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Transaction processing is a computer-based group of logical operations. For it to work, all the operations must succeed or fail as a group. A simple example of transaction processing is paying a utility bill from your bank account. The process of paying a bill from your account consists of debiting your account by say, 100 US dollars (USD), and crediting your utility provider’s account.
This may seem like a simple transaction, but it may actually consist of several sub-operations. If the debit of 100 USD was successful, but the credit did not go through to the utility provider’s account, then the transaction would fail. Your 100 USD would be lost somewhere in the transaction. The transaction processing system allows all the operations to be grouped into a single transaction in order to prevent problems in consistency.
Systems capable of transaction processing must pass tests for atomicity, consistency, isolation and durability, otherwise known as the ACID test. Transactions are known as atomic, meaning that the transaction will either happen or not. If one account is debited, then another account has to be credited.
The transaction processing system must always be consistent with its own rules. If errors occur in the transaction on either side, then the transaction will fail. Isolating transactions means that other processes never see information during the transaction. They may see information before or after the transaction, but not during the transaction. For example, if two people are booking the last theater seat at the same time, they can both see the seat before the booking, but only one person will succeed in booking that seat.
Transactions must be durable. This means that when that final seat in the theater has been booked and you have received notification that the seat is yours, it is permanently recorded. No matter what problems occur to the system, there are back-ups in place in the transaction processing system to ensure that the record stays permanent.
Transaction processing systems have been available since the 1970s, and nearly all businesses use them. The advent of the Internet has seen a boom in these systems and software. Over the years, the cost of buying and implementing the necessary software has dropped so much that most businesses can apply it profitably.