Identify the purpose of a transaction processing system used in organizations

Transaction processing systems assist users in facilitating data transactions inside a database which monitors transactional programs.

These systems are designed to foster control and balance within an organization’s procedure for acquiring services and goods. It is tasked with the coordination of distribution and product inventory and the management of payment account transactions, and the processing of payroll and sales.

It is ideal for monitoring transactions online since it provides a temporary delay for purchasing or selling a product.

What is a Transaction Processing System (TPS)?

A Transaction Processing System (TPS) is a kind of information system used to gather, store, modify, and retrieve data transactions for an organization. Additionally, transaction processing systems strive for predictable response times to queries, while this is less crucial in transaction processing systems than in real-time systems. Rather than enabling users to run any application concurrently, transaction processing allows only specified, ordered transactions.

The transaction processing system (TPS) further secures the success of each transaction by storing, transferring, and receiving data via a database. Additionally, it integrates with the business’s point of sale system, or POS, which processes credit cards, produces receipts and receives and holds cash. Thus, an online transaction processing system is the e-commerce system’s counterpart for an online store.

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Real-Time vs Batch Processing

TPS comes in two forms, real-time and batch processing. In real-time, every transaction will be automatically processed as it is made. There won’t be any delays, and as a consequence, the system data will always reveal the current status of the transaction.

For example, in online ticketing, the number of available tickets would always be shown and the number of seats taken. Every change is reflected immediately. In some instances, real-time TPS will offer more dependable and efficient data.

Every operation will be saved over time and then processed by batch or at once for batch processing. For instance, an enterprise might decide to process its payroll data bi-weekly. As a result, there will be a postponement between data gathering and transaction processing.

Transaction Processing System Examples

Below, are some examples to help you understand the concept:

Real-Time Transaction Processing System Examples

• Reservation systems – Reservation systems are beneficial in any sector where a product or service is reserved for a specific consumer (e.g. layby, train tickets). In such a case, the goods or service is kept until a fair response time.
• Point-of-sale (or POS) terminals – Used by retail enterprises to sell products and services, POS terminals lower the cost of bulk data processing by transforming data to a format that can be easily transmitted over a communication system. For example, after inputting the product number into a POS terminal, the right product pricing is returned.
• The library’s lending system – Used to maintain track of borrowed things, which may be identified by the user’s card and the barcodes on the products. Similar to reservations systems (which maintain product, availability, usage, and maintenance information).

Batch Transaction Processing System Examples

• Cheque Clearance – A written instruction to a bank directing that funds be transferred to a designated account. They are placed into individuals’ bank accounts. It is necessary to establish if the individual has sufficient financial resources (which takes three days). After a check is cleared, money is withdrawn.
• Credit Card Transactions (Manual) – A credit card impression is imprinted on a credit slip, which is then filled up by a sales clerk. The bank receives and processes all impressions in a single batch.
• An impression of the credit card is made on a credit slip, which a sales clerk subsequently fills up. The bank receives all impressions collectively. Not processed immediately. Customers can view real-time credit card transactions, although the data are updated in batches.

How Transaction Processing Works

TPS is an information system that will store, collect, retrieve and alter data transactions for an organization. It will also try to offer predictable response times for predictable requests, especially for processing in real-time. Instead of allowing users to operate arbitrary time sharing programs, TPS only allows structured and predefined transactions. Most transactions will therefore be of short duration, while the activity for every transaction will be programmed well in advance.

TPS comprises four components: outputs, inputs, storage device, and the processing system. The output refers to the reports or records that the TPS generates. The input is usually source documents obtained from the transactions that function as inputs for accounting systems. An example of this would be patron order slips or invoices.

The processing is the component responsible for breaking down the data contained within the inputs, transforming it into formats that computers can decipher.

• Input – A request for a product or a payment payable to an organization’s transaction processing system by a third party constitutes an input. Consequently, if your company uses batch processing, your Transaction Processing System will store and handle batches of inputs. If your company uses a real-time Transaction Processing System, each input is managed in real-time. Typical inputs include Bills, Coupons, Invoices, and Custom Orders
• Output – Once the system has processed all the inputs, the system will generate the output documents. This may consist of receipts for record-keeping to verify a transaction or sale. In addition, they can be an important source of data for government-related reasons, such as tax. If a supplier submits an invoice to you, you can send the seller a payment confirmation once you have paid the invoice. The original invoice can then be marked as “paid” in the company’s TPS.
• Storage – The storage aspect of TPS pertains to the placement of an organization’s input and output digital data or documents. However, some businesses keep these documents in an electronic database. Consequently, the storage component ensures that every document is organized, secure, and retrievable. In the event a supplier needs to confirm whether a particular invoice has been paid, the TPS can be searched for the invoice and verify whether or not payment was made.
• Processing – Responsible for reading each input and producing a meaningful output. This process may also be utilized to specify input and output data. Consequently, processing times differ according to the type of Transaction Processing System your company employs.

As TPS gathers data regarding transactions, it will also initiate processing, transforming it. The best examples of this include employee records, hotel reservations and order processing.

Examples of batch transactions include check clearances and the generation of bills. Transaction processes that occur in real-time will include microfinance loans and POS (point of sale) terminals.

TPS Features

Transaction processing retains the info necessary for collecting, altering, or retrieving transactional data. Therefore, it has to be consistent and reliable to facilitate every transaction without problems. TPS can channel substantial levels of data. This makes it indispensable in managing online transactions. The system can handle large purchases by coordinating personal and banking details and shipping and processing orders from the right buyers.

TPS is also well suited to dealing with both security and hardware issues. It utilizes hardware and software to handle large amounts of user and business data. However, security breaches can still occur since there will always be hostile parties who want to steal private information.

Therefore, a dependable TPS offers the latest security countermeasures to block data breaches or intrusions while safeguarding consumer information. Furthermore, if the network or terminal fails, it will be able to prevent user loss through the recovery of the latest OS (operating system) state.

Those who use transaction processing systems will have a greater capacity to offer improved market access. They can tap into multiple markets simultaneously and provide services or products to a larger audience, mainly if they utilize correct market penetration. Because TPS can work from anywhere, companies are no longer limited by language or geography.

Benefits of Using a Transaction Processing System

Some of the benefits of using a TPS are:

• Increased Transaction Speed – Businesses may expedite transactions and reduce client wait times using a TPS. The TPS employed determines the rate at which a business processes transactions. While some systems handle transactions promptly, others collect data over time and process it later, typically after business hours.
• Increased Cost-Effectiveness – A TPS may help a business save money by enhancing the cost-effectiveness of transactions and database data retention. A Transaction Processing System may arrange and manage tens of thousands of transactions daily. This can save money for the organization by eliminating system upgrades or the use of several systems to satisfy demand.
• Improved Reliability –  Using a TPS provides for the exact and real-time confirmation of customer transactions. A trustworthy TPS can save your business money on future system issues and coding costs.
• Automated Management – TPS enables the bulk of an organization’s revenue management and internal resource to be automated. With the increase in automation, the TPS can reduce the time spent assessing transactions by people. Automation is essential for enhancing a business’s profitability since it allows employees to focus on more engaging tasks that demand critical thought.

Transaction Processing Limitations

TPS does have its limits. The records it provides are quite basic, which can become problematic for workers or managers who need to review a job carefully. Although transactional processing is very intensive when entering or retrieving data, its calculations are not always accurate, and some of its processing may seem rudimentary. The effectiveness of TPS will depend mainly on the environment in which it is used.

Problems can also occur with the hardware or software since TPS is a combination of the two. For this reason, virus attacks that succeed can be so debilitating since it targets the personal info contained within the database. Any hardware malfunction might result in severe electrical damage, rendering the system useless.

TPS Databases

The database is a data collection which is organized. It provides rapid retrieval times, especially for requests which are non-structured and might be formed using either relational, network or hierarchical structures. With a relational structure, the database will organize the data within a collection of related tables. This provides greater flexibility.

The network will organize the data utilizing branches and nodes in a network structure. However, every child node might be linked to numerous elevated parent nodes.

Finally, hierarchical structures will organize that data into a collection of levels. It has a top to bottom form full of branches and nodes, and every child node will have branches that will link to a single elevated parent node.

Regardless of which database structure you use, they should all have optimal data placements. This is so that the database can access data patterns from multiple users simultaneously and shortened transactions, which allow for quick processing and high normalization while reducing redundant info to boost speed.

The historical data should always be archived, and the hardware should be well configured, which will allow it to manage lots of users while providing rapid response times.