Steps Involve in Transaction Procession Process

Steps Involve in Transaction Procession Process

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The global digital payment market size was evaluated at USD 81.03 billion in 2022 and is projected to expand at a compound annual growth rate (CAGR) of 20.8% from 2023 to 2030 as per research. 

The system that automates the recording of transactions between two or more entities is called a transaction procession process. This process requires a specific application for data entry, batch processing, integrating master data, etc. Large server computers are used to support such applications, which is an interface between individuals and their indivisible operations. 

Steps Involved in Transaction Processing

Here’s a detailed breakdown of the steps involved in transaction processing:

Initiation

Being a banking procedure, it starts when the user or customer initiates a transaction. This happens when users purchase or sell, which ultimately ends up in transferring funds. This action triggers a transaction. So, this is just a beginning of the transaction processing.

Data Entry

This is a data input step where the relevant information, such as customer account details, transaction type, product/service information, quantities, amount, etc. are recorded online. The inputs automatically enters the online tools in the backend as one makes a payment or transfers money. This is because of advanced machine learning tools, which is trending.

Authorization

Now that the data is recorded, authorization takes place. It means executing the verification process to see if the transaction is authentic or true. For this, several methods are introduced, such as 2-Factor authentication, Biometric Verification, Device Fingerprinting, Geolocation Verification, Address Verification System, Card Verification Value (CVV), SSL/TLS Encryption methods. Apart from these, there are some other AI systems like Forter, Simility, Whitepages Pro, etc. that help in detecting & preventing fraudulent activities. 

These all methods help in verifying customers’ identities, account balances, available credits, and fraud checks online.

Processing and Routing

This is the processing phase, wherein the transactions are filtered, cleaned, and routed to the appropriate channels. Once processed, the transfer of the amount is routed to the payment gateway. This also encloses details to a fulfilment center. This raises a service request to a concerned department.  So, this is just one way of a transaction.

Payment Processing (if applicable)

Now, security comes in a pivotal role. In financial transactions, it is necessary to securely channelize the payment for transmission to the next level, which is to the processor, banks master data, and credit card networks. As it reaches the destination, it is further checked and approved or settled. It’s actually the payment processor that interacts with the backend systems to provide or further the transaction status back to the system.

Confirmation and Receipt

Just the transaction is made in the previous steps. Now is the time to confirm if the transaction is successful. For this purpose, there are many other communication systems attached to route the status of the transaction through an email, SMS, or on-screen confirmation. Also, a receipt is typically generated and sent to the customer as well.

Fulfillment (if applicable)

This is a step involved in eCommerce trade. If the product or service is to be delivered, the fulfillment process starts. It consists of further activities like picking up and packing products for shipment, preparing digital products to upload or download, and scheduling an associated order process.

Update Records

The next step is to update records. Remember, these transactions are associated with buying and selling. As the online transactions are popular, this online transaction process is also incorporated with order management or shipping systems. This step, in particular, is reserved for updating those backend systems or all records, such as zoho inventory for inventory management, account balances, order status, and other ones.

Reporting and Analytics

Now comes the analysis of the transaction process.  The data from banking or bookkeeping inputs online, and payment systems are used for this purpose. The entire database is automatically called in the backend system to flow to online integrated reporting & analytics tools, such as SAS Banking Tool for Intelligence Solutions, and IBM Secure Gateway.  

With these, the transaction management entities and various businesses monitor trends, performance, and also make informed decisions and projections for further improving these transactions and their counts successfully.

Reconciliation

It’s typically associated with banking, which refers to confirming the accuracy of transactions and also, if the records match the actual transactions. This reconciliation is carried out by banks, payment processors, and businesses. If there appears any mismatch or gap, it is identified and addressed immediately.

Post-Transaction Communication

As the mid-way communication via emails or SMS takes place, businesses or various companies initiate collection solutions, which is all about making recoveries. Also, insurance companies together with healthcare companies trigger medical billing

Herein, businesses or companies have to follow up with customers. The reason can be to recover the amount or gather feedback, offer personalized customer support using expertise, or recommend for further transactions in the future.

Security Measures

As aforementioned, this transaction process involves sensitive details, which obviously make it mandatory to put rigorous security & backup system in place. This is done through encryption, secure connections, authentication, and compliance with data protection regulations.

Auditing and Compliance

Businesses often need to maintain transaction records for auditing and compliance purposes. This ensures transparency and accountability in financial transactions.

Conclusion

Modern transaction processing is typically automated, seamless, and designed to provide a smooth customer experience. The steps may vary depending on the industry, nature of the transaction, and technology used, but these fundamental steps generally apply to most transaction processes.

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