What is Online Transaction Processing?

Malcolm Tatum

Online transaction processing is a collective term used to describe a classification of systems that process each step of a transaction in an online environment. Sometimes known as OLTP, this processing typically involves data entry, retrieval of information from some type of database or source and the logical progression to the completion of a transaction. While many tend to think of OLTP as being related to the processing of financial transactions in an online environment, the term can be applied to other types of transactions as well, such as the transfer of electronically signed documents through a point-to-point server transmission.

Woman doing a handstand with a computer
Woman doing a handstand with a computer

The underlying function of online transaction processing is to allow users to initiate some type of transaction online by connecting with the appropriate servers and data sources to successfully complete the operation. For example, an online money transfer service allows users to identify a recipient for a payment, using either an account number or an email address associated with the recipient’s account, enter the amount to be paid, schedule the payment for immediate or delayed delivery, then execute the transaction. As part of the process, the software used by the service provider verifies availability of the funds from a designated source, approves the transaction, then executes the transmission according to the parameters set by the sender. Many services of this type return a confirmation number to document the transmission, simultaneously deducting the amount of the transfer from the funding source.

At the receiving end of the transaction, the process of online transaction processing delivers the transmitted funds to the recipient’s account. Typically, a notification is generated and sent to the account owner, advising him or her of the receipt of funds. If the transaction cannot be completed for some reason, the originator is notified of the status, making it possible to cancel the transaction or instruct the system to try again.

Along with money transfers between accounts, online transaction processing can also involve the transfer of data between points. For example, electronic copies of documents such as contracts can be sent, approved, electronically signed, then distributed to one or more parties. In the broadest sense, online transaction processing takes place any time a consumer places an order with an online retailers, an employee logs in for work using web-based time clock software, or even when debit cards are used to pay for purchases at a supermarket. In each scenario, a transaction is initiated that utilizes the Internet to process and complete an order to the mutual satisfaction of both parties involved in the transaction.

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