Transaction processing systems are cross-functional information systems that process data resulting from the occurrence of business transaction whereas transactions are events that occur as part of doing business such as sales, purchases, deposits, with draws, refunds and payment. Initial data of every information system arises due to the processing business transaction. Thus the transaction processing system is the building block of most of the information system.
Let‘s take an example that data generated whenever a business sells something to a customer on credit, whether in a retail store or at an e-commerce site on the web. In this case, there are data about the customer who purchase the product, about the sales person, about the product, stores etc will be generated. These are the first stage data generated for the information system. These data will be useful for the accounting information system, sales and marketing information system, production information system, human resource information system. Further data generated during certain interval of time can be utilized to develop the business intelligence.
Moreover as the payment is done through the credit card it additionally generates the data like credit card numbers, credit checks, customer billing, inventory changes, increase in account receivable balances which in turn generates further data. This example shows that transaction processing activities are needed to capture and process such data, or the operations of a business. Therefore transaction processing system plays a vital role in supporting operations of e-business and definitely is the building block of the most of the information system.