Deck 11: Payment Systems for Electronic Commerce

Question 1

Concerns about electronic payment methods include privacy and security, independence, portability, and convenience.

Answer 1

True

Question 2

Sending bills and receiving payments over the Internet can drop the transaction cost to an average of 50 cents per bill.

Answer 2

True

Question 3

Using electronic cash provides an audit trail.

Answer 3

False

Question 4

Many stores that accept credit cards require a minimum purchase amount of $50.

Question 5

Electronic cash systems, though less popular than other payment methods, provide advantages and disadvantages that are unique to electronic cash.

Question 6

Online and telephone purchases are often called card not valid transactions.

Question 7

Credit cards provide assurances for both the consumer and the merchant.

Question 8

Electronic cash has been much more successful in the United States than it has been in Europe and Asia.

Question 9

The front-end processor handles chargebacks and any other reconciliation items through the interchange network and the acquiring and issuing banks, including the ACH transfers.

Question 10

Transferring electronic cash on the Internet costs more than processing credit card transactions.

Question 11

An important characteristic of electronic cash is that it must be traceable back to the person who spent it.

Question 12

The use of electronic cash requires no additional distribution method or human oversight.

Question 13

A two-part lock provides anonymous security but signals when someone is attempting to double spend cash.

Question 14

American Express and Discover card are examples of open loop systems.

Question 15

In an online storage system, the merchant must contact the consumer's bank to receive payment for a purchase.

Question 16

Online stores have many of the same payment collection inefficiencies as their brick-and-mortar cousins.

Question 17

Fewer than 5 percent of all credit card transactions are completed online, but those transactions are responsible for about 50 percent of the total dollar amount of credit card fraud.

Question 18

Online cash storage is similar to money kept in a wallet.

Question 19

Small purchases are not profitable for merchants that accept only credit cards for payment.

Question 20

A debit card removes the amount of the sale from the cardholder's bank account and transfers it to the seller's bank account.

Question 21

A(n)____ a purchased card that contains a limited value and that can be used for making purchases from retailers.

A)debit card
B)prepaid card
C)digital cash card
D)digital wallet

Question 22

A(n)____ is a set of connections between banks that issue credit cards, the associations that own the credit cards (such as MasterCard or Visa), and merchants' banks.

A)transaction network
B)e-money network
C)interchange network
D)closed loop system

Question 23

The Check Clearing for the 21st Century Act (usually referred to as Check 2
1), permits banks to eliminate the movement of physical checks entirely.

Question 24

The Internet has opened new opportunities for organized crime in their traditional types of criminal activities and in new areas such as generating spam, phishing, and identity theft.

Question 25

The most important step that companies can take today to prevent phishing attacks is to update their prevention technology.

Question 26

____ are also called electronic funds transfer at point of sale (EFTPOS)cards, especially outside the United States.

A)Debit cards
B)Credit cards
C)Gift cards
D)Prepaid cards

Question 27

In a(n)____ system, the card issuer pays the merchants that accept the card directly and does not use an intermediary, such as a bank or clearinghouse system.

A)open loop
B)closed loop
C)virtual loop
D)direct loop

Question 28

Whenever additional parties are included in payment card transaction processing, the system is called a(n)____ system.

A)open loop
B)closed loop
C)virtual loop
D)indirect loop

Question 29

Some companies have begun to offer small payment and micropayment services through ____ telephone carriers.

A)Internet-based
B)specialized
C)land-line
D)mobile

Question 30

ACH is short for ____.

A)Automated Cash Holding
B)Automatic Clearing House
C)Automated Clearing House
D)Autostatic Clearing House

Question 31

A(n)____ obtains authorization for the transaction by sending the transaction's details to the interchange network and storing a record of the approval or denial.

A)back-end processor
B)front-end processor
C)ACH
D)issuing bank

Question 32

____ fees are charged by an acquiring bank for providing payment card processing services.

A)Acquirer
B)Merchant
C)Issuing
D)Collector

Question 33

Internet payments for items costing from a few cents to approximately a dollar are called ____.

A)nanopayments
B)micropayments
C)small-value payments
D)mini-value payments

Question 34

In San Francisco, the Bay Area Metropolitan Transportation Commission created a smart card system called TransLink, patterned after Hong Kong's Octopus Card.

Question 35

In the textbook, the term ____ refers to all payments of less than $10.

A)mini payments
B)small payments
C)minitransactions
D)microtransactions

Question 36

The average consumers who engage in online payment transactions are easy prey for expert criminals.

Question 37

When a cardholder successfully contests a charge, the acquiring bank must retrieve the money it placed in the merchant account in a process called a(n)____.

A)click-through
B)chargeback
C)dispute
D)recharge

Question 38

A(n)____ bank is a bank that does business with sellers that want to accept payment cards.

A)online
B)acquiring
C)virtual
D)broker

Question 39

What payment method dominates online transactions today?

A)PayPal
B)credit and debit cards
C)gift cards
D)store-branded cards

Question 40

A ____, offered by companies such as American Express, carries no spending limit, and the entire amount charged to the card is due at the end of the billing period.

A)credit card
B)charge card
C)debit card
D)smart card

Question 41

____________________ is a technique used by criminals to convert money that they have obtained illegally into cash that they can spend without having it identified as the proceeds of an illegal activity.

Question 42

____ is a key element in a phishing attack.

A)Pharming
B)Money laundering
C)Due diligence
D)Spam

Question 43

A card verification number (CVN)is a three- or four-digit number that is printed on the credit card, but is not encoded in the card's ____________________.

Question 44

____ is spending a particular piece of electronic cash twice by submitting the same electronic currency to two different vendors.

A)Double spending
B)Fraudulent spending
C)Double shopping
D)Illegal shopping

Question 45

____________________ cash storage means that the consumer does not personally possess electronic cash.

Question 46

Businesspeople often use the term ____________________ as a general term to describe all types of plastic cards that consumers use to make purchases.

Question 47

Banks have been working for years to develop technologies that will help them reduce the ____, which is the delay that occurs between the time that a person writes a check and the time that check clears the person's bank.

A)fluctuation
B)interval
C)drift
D)float

Question 48

Visa and MasterCard, which do not issue cards directly to consumers, are ____________________ associations that are operated by the banks who are members in the associations.

Question 49

For U.S.consumers, payment cards are advantageous because the Consumer Credit Protection Act limits the cardholder's liability to $____________________ if the card is used fraudulently.

Question 50

____ is a technique for committing fraud against the customers of online businesses.

A)Due diligence
B)Money laundering
C)Phishing
D)Chargeback

Question 51

With a(n)____________________ card, a user can pay off the entire card balance or pay a minimum amount each billing period.

Question 52

A ____ is a stored-value card that is a plastic card with an embedded microchip that can store information.

A)credit card
B)debit card
C)charge card
D)smart card

Question 53

____ digital wallets remain on a server and thus require no download time or installation on a user's computer.

A)Server-side
B)Client-side
C)Paypal
D)Virtual

Question 54

____________________ is a general term that describes any value storage and exchange system created by a private entity that does not use paper documents or coins and that can serve as a substitute for government-issued physical currency.

Question 55

____ is a criminal act in which the perpetrator gathers personal information about a victim and then uses that information to obtain credit.

A)Pharming
B)Identity theft
C)Due diligence
D)Money laundering

Question 56

The largest dollar volume of payments today are made using ____.

A)paper checks
B)debit cards
C)credit cards
D)Paypal

Question 57

A(n)____ digital wallet stores a consumer's information on his/her own computer.

A)server-side
B)client-side
C)PayPal
D)virtual

Question 58

To process payment cards for Internet transactions, an online merchant must set up a(n)____________________.

Question 59

____________________ cards give consumers a unique card number that is valid for one transaction only.

Question 60

____ electronic cash is electronic cash that cannot be traced back to the person who spent it.

A)Blank
B)Virtual
C)Anonymous
D)Insignificant

Question 61

A(n)____________________ card can store about 100 times the amount of information that a magnetic strip plastic card can store.

Question 62

Although several companies have attempted to find a better way to do online payments, ____________________ has prevailed not only because it was an early entrant, but because it performed as well as any of its challengers.

Question 63

What is the difference between a credit card and a charge card?

Question 64

____________________ can be accomplished by purchasing goods or services with ill-gotten electronic cash.

Question 65

What are the advantages and disadvantages of payment cards?

Question 66

Processing a payment card transaction online involves two general processes.List these processes.

Question 67

Describe the basic structure of a phishing attack.

Question 68

With a smart card, credit theft is much more difficult because the key to unlock the encrypted information is a(n)____________________.

Question 69

____________________ strip cards are passive, that is, they cannot send or receive information, nor can they increment or decrement the value of cash stored on the card.

Question 70

U.S.laws define organized crime, also called ____________________, as unlawful activities conducted by a highly organized, disciplined association for profit.

Question 71

Smart cards are safer than conventional credit cards because the information stored on a smart card can be ____________________.

Question 72

Hong Kong's transportation companies-subways, buses, railways, trams, and ferries-joined together and created a(n)____________________ called the Octopus that lets commuters use one card for all of their public transportation needs.

Question 73

Yahoo! wallet is a(n)____________________-side electronic wallet offered by the Web portal site Yahoo!

Question 74

What are the disadvantages of using paper checks?

Question 75

Microsoft Windows ____________________ is a single sign-in service that includes a server-side electronic wallet operated by Microsoft.

Question 76

Implemented with smart cards, TransLink is the first integrated ticketing system for public transportation in the ____________________.

Question 77

A(n)____________________, serving a function similar to a physical wallet, holds credit card numbers, electronic cash, owner identification, and other owner contact information.

Question 78

In the United States, the ____________________ advances the benefits of smart cards.

Question 79

When the e-mails used in a phishing expedition are carefully designed to target a particular person or organization, the exploit is called ____________________ phishing.

Question 80

____________________ software runs transparently on a variety of hardware configurations and on different software systems.