1 transaction processing system is a type of information system. TPSs
ニニ*led, store, modify and retrieve the transactions of an organization. A Iraosaction is an event that generates or modifies data that is eventually >cOced in an information system. To be considered a transaction :rxessing system the computer must pass the ACID test. ACID (atomicity, ::_"sistency, isolation, durability) is a set of properties that guarantee that ransactions are processed reliably. A single logical operation on the data s alied a transaction. For example, a transfer of funds from one bank acaxint to another, even though that might involve multiple changes 'sodi as debiting one account and crediting another), is a single uansaction.
-ve essence of a transaction program is that it manages data that
must be er m a consistent state, e.g. if an electronic payment is made, the a~cunt must be both withdrawn from one account and added to the icr»er.
: it cannot complete only one of the two steps.
Either both must :c:jr or neither. In case of a failure preventing transaction completion, tie partially executed transaction must be 'rolled back' by the TPS. While tns rype of integrity must be provided also for batch transaction irxessing, it is particularly important for online processing.
res of Transaction Processing Systems
Information Technology in Financial Services | Reference Book 2
processing ir r=nsactions to ensure that customer requirements are met on time, ■»«r nat partners and suppliers are paid and can make payment. The field ir r=Tsaction processing, therefore, has become a vital part of effective nisiraess management, led by such organizations as the Association for 'ifcri Process Improvement and the Transaction Processing Performance
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Inaction processing systems offer enterprises the means to rapidly JPicess transactions to ensure the smooth flow of data and the jm«jes5ion of processes throughout the enterprise. Typically, a TPS will eanirc following characteristics：
■apwd Processing
He iap*d processing of transactions is vital to the success of any .srae-:丨「i? - now more than ever, in the face of advancing technology and demand for immediate action. TPS systems are designed to transactions virtually instantly to ensure that customer data is anaiacic to the processes that require it. sisre'Tis must be designed to ensure that not only do transactions >i:p past the net, but that the systems themselves
remain .:mal permanently. TPS systems are therefore designed to
incorporate comprehensive safeguards and disaster recovery systems. These measures keep the failure rate well within tolerance levels.
Standardization
Transactions must be processed in the same way each time to maximize efficiency. To ensure this, TPS interfaces are designed to acquire identical data for each transaction, regardless of the customer.
Controlled Access
Since TPS systems can be such a powerful business tool, access must restricted to only those employees who require their use. Restricts access to the system ensures that employees who lack the skills, abili and authority to use them cannot influence the transaction process.
Real Time Processing
In many circumstances the primary factor is speed. For example, when bank customer withdraws a sum of money from his or her account it' vital that the transaction be processed and the account balance updat as soon as possible, allowing both the bank and customer to keep track funds.
Multi-Currency Operations
With the global nature of businesses and organizations these days it necessary that banks offer facilities of carrying out variety of transacti in different world currencies. The same requirement must be fulfilled ■ the banking package used.
transaction processing, online access to customers for carrying banking activities (Internet, phone etc).
Core banking Core Banking is normally defined as the business conducted by a banf
• institution with its retail and small business customers. Many banks tr the retail customers as their core banking customers and have a sepa line of business to manage small businesses. Larger businesses managed via the corporate banking division of the institution, banking basically is depositing and lending of money. Nowadays, most banks use core banking applications to support operations where CORE stands for "centralized online real-i exchange". This basically means that all the bank's branches ac applications from centralized datacenters. This means that the de made are reflected immediately on the bank's servers and the cust can withdraw the deposited money from any of the bank's bra throughout the world.
A few decades ago it used to take at least a day for a transaction to re in the account because each branch had their local servers and the from the server in each branch was sent in a batch to the servers in datacenter only at the end of the day (EoD). '• Normal core banking functions will include deposit accounts, I
mortgages and payments. Banks make these services available across multiple channels like ATMs, Internet banking, phone banking and physical branches.
Core banking solutions
Core banking solutions are banking applications on a platform enabling a phased, strategic approach that is intended to allow banks to improve operations, reduce costs and be prepared for growth. Implementing a modular, component-based enterprise solution facilitates integration with a bank's existing technologies. An overall service- oriented-architecture (SOA) helps banks reduce the risk that can result from manual data entry and out-of-date information, increases management information and review and avoids the potential disruption to business caused by replacing entire systems.
Core banking solutions is relatively a new terminology frequently used in banking circles. The advancement in technology, especially Internet and information technology has led to new ways of doing business in banking. These technologies have cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as core banking solutions. Here, computer software is developed to perform core operations of banking like recording of transactions, passbook maintenance, interest calculations on loans and deposits, customer records, balance of payments and withdrawals. This software is installed at different branches of bank and then interconnected by means of communication lines like telephones, satellite, internet etc. It allows the user (customers) to operate accounts from any branch if it has installed core banking solutions. This new platform has changed the way banks are working. Gartner defines a core banking system as a back-end system that processes daily banking transactions and posts updates to accounts and other financial records. Core banking systems typically include deposit, loan and credit-processing capabilities, with
Information Technology in Financial Services | Referencel
interfaces to general ledger systems and reporting tools. Features of a core banking system include：
_ Single Window Operation
■ Secured & Authorized Signature Operations.
■ User Configurable Trial Balance and P & L Account with multiple formats. ■ Max. Operations & information on Hot keys.
' ■ Daily Receivable, Payable. ■ User level based security.
Data Export Facility.
■ Strong system for Bills (OBC, IBC, Bank Guarantee and Pay Orders) are available. ■ Normalized data structure for consistent and quick access.
_ Online Snapshot backup after specified time interval.
■ Remote Transactions through modem of media are available
■ A/c. Opening documents received/pending message while transactions on A/c. ■ User-wise Reminder Setting
■ Officer-wise passing levels, Overdraft limits.
■ While transacting a Loan account status regarding Overdue/Overdraft, Insurance due, Renewal, Stock Statement wHI automatically appears on the screen.
■ Connectivity Interfaces for pigmy Terminals, ATM IVRS, Touch Screens is built-in. ■ Clearance of Outward Clearing Cheques based on Fate Dalay and Branch weekly off.
Technology in banking sector Credit transfer to B's A/C
IT Systems that link Bank with
other Banks
Modern financial institutions have cashed in on the electronic business opportunities of the Internet by developing numerous payment systems to meet various payment service requirements. Advanced computer systems and telecommunications technology are being used to offer fast, convenient, and secure ways to conduct financial transactions at service and security levels that are hardly or never achieved by traditional payment systems.
Inter-bank EFT uses on-line transactions carried out on private networks to transfer funds； the bank plays the role of both payer and payee. Such transfers occur between a bank and its customers, or a bank and another bank. In contrast to a check payment, which requires several actual cryptographic processing days and manual efforts like signature verification, check sorting, and information capture, EFTs are same-day, almost instantaneous payments. Figure illustrates one possible method used for such transfers to conduct payments.
As shown in the figure, customer A uses commercial bank A to remit a 』xed amount of money to customer B banking with commercial bank B. After receiving the remittance amount plus any fees, commercial bank A sends an electronic credit transfer message to commercial bank B through a clearing house. According to the credit instruction, commercial bank B credits the remittance amount to customer B's. After a fixed accounting period, the computer system at the clearing house will calculate the
Commercial Clearing Commercial
Bank A House Bank B *1 Customer B >
Settleme nt positions
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settlement positions for participating banks and send them to the central bank via telecommunication channels. The system at the central bank will use the accounts held by commercial banks to perform debit/credit operations for clearing the difference of transfer amount among banks, thus completing the funds flow of remittance process. EFTs can achieve immediate payment across two remote sites by the telecommunication facility under some credit line arrangement, but there must be some way to ensure the security of the remittance. Such protection should prevent the revelation of the information as well as illegal modification of it, by both external attackers and internal betrayers.
The prominent networks available in Pakistan for interbank operations are Society for Worldwide Interbank Financial Telecommunication (SWIFT), Real Time Gross Settlement System (RTGS), 1LINK and Mnet. A couple of them are discussed below.
Society for Worldwide Interbank Financial Telecommunication SWIFT
The Society for Worldwide Interbank Financial Telecommunication (SWIF operates a worldwide financial messaging network which exchan^ messages between banks and other financial institutions. SWIFT markets software and services to financial institutions. The majority of international interbank messages use the SWIFT netwc As of September 2010, SWIFT linked more than 9,000 financial institut in 209 countries and territories, which were exchanging an average ■丨over 15 million messages per day. SWIFT transports financial messages i a highly secure way, but does not hold accounts for its members and < not perform any form of clearing or
settlement.
SWIFT has become the industry standard for syntax in financial mess Messages formatted to SWIFT standards can be read by, and
processed I many well known financial processing systems.
SWIFT does not facilitate funds transfer, rather, it sends payment ord which must be settled via correspondent accounts that the institi have with each other. Each financial institution, to exchange bar transactions, must have a banking relationship by either being a affiliating itself with one (or more) so as to enjoy those particular bus features.
The SWIFT secure messaging network is run out of three redundant i centers, in the United States, Netherlands and Switzerland. These cc share information in near real-time. In case of a failure in one of the< centers, the other is able to handle the traffic of the complete net
1LINK
1LINK (Guarantee) Limited is a consortium of major banks that ov operate the largest representative shared financial services net Pakistan with a combined strength of over 2200+ online ATMs im| cities and towns across the country.1 LINK started its journey way I
_1丨liieouoogy in banking sector
1997 when two banks took initiative of forming shared switch and it has come a long way since then.
The synergy of financial institutions working together for a common goal has steadily increased the strength and services of 1LINK (Guarantee) Limited. Over the years 1LINK has become a widely acknowledged brand with an increasing number of members, serving as a catalyst for the development of e-Banking in the country.
The network is continuously expanding as more member banks are engaged in the deployments of ATMs. 1LINK Shared ATM network provides round-the-clock access of ATMs and wide range of products and services to member banks customers. The number of banks connected to the network has grown from twelve in 2003 to twenty-two in 2006 and more than thirty in 2010.
The State Bank of Pakistan has mandated that all commercial banks in Pakistan, both foreign and domestic become members of one or the other switch. Additionally, the two switches have been interconnected since 2006, which means that a consumer holding an ATM or debit card issued by any bank in Pakistan may use any ATM located throughout the country
In June 2011 PTCL and 1 Link entered into an agreement under which PTCL will offer 1Link with a bouquet of its services. These services offer secure, reliable and integrated end to end connectivity solutions to cater 1 LINK'S requirements. As a result of this arrangement, the services and service quality of 1Link is expected to enhance.