Batch processing is a method of processing various types of transactions. As the name suggests, transactions are processed in a group or “batch.” While batch processing infrastructure can require time, money, and employee training to get up and running, once integrated into a business it is generally a reliable, behind-the-scenes function.
Batch processing can be completed at any time, but it is most often used for end-of-period transaction processing such as bi-weekly payroll, end-of-business-day banking reports, or quarterly or annual financial statements. Automated Clearing House (ACH) Network payments also utilize batch processing.
The History of Batch Processing
Around 1890, US Census Bureau statistician Herman Hollerith first developed the idea for the punch card, to help calculate census data. Manually fed one-by-one into an electromechanical device, the data “punched” into each card would be read by the device. 50 years later, the punch card became the foundation for the idea of batch processing. Punch cards were organized into decks—or batches—to be processed all at once.
Herman Hollerith patented his punch card reading device as a “Electronic Tabulating Machine.” Later, he joined forces with a group of other inventors who collectively formed the Computing-Tabulating-Recording Company (CTR)—the CTR went on to become International Business Machines, otherwise known as IBM.
How Does Batch Processing Work?
Batch processing is a cost-effective way to handle large quantities of data all at once. For a real-world example, consider your cell phone bill. While it is possible that your cell phone provider manually calculates, processes, and sends you your bill each month, it is much more likely that they use batch processing to process and send bills to all of their customers at once, each month.
Batch processing jobs are usually run on regular intervals—overnight, bi-weekly, monthly, annually, etc.—but they can also be run as one-offs or as-needed. Batch processing systems are able to function at any time of the day or night, meaning jobs can be run outside of regular business hours or run during periods of down-time.
One major benefit of batch processing is that it doesn’t require any user interaction once it has begun (unlike transaction processing which requires transactions to be processed manually and one at a time). The hands-off nature of batch processing allows workers to maximize their time focusing on other aspects of their jobs. If a problem happens to arise with a batch processing job, an alert can be sent to let employees know that the job requires their attention.
These are the broader payment concepts that underpin payment operations.