Transaction Processing

what are transaction processing systems

Transaction process is a term that refers to the adding, changing, deleting, or looking up of a record in a data file or database by entering the data at a terminal or workstation. Most transaction processing systems also include a method of ensuring that all the information entered as a transaction is simultaneously saved. When a large number of transactions are taken and then stored to be dealt with at a later time, the process is known as batch processing. Different examples of transaction processing include automated teller machines, credit card authorizations, online bill payments, self-checkout stations at grocery stores, the trading of stocks over the Internet. and various other forms of electronic commerce.

At the center of most commercial interactions is a transaction so, every business has to deal with its commercial transactions in some form. How a company decides to manage these transactions can be an important factor in its success. As a business grows, the number of transactions it must manage usually grows as well. Careful planning must be done in order to ensure that transaction management does not become too complex. Transaction processing is a tool that can help growing businesses deal with their increasing number of transactions.


One place where transaction processing has made a big splash is on the Internet. The advent of online technology has made the international distribution of goods and information a quick and often simple process. Customers have grown accustomed to placing orders online. The emergence of features like secure servers, one-click shopping, and tracking of packages over the Internet have helped make them feel more at ease with the process.

Transaction processing on the Internet includes several options for those who want to use a credit card or a checking account to pay for goods that do not originate from a typical e-business site, almost as if it is digital cash. One example of this type of service is PayPal, ( the world's first, successful, instant and secure online payment service. With PayPal, anyone can register to send and receive payments through the Internet. This service has gained most of its popularity on auction sites like eBay, but can also be used for simple transactions between any two people in the world that have access to the Internet. Users have found this to be a safe, fast, easy, convenient, and inexpensive way to distribute money in the digital world. PayPal's service is free to most consumers, although there can be small service fees to businesses that decide to use it for a large number of transactions. PayPal only requires that users have either a valid credit card or active checking account.

Retailers have also enjoyed the benefits of jumping on the Internet bandwagon to help with the processing of their transactions. A company can set up a web site through which its customers can purchase merchandise and the order can be taken, fulfilled, and processed by a subcontractor. Yahoo, for example, handles the distribution of products for many online companies. If a business decides to go this route, it should investigate thoroughly the

shipping charges that a particular firm will charge to send its goods. Many times, the shipping charges for products purchased over the Internet become inflated, causing consumers to become annoyed and even angry, feeling as if the shipping charges are a hidden extra fee. Any business must work to avoid losing a customer due to the poor service provided by a subcontractor. Other possible problems that often plague the online world — such as computer system outages, slow servers, and security issues — should also be considered.


The Transaction Processing Performance Council (TPC) is a non-profit corporation that defines transaction processing and provides database benchmarks which it shares with the industry. The TPC emerged in the early 1980s just as ATMs, self-service, self-pay gasoline pumps, and other electronic payment devices began to gain in popularity. The industry has grown since then and now the online transaction processing industry registers billions of dollars in yearly sales transactions. The TPC also monitors and measures transaction processing and database performance in terms of how many transactions a system can perform in a given amount of time. Many businesses can benefit from the work of the TPC, including retail stores, online businesses, electronic stock brokers, and travel agencies. Their dedication will only ensure that the quality of conducting transactions remains at the highest possible level. For more information on what they do, visit


The growth in the transaction processing industry portends good things for small businesses. A company that distributes and manages coin operated video games and vending machines, for example, can expand its business by teaming up with a transaction processing firm that will help allow the machines to accept credit cards. A small antique store can increase business by marketing its goods over the Internet and then accepting payments through PayPal or another similar service. As is the case with most sound business decisions, managers should acquire proper education and knowledge about transaction processing before committing to it. It is, after all, just a new way to manage commercial transactions.

see also Internet Payment Systems


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Gomolski, Barbara. "Automated Billing: Have We Gone Too Far?" Computerworld. 20 March 2006.

Hapgood, Fred. "Online Transaction Processing Takes a Bow." CIO. 15 February 2001.

Hunt, Clair. "In the Blink of an Eye." Computer Weekly. 31 March 1994.

Overton, Rick. "Signed, Sealed, Delivered … Online." PC World. November 1999.

                                                              Hillstrom, Northern Lights

                                                                updated by Magee, ECDI

A Dictionary of Computing


Category: Forex

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