Transaction Processing Systems

Recently updated on April 13th, 2023 at 05:45 pm

A transaction process system (TPS) is an information processing system for business transactions involving the collection, modification and retrieval of all transaction data. Characteristics of a TPS include performance, reliability and consistency. TPS is also known as transaction processing or real-time processing.

A transaction process system and transaction processing are often contrasted with a batch process system and batch processing, where many requests are all executed at one time. The former requires the interaction of a user, whereas batch processing does not require user involvement. In batch processing the results of each transaction are not immediately available. Additionally, there is a delay while the many requests are being organized, stored and eventually executed. In transaction processing there is no delay and the results of each transaction are immediately available. During the delay time for batch processing, errors can occur. Although errors can occur in transaction processing, they are infrequent and tolerated, but do not warrant shutting down the entire system.

To achieve performance, reliability and consistency, data must be readily accessible in a data warehouse, backup procedures must be in place and the recovery process must be in place to deal with system failure, human failure, computer viruses, software applications or natural disasters.

Features of Transaction Processing System

There are several features involved in a good transaction processing system. A few of these critical features are described below.

  1. Performance

The concept behind the use of TPS is to efficiently generate timely results for transactions. Effectiveness is based on the number of transactions they can process at a particular time.

  1. Continuous availability

The transaction processing system should be a very stable and reliable system that must not crash easily. Disruption of TPS in an organization can lead to work disturbance and financial loss.

  1. Data integrity

The TPS must maintain the same method for all transactions processed, the system must be designed to effectively protect data and overcome any hardware/ software issues.

  1. Ease of use

The TPS should be user-friendly in order to encourage the use and also decrease errors from inputting data. It should be structured in such a way that it makes it easy to understand as well as guarding users against making errors during data-entry.

  1. Modular growth

The TPS hardware and software components should be able to be upgraded individually without requiring a complete overhaul.

  1. Controlled processing

Only authorized personnel, staff members, or employees should be able to access the system at a time.

Types of Transaction Processing Systems

  1. Batch processing

Batch processing is when clusters of transactions are refined simultaneously using a computer system.

This method, although designed to be efficient for breaking down bulky series of programs, has a drawback as there is a delay in the transaction result.

  1. Real-time Processing

Real-time processing carries out its transactions exclusively; this method ensures a swift reply on the condition of the transaction result. It is an ideal technique for dealing with singular transactions.

How does a Transaction Processing System Work?

  1. Processing in a batch

Processing batch transactions requires data collection and batch grouping. Data collected are stored in the form of batches and may be processed anytime.  This long-established technique was used widely in the absence of infotech.

  1. Processing in real-time

Recent technology innovations gave rise to real-time processing. RTP ensures instant data processing with the aim of providing a quick verification of the transaction. It is highly versatile as it can work effectively as a multi-user interface and can also be accessed anywhere there is an online network.

Components of Transaction Processing System

  • Inputs: These are source documents gotten from transactions which serve as inputs into the computer’s accounting system examples are invoices, and customer orders.
  • Processing: This requires the breaking down of information provided by the inputs.
  • Storage: This is saved information in TPS memory, it may be in the form of ledgers.
  • Output: Any generated record may serve as the output

Examples of Transaction Processing System

  • TPS accumulates data about transactions and also initiates processing that transforms stored data. Examples include order processing, employee records, and hotel reservation systems.
  • Batch transaction process examples include bill generation and check clearances.
  • Examples of real-time transaction processes are the point of sale terminals (P.O.S) and microfinance loan systems.

Limitations of Transaction Processing Systems

  • Managing operations with the TPS can be complicated if the company is not big enough to efficiently use the transaction processing system.
  • TPS needs both hardware and software components to efficiently manage high data volume. This capacity makes TPSs susceptible to software security breaches in the form of the virus and faulty hardware issues such as power outage can disrupt the whole system.
  • Effective integration of a TPS in a company operation requires skilled personnel, it also requires a link with associate company branches to maintain a secure flow of information. This high requirement can create instability and flux in the company’s daily operations.

Functions of Transaction Processing System

Transaction Processing Systems can execute input, output, storage, and processing functions.

(i) Input functions

This includes the securing of data on the source document, entering of input data in the system and also validate data.

(ii) Output functions

This includes the production of the report of the transaction via monitor or paper, examples are exception reports, detail reports, and summary reports.

(iii) Storage functions

This is the process by which data is stored. It entails the storage of information, accessing, sorting, and updating stored data.

(iv) Processing functions

This entails the transformation of data, it includes calculation, computation, and apt result.

Types of Recovery

  • Backup Recovery: this can be used to reverse required changes to a record.
  • Forward Recovery: this can be used to save transactions made between the last backup and the up to date works by backing up a copy of the database and it is more proficient because it does not need to save each transaction.

A Transaction Processing System (TPS) is an infotech used to accumulate, store, modify and retrieve data transactions. Transaction processing systems present a unique response to user requirements, although planning to choose the most appropriate method relies heavily on the quantity of data and the type of business.

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