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03Feb, 2022
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Transaction Processing Systems

Transaction processing systems provide transaction management to businesses. This transaction management allows businesses to manage their accounts, pay employees, process purchases and sales, track inventory, order supplies, etc. In addition, they hold transaction history data in a database where companies can access it at any time for business analysis or review. Businesses would be very costly and inefficient without transaction processing systems doing all this transaction processing.

History and development

Transaction processing systems have been around for a long time – almost as long as retail sales have existed. In fact, until recently, transaction processing was done with pen and paper – a method that was slow and prone to error. The first system appeared in the early 20th century with the invention of the adding machine. After that, people designed the first transaction processing systems for individual business enterprises. Finally, transaction processors moved to more extensive transaction processing operations in the 1960s with IBM’s System/360 mainframe computer.

Although the systems still rely on powerful databases, transaction processors have diversified in the last three decades. PCs and transaction processing software have allowed smaller transaction processors to operate on a more limited scale.

Transaction processing systems in recent years

In recent years, transaction processing systems have moved from commercial off-the-shelf software to packaged applications tailored specifically for each business or industry.

 The systems are used globally in almost every industry. They are the backbone of transaction processing for any business transaction. In this case, companies can process transaction data quickly and accurately with the transaction process software. 

By converting manual transaction processes into automated ones, businesses benefit from faster transaction times, improved liquidity management and increased accuracy. 

Transaction Processes

Every business has many different types of transactions that it must complete to run smoothly. The type of transaction will depend upon the size of the company. 

Transaction processing systems include:

Every business is different, and no transaction processor will be exactly like another. However, there are four main transaction types that most transaction processors use to complete their transactions:

Sales Transaction Processing: When a customer purchases goods or services from a company using a transaction processor, the system records transaction data.

Payroll Transaction Processing: Employees receive their salaries through one of two methods. It is either directly deposited into the bank account or using a transaction processor. Companies use the transaction processing system for salary or payroll services. Once the employee receives payment, the system records the transaction data.

Accounts Receivable Transaction Processing: It is beneficial to businesses that deal with customers who purchase products on credit. 

Advantages of transaction processing systems

Transaction Process Systems can provide real-time reporting or batch reporting. Real-time reporting provides current information immediately after a business has completed its transactions, whereas batch reporting is not current information. Real-time transaction reporting provides real-time and batch transaction data that the system stores for some time before the system reports it to management.

Batch processing sends the information to a location where management can access it. Managers can also access the information on an online customer service centre. However, this information does not reach decision-makers immediately after the system completes the transaction.

The systems are used in most businesses to ensure transaction data is recorded, processed, and reported. Although transaction system vendors constantly strive to improve their software to keep up with technological advances, transaction processing systems still have several disadvantages.

Disadvantages of Transaction Processing Systems

Time and effort to switch between systems

One disadvantage of transaction processing systems is the time and effort it takes to switch between different software packages if a business uses more than one system. This causes businesses and transaction processors trouble as they cannot operate on multiple platforms. 

The systems may not offer some of the features a business may need for a transaction.

For example, a company needs customers to order products online and pay by credit card or debit card. If the system doesn’t offer this function, the transaction processing system would not be a good fit.

Integration, scalability and flexibility

The systems can also lack the integration, scalability and flexibility that some businesses require to transact. However,the transaction processing systems still have many advantages over other transaction processors. As a result, we see companies use them in most transactions in some form or another.

Trends           

Transaction processing has changed a lot in the last few decades. The processors continue to evolve and become more efficient for businesses. Some processors have been around for over forty years. As technology improves, we will see more and more innovative ways for companies to process their transactions. This can only be a good thing as time moves on.

Transaction processing systems are still the transaction processor of choice for most businesses. They continue to make transaction processing more straightforward, faster and more efficient. Transaction processors will continue to improve transaction processing systems as they evolve with technology; 

As transaction processing systems improve, transaction processors will see increased earnings and other benefits.

Transaction processing systems are here to stay for many years to come as they continually strive to meet consumer demand and make transactions easier for everyone involved.

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