The Transaction Processing Systems

It has been widely established lately that how important information system has become for business processes. According to authors, information system is a field that merges business management with computer applications to smoothen the process for business in more efficient a way. In simpler terms, information system bridges in data, people, procedures and computer software and hardware to analyse and gather information digitally. This typically helps in assimilating information in an organised way for better functionality and operations of organisations. Traditionally information system was considered as design meant to be carried out principally from a technical viewpoint. But with growing awareness and acceptance towards the system has made people realise that it represents various other and broadened viewpoints that culminates stakeholders in order to attend to their economical, institutional, political and other interests. Hence, it would not be wrong to say that a systematic and practical framework or information system is most likely to tend to the aim of reaching an integrated information model for an organisation.

Information System

Silver et al. (1995) defines Information Systems as one which is implemented within an organization for the purpose of improving the effectiveness and efficiency of that organization. Capabilities of the information system and characteristics of the organization, its work systems, its people, and its development and implementation methodologies together determine the extent to which that purpose is achieved. Where a group of scholars believe that information connects with hardware, software, data, procedures and people’; another school of thought advocates Information system to include people, business processes and Information Systems.

Four conventional Classes of Information System

Classification of Information system differs as per the business needs and the structure and level of organisations. The needs of information system vary as per the levels and decision structure needed at every level. Primarily, information need ranges in following management capacity- Strategic control, managerial aspects and operational functions. The following pyramids describe the functions of organisation and the levels of decision authority along with the associated classes of Information System.

TRANSACTION PROCESSING SYSTEMS

The pyramid from bottom starts with lower management which deals with day to day operations of the organisation. This class of information system is handled by lower management who represents an organisation in daily routine and business such as attendance of employees, posting of entries in bank, processing of orders, evaluating overdue purchaser orders airline booking function etc.

MANAGEMENT INFORMATION SYSTEMS

The second category of information required by the middle management is known as managerial information. The information required at this level is used for making short term decisions and plans for the organization. Information like – sales analysis for the past quarter or yearly production details etc. – fall under this category. Management information system (MIS) caters to such information needs of the organization. Due to its capabilities to fulfil the managerial information needs of the organization, Management Information Systems have become a necessity for all big organizations. And due to its vastness, most of the big organizations have separate MIS departments to look into the related issues and proper functioning of the system.

DECISION SUPPORT SYSTEMS

In simpler words, it is an interactive channel that integrates and collets information from varied source to enhance the non-routine decisions. The information generated here is not made available to lower level staff nor do they need it. For example, trends and figures of revenue generation which helps in deciding policies etc. These types of decisive data supported by information system are required by senior management only and are called as Decision Support Systems.

EXECUTIVE INFORMATION SYSTEMS

The top level of this hierarchical classification of information system concerns only topmost management and the data integrated by information system is here is handy for executives only. Executive Information Systems involves at strategic management level which is coordinated and handled by top management in an organisation. This category facilitates the management with relevant data and information in convenient format required for strategic planning that aims at developing plans and construct major decisions towards the organisational goals

Banking Structure & Implementation of Information System

Banking is a vibrant sector which deals in with enormous data on daily basis. Technically speaking a bank caters to the money related transaction with customers. Generally it involves following services-

Customers’ saving and Current account management

Cheque services- collections and payments

Credit and debit cards

Handling of Loans, insurance, fixed deposits and other policies

In competitive environment, any bank strives to provide best of services facilitating convenience factor and ease of use to customer to gain on competitive advantage. Banking structure has evolved tremendously since its inception. Where banking was started with manual maintenance of records on papers; now the sector has been computerised and IT have been playing quite a revolutionary role to bring transformation in banking. The different platforms that a bank extends nowadays are – conventional retail bank outlet, ATM, online banking, Mobile Banking etc.

In this versatile scenario of functions and services, information takes a centric position and a strategic handling and available of information gets very pertinent. Lately information system has been hotly debated for being a contributory tool to amalgamate all these functions by integrating all the information and data for required authority in right time and place.

Information system and banking

As has been explained above information system involves people, data and procedure. For any given bank or financial institution accuracy and timely availability of information is quite challenging. Inculcation of information system and technology tend to solve the maximum of related issues and bring in efficiency in the system and added benefits to ease the line of operations. For bank, an information system execute three basic functions-

It receive data from different sources as input

It generates information by processing the collected data

It transfers the output to the concerned authority viz. Managers, sales executive, accountant, cashier etc.

Functions of Information System in Bank

A few typical business processes in bank that information system coordinates are-

Bank account transactions

Bank loans and insurance management

Business forecasts

Customer credits approval and credit terms

Property tax evaluation

Stock transactions

Financial cash flow reports

The following section will elaborate application of different information system in bank operations.

TRANSACTION PROCESSING SYSTEMS

Every bank tends to rely on a system that can manage and integrate its routine operations in organised manner with accuracy. Bank in its operation involves encountering with numerous customers to deal in with their payment or deposit demands. As per Ralph (2008) in absence of such systems, recording and processing of such business transaction would consume plenty of time and absorb huge amounts of organisational resources. Data thus collected through these systems also end up making valuable repositories which can later also be used in decision making. However, primary use is to satisfy customers and provide a competitive advantage by improving services and reducing costs.

For the same line of functions, banks deploy many type of transaction process system in order to capture and process the data necessary to update records regarding basic functions of the bank. For instance, bank TPS systems standardise the routine work linked with general banking transactions for the handling of deposits and withdraws, cashing of cheques, ATM & online banking functions and other processes.

TPS can be divided in two categories based on its way to process data-

Batch Processing- It suggests processing of data within the preset limits for certain period of time such as daily, weekly or monthly.

A conceptual figure of Batch Processing System

The above conceptual figure illustrates how the batch processes system work for a bank in processing of cheques which are collected and then processed usually over specific period of time. It incorporates following 4 steps-

Gathering information of business transactions in batches which in this case is cheques

Recording the information on specific files and discs in input medium

Processing of transactions (cheques for this case) as per defined process i.e. after verification, checking accounts etc and updating master file, reports and a variety of documents, for example customer paycheques or invoices.

Capturing and storing batches of transactions data at remote sites, and then transmitting it periodically to central computers for processing.

Real-time Processing- This involves instant transaction needs such as money withdrawal from ATM or cash counter or online banking transactions. It provides a direct interface between user and TPS allowing one transaction at time with immediate results. Following figure explains how transaction process works on real-time basis.

A Typical Example of Banking Transaction Process System

Customer Activity

System Activity

Enter A/c number

Verify a/c no.- acceptable or not

Enter password (****)

Verify the password

Enter withdrawal amount

Verify if the amount is within the withdrawal limits

Ledger

Updates the transaction in bank records

Remove Receipt & Money

Dispense Money

Issue transaction Receipt

Ready for next transaction

To sum up, TPS in bank incorporates 5 activities-

Data entry- accounts and customers entry

Transactions- bank transactions- cheques, accounts and ATM transactions etc

Report and Documents processing

Database and Files processing

Inquiry processing- Checking balance

MANAGEMENT INFORMATION SYSTEMS

MIS helps middle level managers with reports and information that further assists them in taking unstructured decisions. TPS takes into account data entry and usual transactions but MIS generates report on how transactions are done over a period of time such as monthly or quarterly reports. This data helps business assess the performance of bank and how much business they have done. Based on the data generated, sales policy can be framed to target for next quarter. For example, a quarterly report can reflect how many new accounts have been opened and how many have been closed. If any major discrepancy is observed in these figures as compared to previous quarter’s reports than a manager needs to pay attention. He will have to see if this is happening due to service offered by bank or if customers are dissatisfied and displeased with bank or due to competitors or it’s just like that. Based on the analysis and the resulting reason, a line of action can be planned by manager to improve the performance of bank in order to attract and retain new customers.

DECISION SUPPORT SYSTEMS

Roping in around the definition given by authors like Alter (1980), Bonczek et al.( 1981), Keen and Scott-Morton (1978), DSS can be defined to be a system which-

Enhances decision with data for decision makers rather than replacing them

Utilises information, documents, and reports

Solves problem with varying structure degrees- semi structure, unstructured

Facilitates effectiveness and not efficiency in decision making process

Velmurugan (2008) defines DSS as, an interactive information system that enables decisions making in unstructured or semi structured situations by facilitating information, models and data manipulation. Authors further argues that DSS method generally influences upper level management decision making with a reasonably low frequency and high potential consequences in which the time taken for thinking through and modelling the problem pays off generously in the long run. It can be differentiated with MIS on accounts that it requires a macro approach and not a target based decisions that are usually taken through MIS. As explained above that through MIS, manager can draft a sales plan to cover up falling customers for next quarter. However, with Decision Support system case is not so. It takes a broader view. If this decline in customers is observed for long term than senior management takes a note and based on reports takes a decision. It can be anything based upon the situation. For instance- hiring new staff or training the existing one if management thinks it’s due to employees’ inefficiency. Installation of new ATM machines if customers are withdrawing for not able to find out bank outlets. New software installation for online banking channel in case of painstaking effort that customer is facing while doing online transactions and so on. There can be number of other decisions that can be reached but everything depends on managers’ ability to think and to infer a decision based on the data drawn from DSS.

In bank typically DSS can help in decision related to following areas-

Cash management and debt planning

Planning in mergers and acquisitions

Capital budgeting

Selecting R&D project

Evaluating financial risks

Structuring optimal lease

Financial analysis and diagnosis

Real estate appraisal and investment

Funding strategic product development

Setting interest rates for money market deposit accounts

Locating banks & Managing portfolio

Small business financial planning

EXECUTIVE INFORMATION SYSTEMS

‘Executive Information System’ was first introduced in 1982 (Rockart and Treacy, 1982) to illustrate the kind of systems a few senior corporate officers were using on a regular basis to access information they needed. Watson et al (1991) characterises that EIS is an information system that equips topmost management with internal and external data that contributes towards the success factors of organisation without the need of intermediaries. This data is considered as very confidential and is made available to the topmost managers only who are capable to take major decisions for business process and structure of an organisation.

In a bank EIS can assist executives with financial ratios and cash flow analysis that further enhance them to plan out capital investment decision based on trends drawn from EIS reports. It involves both internal and external data that gives a large picture of scenario before executive really think to bring in a major decision in the bank. Executive information system is a responsibility-oriented medium that blends budgeting and planning with control of performance reporting, and it can be considerably helpful to finance executives. EIS aids topmost management to focus on the long term goals by curbing in current year and beyond. This allows executives to monetize and plan with a visionary approach for years to come to expand business based on current operations and future projections generated from EIS reports. It would hence not be wrong to say that EIS is a significant tool for executives to analyse financial trends, ratios and review bank’s performance, its competitors and market trends. .

Conclusion

It has been widely accepted that information system is increasingly being adopted by more and more companies to streamline their business process in systematic way. Factors such as efficiency and cost cut and time saving are being mentioned as top advantages of information system. Broadly information system is accrued with following advantages-

It enables company to keep a track of strength and weaknesses with the 360 degrees assessment of reports generated for revenue, employees performance etc

Trackback of customers’ data and their feedback is useful for organisations to reach decisions for business

Streamlining of information and availability to it whenever needed helps organisation to work efficiently

The above discussion clearly reflected that how information system can be implemented in an organisation (particularly bank) and how that organisation can reap in benefits out of it. The four different classes of the system were defined and their implementation in banking operations has been illustrated in detail. A bank is a place with certain predefined standards and hence accuracy to them is very pertinent. Any failure in those on behalf of employees or any other reason can cost bank heaps – not only on monetary terms but on brand image also. A customer deals with bank out of trust factor only. Henceforth, a flawless technology and apt use of these different information systems at different level is very promising for bank. This paper didn’t discuss the limitations which might arise but an organisation should keep a vouch upon them as ongoing process. Cultural and technological concerns are cited as most typical limitations to the information system. Despite of this bottleneck that may arise in the process of acceptance of information system, it holds tremendous potential to automate the process in business and improve the overall functionality of organisations.

References

Bonczek, R.H., Holsapple, C. & Whinston, A.B., 1981. Foundations of Decision Support Systems, Academic Press, New York.

Keen, P. G. & Scott Morton, M.S., 1978. Decision support Systems: An organisational Perspective. Addison- Welson Inc. MA.

Mentzas, G. (nd). Towards Intelligent Organisational Information Systems. International Journal of Information Management. 14 (6), pp. 397-410.

Narayanasamy, K. & Velmurugan, M.S., 2008. Application of Decision Support System in E-commerce. Communications of the IBIMA Volume 5.

Ralph, M.S. & Reynolds, G., 2008. Fundamentals of Information Systems. Cengage Learning.

Rockart J. F. & Treacy M.,1982. The CEO Goes On-line. Harvard Business Review, 60 (1)

Watson, H.J. and M.M. Hill (1983) Decision Support Systems or what didn’t happen with MIS, Interfaces, 13(5), pp. 81-88.