Deck 10: Electronic Commerce Payment Systems

Question 1

Because of their visibility and large sales volumes,larger firms are more susceptible to fraud than medium-sized firms.

Answer 1

False

Question 2

Credit cards,charge cards,and debit cards are three forms of online payment cards.

Answer 2

True

Question 3

E-payment methods that can address the lower or higher end of the price continuum are unlikely to be widely accepted because of cost and security issues.

Answer 3

False

Question 4

For a given type of payment card and processing system,the processes and participants are essentially the same for offline (card present)and online (card not present)purchases.

Question 5

In the settlement process,the systems must determine whether a buyer's card is active and whether the cardholder has sufficient funds available for the purchase.

Question 6

The success of an e-payment method depends on its interoperability with existing enterprise systems and applications.

Question 7

The barrier to selling books online,either hardcopy or electronic,is technical and not financial.

Question 8

To succeed,special e-payment methods,such as e-cash,have to maintain anonymity.

Question 9

Contact and proximity are two types of smart card readers.

Question 10

Over 80 percent of all merchants use the manual review method,which relies on staff to manually review suspicious orders.

Question 11

One problem with the Address Verification System (AVS)for fraud prevention is the number of false positives,meaning that the merchant rejects a valid order.One reason for these rejects is simply that cardholders make mistakes in inputting their addresses or zip codes.

Question 12

The overwhelming majority of B2C purchases are paid for by smart cards.

Question 13

In the online world,virtually every attempt to disintermediate cash and credit cards has failed.

Question 14

Technically speaking,a smart card reader is actually a read/write device.The primary purpose of the smart card reader is to act as a mediator between the card and the host system that stores application data and processes transactions.

Question 15

Card verification number (CVN)methods are useless against a fraudster who possesses the stolen credit cards.

Question 16

In the online world,merchants are not held liable for fraudulent transactions.

Question 17

The processing of card payments has two major phases: identification and settlement.

Question 18

Recent surveys by CyberSource indicate that fraudulent card transactions are a growing problem for online merchants in spite of their increasing efforts to combat fraud despite improved anti-fraud measures.

Question 19

Thirty-eight percent of all merchants use negative lists,which are files that include a customer's information and the status of that customer.A customer's transaction is matched against these files and flagged if the customer is a known problem.

Question 20

E-payment systems that require the payer to install specialized security software have proven more likely to succeed.

Question 21

With letters of credit,credit risk is reduced because payment is accessed via the credit worthiness of the issuing bank.

Question 22

Which of the following is a peer-to-peer encrypted digital currency created in 2009 by Satoshi Nakamoto?

A) Bitcoin
B) PayPal
C) Kindle
D) DotCoin

Question 23

E-checks cannot be used with in-person purchases.

Question 24

In most cases,smart cards are more secure than credit cards and can be extended with other payment services.In the retail arena,many of these services are aimed at those establishments where payments are usually made in cash and speed and convenience are important.

Question 25

The information divide is the gap between people with effective access to digital and information technology and those without.

Question 26

With the stored value micropayment model,up-front payments are made to a debit account from which purchases are deducted as they are made.

Question 27

Factors that come into play in determining whether a particular method of e-payment achieves critical mass include each of the following except

A) dependence.
B) ease of use.
C) divisibility.
D) regulations.

Question 28

An e-check is a legally valid electronic version or representation of a paper check.

Question 29

An electronic card that contains information that can be used for payment purposes best describes

A) host card.
B) payment card.
C) funds card.
D) pocket card.

Question 30

One benefit of smart cards versus standard cards is that they are more secure.

Question 31

The process of determining whether a card is active and whether the customer has sufficient funds for the purchase is called

A) settlement.
B) approval.
C) authorization.
D) procurement.

Question 32

Which statement about the payment revolution is true?

A) Cards and electronic payments are taking the place of cash and checks.
B) Debit card use has been declining since 2003.
C) Approximately 20 percent of recurring bills are paid electronically.
D) By 2015, the U.S. will be a cashless society.

Question 33

Cash Concentration or Disbursement (CCD)is a type of ACH entry for B2B transactions.

Question 34

The Purchase Order Processing NACHA system does not require specialized readers for each checkout counter.

Question 35

Mobile payment refers to payment transactions initiated or confirmed using a person's desktop computer.

Question 36

The consolidator EIPP model links one seller to many buyers.

Question 37

Most contact cards are EPROM.

Question 38

Companies such as Walmart are likely to use the Seller Direct EIPP model.

Question 39

Mobile proximity payments involve a special mobile phone equipped with an integrated chip or smart card,a specialized reader that recognizes the chip when the chip comes within a short distance of the reader,and a network for handling the payment.

Question 40

Regardless of the vendor's point of view,there is substantial evidence that consumers are not willing to use their credit or debit cards for micropayments under $5.

Question 41

The largest demand for smart cards continues to come from

A) the Asia-Pacific region.
B) Europe.
C) North America.
D) South America.

Question 42

Which of the following is an example of a charge card?

A) MasterCard
B) EuroPay
C) Diner's Club card
D) Visa

Question 43

An electronic card containing an embedded microchip that enables predefined operations or the addition,deletion,or manipulation of information on the card best defines

A) pocket card.
B) smart card.
C) EPROM card.
D) secure card.

Question 44

________ are used for applications in which the data must be processed very quickly (e.g.,mass-transit applications,such as paying bus or train fares)or when contact is difficult (e.g.,security-entering mechanisms to buildings).

A) Contact cards
B) Contactless cards
C) RFID cards
D) EEPROM cards

Question 45

Which of the following activates and reads the contents of the chip on a smart card,usually passing the information on to a host system?

A) cloud reader
B) transmit reader
C) smart card reader
D) cube reader

Question 46

A(n)________ has two separate chips embedded in the card (contact and contactless),which eliminates the need to carry multiple cards to support the various smart card readers and applications.

A) dual-interface smart card
B) multi-debit card
C) hybrid smart card
D) RFID card

Question 47

Forms of payment cards include each of the following except

A) credit cards.
B) purchase cards.
C) charge cards.
D) debit cards.

Question 48

________ offer Internet Merchant Accounts,which are special accounts for credit card authorization and payment processing.

A) Acquiring banks
B) Issuing banks
C) Credit card associations
D) Payment processing services

Question 49

Which of the following is an online fraud detection tool that matches a customer's transaction against a file containing customer information that is flagged if the customer is a known problem?

A) negative list
B) profile list
C) boycott list
D) compliance list

Question 50

In 2010,the median number of fraud detection tools used by merchants was

A) 10.7.
B) 2.9.
C) 7.3.
D) 4.6.

Question 51

Which of the following participants in the online card payment process is the data center that processes card transactions and settles funds to merchants?

A) processor
B) merchant
C) customer
D) acquiring bank

Question 52

Approximately 80 percent of merchants use the Address Verification System,which results in a number of ________,meaning that the merchant may reject a valid order.

A) suspicious hits
B) false negatives
C) false positives
D) positive verifications

Question 53

Smart cards that have erasable memory and are modifiable best describe

A) contact cards.
B) contactless cards.
C) EPROM cards.
D) EEPROM cards.

Question 54

A special system that handles file management,security,input/output,and command execution and provides an application programming interface for a smart card best defines

A) networking operating system.
B) mobile operating system.
C) smart card operating system.
D) BIOS.

Question 55

Which of the following participants in the online card payment process is the financial institution that provides card services to banks?

A) issuing bank
B) credit card association
C) acquiring bank
D) processor

Question 56

If someone steals a smart card,the thief is usually out of luck,with the major exception of ________ used for retail purchases.

A) contact cards
B) contactless cards
C) EPROM cards
D) EEPROM cards

Question 57

A(n)________ is a third-party service connecting a merchant's EC system to the appropriate acquiring bank or financial institution.

A) Internet service provider (ISP)
B) payment service provider (PSP)
C) application service provider (ASP)
D) credit service provider (CSP)

Question 58

Basic configurations for processing online payments include each of the following except

A) using a POS operated by an acquirer.
B) using a POS operated by a payment service provider.
C) owning the payment software.
D) contracting with an online cash checking company.

Question 59

According to a CyberSource survey,online revenue losses due to fraud in 2010 were

A) $5.5 billion.
B) $150 million.
C) $2.7 billion.
D) $9 billion.

Question 60

Key tools used in combating online fraud include

A) negative lists.
B) manual reviews.
C) address verification.
D) all of the above.

Question 61

The nationwide batch-oriented electronic funds transfer system that provides for interbank clearing of electronic payments for participating financial institutions is called the

A) Automated Clearing House Network.
B) Federal Reserve System.
C) E-bill Presentment and Payment Network.
D) Receiving Depository Financial Institution.

Question 62

A ________ is a card that has monetary value loaded onto it and is usually rechargeable.

A) contact card
B) contactless card
C) stored-value card
D) closed loop card

Question 63

Basic micropayment models include each of the following except

A) stored value.
B) wholesale.
C) subscriptions.
D) direct payment.

Question 64

Payroll cards,government benefit cards,and prepaid debit cards are examples of ________ cards.

A) closed-loop
B) open-loop
C) contactless
D) EEPROM

Question 65

Which of the following is the NACHA system where checks are collected at checkout counters and later converted into e-checks?

A) POP
B) NOS
C) EPROM
D) BOC

Question 66

The provision of financial services,in small amounts of money,to poor or low-income clients,including consumers and the self-employed best describes

A) peer-to-peer loans.
B) microfinance.
C) low-risk mobile investments.
D) microloans.

Question 67

EIPP models include each of the following except

A) consolidator.
B) seller direct.
C) buyer direct.
D) intermediate.

Question 68

Which of the following is the initiative where all EU banks agreed to use the same basic bank card standard,enabling the use of credit and debit cards throughout the EU?

A) EPROM
B) SEPA
C) EUMI
D) MCI

Question 69

In global trade,a ________ is a written agreement by a bank to pay the seller,on account of the buyer,a sum of money upon presentation of certain documents.

A) trade card payment
B) letter of credit
C) micropayment
D) bank check

Question 70

Types of mobile payments include each of the following except

A) EIPP payments.
B) POS payments.
C) remote payments.
D) mobile proximity payments.

Question 71

Presenting and paying B2B invoices online best defines

A) EIPP.
B) NOC.
C) POP.
D) ACH.

Question 72

Single-purpose cards issued by a specific merchant or merchant group that can only be used to make purchases from that merchant or merchant group best describes

A) location-based cards.
B) dedicated cards.
C) open-loop cards.
D) closed-loop cards.

Question 73

Small online payments,typically under $10,are referred to as ________.

A) e-micropayments
B) e-minipayments
C) automated payments
D) contactless payments

Question 74

Unlike the physical supply chain,inefficiencies characterize the financial supply chains of most companies.Factors that create these inefficiencies include each of the following except

A) the time required to create, transfer, and process paper documentation.
B) the cost and errors associated with manual creation and reconciliation of documentation.
C) disputes arising from inaccurate or missing data.
D) too much transparency in inventory and cash positions when goods are in the supply chain.

Question 75

For sellers the main benefit of a letter of credit (L/C)is

A) reduced risk because the bank assures the creditworthiness of the buyer.
B) reduced risk because the bank assumes the costs.
C) greater customer loyalty.
D) improved buyer satisfaction.

Question 76

Among the forms of online B2B payments,the use of ________ is second only to ACH in terms of frequency of use.

A) letters of credit
B) purchasing cards
C) Fedwire, or wire transfer
D) EDI

Question 77

The basic micropayment model where micropayments are added to a monthly bill for existing services best describes

A) subscriptions.
B) stored value.
C) direct payment.
D) aggregation.

Question 78

E-check processing benefits include

A) reducing the float period and the number of checks that bounce because of insufficient funds.
B) speeding the checkout process for consumers.
C) improving the efficiency of the deposit process for merchants and financial institutions.
D) all of the above.

Question 79

The overall implementation and use of contactless payment cards has been

A) slow.
B) rapid.
C) steady.
D) declining.

Question 80

Special-purpose payment cards issued to a company's employees to be used solely for purchasing nonstrategic materials and services up to a preset dollar limit best defines

A) purchasing cards.
B) smart cards.
C) mobile cards.
D) desk cards.