The advantage & disadvantage of transaction processing systems

Written by mark fitzpatrick
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The advantage & disadvantage of transaction processing systems
Shopping online requires a transaction processing system to manage the purchase. (Comstock/Comstock/Getty Images)

A transaction processing system is a computer database system that balances and controls purchases of goods and services within a business network. A common example may be a consumer purchasing a product on an online store. The transaction processing system coordinates the warehousing and distribution of the item, the credit and bank transaction from the consumer's payment account, and the business's management of inventory, sales, profits and payroll. This complex system has many advantages and disadvantages.

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Handling Operations

In some ways, the main benefit of a transaction processing system can also be a disadvantage: the handling of several thousand operations at once. The transaction processing system must simultaneously coordinate thousands, even millions, of purchases, debit consumers' bank accounts, hold each consumer's private banking and address information, and ship out or process the order to the consumer. This system is helpful for any business that wants to make selling goods and services easier for consumers. However, this complex system can be difficult to handle if the business is not large enough to utilise a transaction processing system.

Security and Hardware Problems

Transaction processing systems are a combination of software and hardware used to handle immense quantities of consumer and business data. Because of this, viral security breaches may occur in this system, especially since consumers' private information is held within the database. Also, any hardware malfunction, such as an electrical outage, could damage a well integrated system that serves millions of consumers. If a business has the resources, the business can invest in high-quality computer security to ensure consumer protection and have hardware to back up data or generators for electricity.

Access to Untapped Markets

A transaction processing system makes it easier for consumers around the world to utilise a business's services through a simple online system. Insup Lee of the Computer and Information Science Department at the University of Pennsylvania states transaction processing systems allow people from across the world to access a business and buy that business's goods and services. In a globalised world market, the potential for growth is enhanced when the processing system is implemented properly.

Too Much Consolidation

Having a transaction processing system requires a lot from a firm. To have this system, this business requires technical people that can perform maintenance of the system 24 hours a day, seven days a week. The business will also need flawless integration with other departments, such as shipping, payroll processing, accounting and inventory. The business also would have to create new departments it never had before, which may include international shipping or an information technology department. All these variables could create fears that too much consolidation is taking place. Some businesses are incapable to being the lone provider of every service to consumers.

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