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Unit 2 - Transaction Processing Systems

Transaction processing

Transaction processing system (TPS) is an information processing system for business

transactions involving the collection, modification and retrieval of all transaction data.

A transaction is essentially a single event that changes something. There are many different
types of transactions. For example, customer orders, receipts, invoices, payments, etc. The
actual processing of transactions includes the collection, editing, manipulation and storage of
data. The result of processing a transaction is that the records of an organization are updated to
reflect the new conditions at the time of the last processed transaction.

There are many different types of transaction processing systems, such as payroll, inventory
control, order entry, accounts payable, accounts receivable and others. Transaction processing
produces valuable input into many other systems in an organization, such as management
information systems and decision support systems. A TPS serves as the foundation for these
other systems. A TPS tracks routine operations but does not provide much support for decision
making.
For example, in the case of a bank account, a TPS keeps track of all the events associated with
a single account: deposits, withdrawals, transfers, fees, interest paid, etc. This provides a good
description of the account activity.

Transactions Processing Qualifiers

In order to qualify as a TPS, transactions made by the system must pass the ACID test. The
ACID tests refers to the following four prerequisites:

Atomicity
Atomicity means that a transaction is either completed in full or not at all. For example, if
funds are transferred from one account to another, this only counts as a bone fide
transaction if both the withdrawal and deposit take place. If one account is debited and the
other is not credited, it does not qualify as a transaction. TPS systems ensure that
transactions take place in their entirety.

Consistency
TPS systems exist within a set of operating rules (or integrity constraints). If an integrity
constraint states that all transactions in a database must have a positive value, any
transaction with a negative value would be refused.

Isolation
Transactions must appear to take place in isolation. For example, when a fund transfer is
made between two accounts the debiting of one and the crediting of another must appear to
take place simultaneously. The funds cannot be credited to an account before they are
debited from another.

Durability
Once transactions are completed they cannot be undone. To ensure that this is the case
even if the TPS suffers failure, a log will be created to document all completed transactions.

These four conditions ensure that TPS systems carry out their transactions in a methodical,
standardised and reliable manner.
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Types of Transaction processing systems

1. Batch transaction processing

Batch processing is a technique of processing data that occur in one large group instead of
individually. Batch processing is usually done to help conserve system resources and allow
for any modifications before being processed.

In a batch processing system, transactions are accumulated over a period of time and
processed as a single unit, or batch.

For example, a store may update its sales records every day after the store closes. Or, a
payroll system may process all the time cards every two weeks to determine employee
earnings and produce paychecks. For example, a banks will batch process all their
transactions once every hour instead of processing each transaction immediately.

Examples of batch transaction processing

Cheque clearance
 Written order asking a bank to transfer an amount of money to an account
 People deposit them into their account
 Involves checking the person has the correct funds(takes up to 3 days)
 money is withdrawn when cheque has been cleared

Bill generation
 Invoice given to a customer for a supplied goods or service
 Generated at a scheduled time so the user can effectively manage their time
 Done as a group

Credit card sales transactions (Manual)

 Impression of customer's card is taken on a credit slip, to be filled by a sales clerk
 Impression is sent to the bank as a group
 Not processed immediately
 Customers may view credit card transactions as real time, but the updating is batch

2. Real-time transaction processing systems

In a real-time processing system, transactions are processed immediately as they occur

without any delay to accumulate transactions. The records in the system always reflect current
status.

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Examples of real time transaction processing

Reservation systems
 Used in any type of business involved in setting aside a product or server for a
customer(E.g train tickets)
 Require an acceptable response time

Point of sale terminals

 Used by retail stores to sell goods and services
 Minimises the cost of batch handling by converting the data to a form that can be easily
transmitted through a communication system
 Correct price of the product is received one the product number is entered

Library management system

 Used to keep track of borrowed items
 Barcodes are scanned on user's card and the item
 This is recorded on the database
 Similar to reservation systems(involves keeping information on products, availabilities,
usage and maintenance
 Items are often stored in a warehouse

Features of Transaction Processing Systems

The success of commercial enterprises depends on the reliable processing of transactions to

ensure that customer orders are met on time, and that partners and suppliers are paid and can
make payment. The field of transaction processing, therefore, has become a vital part of
effective business management.

Transaction processing systems offer enterprises the means to rapidly process transactions to
ensure the smooth flow of data and the progression of processes throughout the enterprise.
Typically, a TPS will exhibit the following characteristics:

Rapid Processing
The rapid processing of transactions is vital to the success of any enterprise – now more
than ever, in the face of advancing technology and customer demand for immediate
action. TPS systems are designed to process transactions virtually instantly to ensure that
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customer data is available to the processes that require it.

Reliability
Customers will not tolerate mistakes. TPS systems must be designed to ensure that not
only do transactions never slip past the net, but that the systems themselves remain
operational permanently. TPS systems are therefore designed to incorporate
comprehensive safeguards and disaster recovery systems. These measures keep the
failure rate well within tolerance levels.

Standardisation
Transactions must be processed in the same way each time to maximise efficiency. To
ensure this, TPS interfaces are designed to acquire identical data for each transaction,
regardless of the customer.

Controlled Access
Since TPS systems can be such a powerful business tool, access must be restricted to
only those employees who require their use. Restricted access to the system ensures that
employees who lack the skills and ability to control it cannot influence the transaction
process.

Continuous availability
The system must be available during the time period when the users are entering
transactions. Many organizations rely heavily on their TPS; a breakdown will disrupt
operations or even stop the business.

Data integrity
The system must be able to handle hardware or software problems without corrupting
data. Multiple users must be protected from attempting to change the same piece of data
at the same time, for example two operators cannot sell the same seat on an airplane.

Ease of use
Often users of transaction processing systems are casual users. The system should be
simple for them to understand, protect them from data-entry errors as much as possible,
and allow them to easily correct their errors.

Scalability
The system should be capable of growth at incremental costs, rather than requiring a
complete replacement. It should be possible to add, replace, or update hardware and
software components without shutting down the system.

Uses of transaction processing systems:

 Order processing

An order processing system captures order data from customer service employees or
from customers directly, stores the data in a central database and sends order information
to the accounting and shipping departments, if applicable. Order processing systems
provide tracking data on orders and inventory for every step of the way.

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 Payment processing
A payment system is a set of processes and technologies that transfer monetary value
from one entity to another. The essence of a payment system is that it uses cash-
substitutes, such as checks or electronic messages, to create the debits and credits that
transfer value.

 Delivery tracking
A delivery tracking system is used for observing of objects on the move and supplying
a timely ordered sequence of location data for further processing.

 Person tracking
Person tracking relies on unique identifiers that are temporally (RFID tags) or permanently
assigned to persons like personal identifiers (including biometric identifiers), or national
identification numbers and a way to sample their positions, either on short temporal
scales as through GPS or for public administration to keep track of a
state's citizens or temporary residents. The purposes for doing so are manifold and span
the spectrum from welfare and public security to mass surveillance.

 Automatic number-plate recognition

Automatic number-plate recognition (ANPR; see also other names below) is a technology
that uses optical character recognition on images to read vehicle registration plates to
create vehicle location data. It can use existing closed-circuit television, road-rule
enforcement cameras, or cameras specifically designed for the task. ANPR is used by
police forces around the world for law enforcement purposes, including to check if
a vehicle is registered or licensed

 Automated border control

Automated border control systems (ABC) or eGates are automated self-service barriers
which use the data stored in the chip in biometric passports to verify the user's identity.
Travelers undergo biometric verification using face, fingerprint, iris recognition or a
combination of modalities. After the identification process is complete, a physical barrier
such as a gate or turnstile opens to permit passage.

 Payroll processing
Payroll processing refers to the task of managing the payment of wages by a company to
its employees. The steps involved in payroll processing typically include gathering
employee time information for a selected time period, managing benefits & deductions,
and distributing employee pay for that time period.

 Record keeping (eg : Student record keeping / personal recording keeping systems)
Student records management systems are used to store, administer and manage all
aspects of student information such as contact details, examination marks, attendance
and subject selections.

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Reasons for use transaction processing systems

More efficient daily operations

Main role of Transaction processing system in business is to improve the efficiency of

operations so that the company can complete tasks quicker and cheaper. This often
happens with the help of enterprise software and a centralised company database.

Rather than having to get workers to count and monitor inventory, companies can use
inventory management software that checks real-time levels, provides helpful reports to
managers and can even trigger orders when the supply is low. Customer relationship
management software has automated common sales and marketing tasks such as
generating leads, sending promotions and tracking metrics. Companies can also take
advantage of fully featured enterprise resource planning software to make it easier to do
accounting tasks, manage human resources, monitor the supply chain, generate invoices
and make supply purchases.

Access to untapped markets

A transaction processing system makes it easier for consumers around the world to utilize
a business's services through a simple online system. Transaction processing systems
allow people from across the world to access a business and buy that business's goods
and services. In a globalized market, the potential for growth is enhanced when the
processing system is implemented properly.

Better customer experience

Transaction processing systems also make it easier to provide a good customer

experience through improved customer service, easier customized marketing and e-
commerce. Rather than only being able to reach the company during business hours,
customers can conveniently interact with the company on its website and through social
media, email and custom instant messaging services. Through tracking customers'
previous purchases with marketing software, companies can send customised promotions
that better meet customers' needs and result in more likely sales. Customers also benefit
from being able to purchase products and services from the company's website, and this
also increases the potential for more revenue and growth for the company.

Automated data capture

Automated data capture involves the use of computerised technology to capture data in
transaction processing systems. This method has a high initial cost on account of the
initial investment required as for instance, the purchase of technology but as the system
proceeds, is found to lower the operating costs significantly on account of low manpower
requirement. Further, with the majority of data today existing in electronic forms, the cost
of using such automated technology has also reduced. Hence, there has been
proliferation of techniques and technology of automated methods of data capturing, each
suitable for a particular type data or source of data. Automated data capture includes the
use of different technologies such as OCR, ICR, OMR, MICR and card readers.

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