Transaction processing systems (TPS) are the backbone of businesses, large and small. In today’s highly competitive and rapidly changing business environment, TPS have become a necessity for successful operations. TPS is a technology that allows enterprises to capture, process, store, and retrieve data related to transactions quickly and accurately. Transaction processing systems are essential for businesses to communicate with customers, suppliers, and other parties. They are used to record and track transactions, maintain financial records, process customer orders, and manage inventory. TPS also helps businesses to maintain an accurate and up-to-date record of all transactions, which is essential for monitoring performance and making decisions. By enabling businesses to quickly and accurately process transactions, TPS helps organizations achieve higher levels of efficiency and productivity. In this blog post, we will explore what a transaction processing system is, the different types of TPS available, and how they work.
Types of transaction processing systems
There are two types of transaction processing systems:
Batch processing
A TPS interprets sets, or batches, of data through batch processing by putting things in groups based on similarities. Because batch processing examines multiple sets of data at once and requires more computing power, it can cause a delay.
The TPS system processes the transactions as a batch because they happen at the same time, such as when a customer pays for a subscription service at the end of the month. Because the system only interprets batches once a month, a delay in processing transactions in this instance is acceptable.
Real-time processing
Processing transactions in real-time means doing so as they happen. As a result, processing isn’t delayed and the outcome might be more accurate.
Example: To ensure payment before the business begins its fulfillment process, an e-commerce website might use a TPS to process credit card transactions in real time. Real-time transaction processing speeds up the company’s overall response times and aids in the quick identification and correction of errors.
What is a transaction processing system?
Software that guarantees the completion of a business transaction and keeps track of transactions is known as a transaction processing system. Online retailers use an equivalent system called an OTPS, or online transaction processing system, for e-commerce.
For instance, if a customer visits a store and buys a book, they may use a credit card to make the payment. The customer’s card information is entered into a transaction processing system, which then contacts their bank to determine whether or not to approve the transaction based on the customer’s account balance.
Transaction processing system components
Each TPS has four major components that help it function:
1. Inputs
An original purchase order or payment request sent to a company’s TPS by a third party is referred to as an input. If your business employs batch processing, its TPS will store batches of inputs for later processing. In contrast, a real-time system used by your business would process each input as it came in.
Inputs typically include:
2. Processing system
Each input is read by the processing system, which then produces a useful output, like a receipt. This component can assist you in defining the input data and desired outcomes. Processing times can differ depending on the type of TPS your business uses.
3. Storage
The location of a company’s input and output data is referred to as the storage component of TPS. Some companies store these documents in a database. The storage component guarantees each document’s organization, security, and accessibility for future use.
For instance, if a vendor requests confirmation that your business has paid an invoice, you can check the storage space of your systems to locate the invoice and determine whether you actually delivered a payment.
4. Outputs
TPS outputs are the documents that the system produces after it has processed all of the inputs, such as the receipts that the business keeps in its records. These records can support the legitimacy of a purchase or transaction and offer crucial information for tax and other official purposes.
For instance, if a vendor sends your business an invoice, you can pay the invoice and notify the vendor that your payment has been received. The original invoice can then be modified, and you can mark it as “paid” in the business’ TPS.
TPS benefits
Here are some common benefits of using a TPS:
Increased transaction speeds
With a TPS in place, companies can efficiently speed up each transaction to reduce customer wait times. While some systems process transactions immediately, others gather transaction data over a predetermined time period before processing it later, frequently after business hours.
Improved cost efficiency
A TPS may be used to coordinate and carry out thousands of transactions each day. By avoiding the need to upgrade the system or use multiple systems to handle demand, this can save a business money.
Improved reliability
You can guarantee that you process customer transactions efficiently and accurately by using a TPS. A trustworthy TPS can also assist your business in saving money on potential troubleshooting or coding expenses for broken systems.
Automated management
A large portion of internal resource and revenue management is automated by ATPS. By increasing automation, employees can spend less time reviewing transactions. Automation gives workers more time to focus on interesting tasks that call for critical thought, which is a crucial factor in boosting a company’s profitability.
Overview of Transaction Processing System and Its Functions
FAQ
What is a transaction processing system?
Transaction processing systems offer features for use in unique business applications, such as data access, intercomputer communications, and user interface design and management.
What is transaction processing system with examples?
Sales/marketing, manufacturing/production, finance/accounting, human resources, and other types of industry-specific systems are the five functional categories of TPS. Within each of these major functions are subfunctions.
What is transaction processing system and its function?
Data entry is an input activity used in transaction processing systems. In this procedure, data is recorded or collected through coding, editing, and other processes. The information could then be transformed into a format that can be input into a computer system.
What is transaction processing system MIS?
Benefits of TPS With a TPS in place, businesses can quickly speed up each transaction to cut down on customer wait times. While some systems process transactions immediately, others gather transaction data over a predetermined time period before processing it later, frequently after business hours.
