What is transaction processing system (TPS) with example

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Definition of transaction

“Transaction is a business activity between buyer and seller to exchange an asset of payment.”

For example, you go to the shop and buy something and give money to the shopkeeper. This is a transaction between you and the shopkeeper.

The transaction is of two types:-

  1. Internal transaction
  2. External transaction

The transaction that is done within the organization is known as an internal transaction. The internal transaction is done between different departments of the organization.

The transaction which is done out of the company is known as an external transaction. This transaction is between clients and the company.

Definition of the transaction processing system (TPS)

“TPS or transaction processing system is a type of information system that collects, stores, modifies and retrieves the data transaction of an enterprise.”

TPS is software for managing data transactions that are done within or outside the organization. In this software, we have the option to restore the lost data also. If any data is accidentally deleted then it can be restored by the TPS also.

TPS is done by the Front line staff of the company and the customers of the company. The transactions that can be done by the ticket sale staff and the customers in the railway station is also a type of TPS. The ticket sales staff is also known as Front line staff that directly interacts with the customers. Font line staff has all the data of the company i.e. they know how many tickets are sold and left. They know all the transaction history of the company.

Components of the transaction processing system (TPS)

The components of TPS are:-

  • Inputs
  • Storage
  • Processing
  • Output

Inputs are invoices and customer orders. The processing is done on the inputs. Storage is in the form of ledgers. Output is the generated record from the TPS software.

Types of the transaction processing system (TPS)

There are two types of TPS:-

Batch processing system

A transaction that is done in a batch or group is known as a batch processing system. The batch processing is not done immediately. First, the data is collected and then placed in a group or batch then the processing is started.

Examples of batch processing systems are:-

  • Credit card transaction
  • Payment by cheque

The online transaction processing system

A transaction that is done immediately without any delay is known as an online transaction processing system (OLTP). It is also known as a real-time transaction.

Examples of OLTP are:-

  • Use card for payment
  • Online transaction

Examples of the transaction processing system (TPS)

  • Electronic transfer of funds
  • Airline reservation system
  • Bank account processing system



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Junaid Rehman

I am a blogger and freelance web developer by profession. I love to blog and learn new things about programming and IT World.