quickly finding a system that works for you.

First, take a look at your current internet setup. What kind of service do you have, and is it reliable? If not, you might want to look first at switching to a better internet service provider, which could eliminate a lot of concerns. If you don’t have internet service yet, do some planning. Do you only need wired connections (more common for brick-and-mortar shops with stationary registers), or do you need a wireless network (for line-busting mobile checkouts or restaurant tablet POS systems)? Are there any known dead spots on-premises, any areas where a wireless signal can’t quite reach, or areas where setting up a wired station is a logistical challenge? You can test the signal with smartphones before a POS is even set up to find out if there are any problem areas. Wi-Fi range extenders and access points can be installed to ensure the entirety of your location has internet access.

After you’ve dealt with the logistics of setting up or fine-tuning your internet service, you can start looking into POS systems. The biggest question you should ask is whether the system’s offline mode supports credit card processing. If not, be prepared to switch to cash-only during an outage. In addition, restaurants, in particular, should look into what peripherals will function with the offline mode. For example, if you rely on a kitchen display system, should you install backup kitchen printers? This is also how you can ascertain which POS hardware you need — would a Bluetooth receipt printer be better than an Ethernet printer?

As you’re digging into all of this information and starting to figure out how you want to set up your POS system, the sales or support rep you talk to should be able to answer your questions about what hardware is compatible and how a setup will work and what will function in offline mode. If they’re unable to answer your questions, or they give a vague “yes, it’ll all work!” response, it’s time to start considering some other options. No small business wants to find out they’ve invested in a major piece of software that doesn’t do what they expected (or need) it to do.

Does Your Business Really Need A POS With Offline Mode?

In a perfect world, internet service would never fail. Unfortunately, this is not a perfect world, which means as a business owner, you should have a contingency plan or two when things go haywire.

For some businesses, an internet outage with no POS to ring up sales and no credit card processing won’t be a huge disruption because they have limited inventory or product offerings and deal primarily in cash. But for everyone else, a POS system that can function without internet — especially one that can still take credit card payments — will help minimize lost business and reduce the number of unhappy customers.

Ultimately, as the manager or business owner, you know what’s best. You know what your customers expect, what your most common forms of payment are, and all of the other factors that play into the decision. Any POS system is an investment. Ensuring that your system can function without the internet might be a bigger investment if your system is a hybrid setup with a local server. But it’s still well worth the cost to ensure there’s little to no downtime for your business. This is especially true when you consider that most software and hardware purchases required to run a business are also eligible as tax deductions, which can help offset the costs.

An offline mode shouldn’t be your only concern with a POS system, but it’s definitely an important one. If you’re still not sure how POS software can simplify a lot of your business operations, check out some of these articles:

• Modernize Your Business With A Good Restaurant Ordering System
• Why You Should Consider A Self-Ordering Kiosk For Your Restaurant (Plus The 5 Best Kiosk POS Systems & How You Can Afford Them)
• Employee Management With A POS System: The Secret To Simplified Timekeeping, Scheduling, & Reporting

Thanks for reading! If you have questions about offline credit card processing and POS offline modes, leave them below!