Deck 10: Electronic Commerce Payment Systems

Question 1

The barriers to selling pay-per-page or chapter plans online are technical, not financial.

Answer 1

False

Question 2

Purchases under $5 are called micropayments.

Answer 2

True

Question 3

The disintermediation of cash and credit cards has been successful in the online world.

Answer 3

False

Question 4

Evidence suggests that consumers are willing to use their credit cards for micropayments.

Question 5

To date, companies such as Amazon.com and Random House have been very successful with their pay-per-page and chapter plans for selling books.

Question 6

Currently, the percent of recurring bills paid electronically hovers around 75 percent.

Question 7

Credit cards and charge cards are e-payment instruments that allow the holder to make purchases up to a fixed limit and charge interest each month on unpaid balances.

Question 8

Identification and settlement are the two major phases of card payment processing.

Question 9

In the authorization process, money is transferred from the buyer's to the merchant's account.

Question 10

Recent surveys by CyberSource indicate that fraudulent card transactions are a growing problem for online merchants.

Question 11

According to a recent CyberSource survey, larger firms are more susceptible to fraud than smaller firms.

Question 12

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.

Question 13

One impact of anti-fraud tools is that merchants are rejecting a significant number of both valid and invalid orders due to suspicion of fraud.

Question 14

Smart cards are more secure than credit cards and can be extended with other payment services.

Question 15

Systems that aggregate online purchases are

A) closed-loop systems.
B) open-loop systems.
C) payment consolidation systems.
D) micropayment aggregation systems.

Question 16

Which of the following spurred the use of debit cards by eliminating the requirement for merchants to issue receipts for debit purchases of $15 or less?

A) Federal Deposit Insurance Act
B) Bank Service Company Act
C) U.S. Electronic Funds Transfer Act
D) Bank Protection Act

Question 17

Each of the following is true regarding trends for B2C merchants except:

A) It is hard to run an online business without supporting credit card payments.
B) It is increasingly important to support payments by debit cards.
C) Merchants interested in international markets should support a variety of e-payment mechanisms.
D) Merchants who offer multiple payment types have higher shopping cart abandonment rates and lower order conversion.

Question 18

Factors influencing whether a particular e-payment method achieves critical mass include

A) independence.
B) interoperability and portability.
C) security.
D) all of the above.

Question 19

Each of the following is a true statement regarding e-payment methods except

A) to succeed, special payment methods, such as e-cash, must be well-known.
B) e-payment methods that require the payer to install specialized components are less likely to succeed.
C) if the risk for the payer is higher than the risk for the payee, then the payer is not likely to accept the method.
D) for B2C e-payments, credit cards are the standard due to their ease of use.

Question 20

Each of the following is a payment card type except

A) debit card.
B) video card.
C) credit card.
D) charge card.

Question 21

Which of the following provides the holder with credit to make purchases up to a limit fixed by the card issuer?

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

Question 22

The type of payment card where the money for a purchased item comes directly out of the holder's checking account is a

A) credit card.
B) charge card.
C) debit card.
D) rebate card.

Question 23

During the processing of card payments, which of the following involves the transfer of money from the buyer's to the merchant's account?

A) acquisition
B) acceptance
C) authorization
D) settlement

Question 24

Each of the following is a basic configuration for processing online payments except

A) own the payment software.
B) require the issuing bank to provide the software and the point of sale system.
C) use a point of sale system operated by an acquirer.
D) use a point of sale system operated by a payment provider.

Question 25

Which of the following is the basic configuration for processing online payments where the merchant system deals only with order information?

A) own the payment software
B) use a point of sale system operated by a payment service provider
C) use a point of sale system operated by an acquirer
D) require the payee to utilize specialized software

Question 26

Costs associated with fraudulent transactions include

A) additional fees and penalties imposed by card associations for accepting fraudulent transactions.
B) the cost of manually reviewing orders.
C) the revenue that is lost from rejecting orders that are valid.
D) all of the above.

Question 27

In a 2008 survey, CyberSource documented each of the following except:

A) The total dollars lost to fraud increased substantially, from $1.9 billion in 2003 to $4.0 billion in 2008.
B) The fraud rate for international orders is 3.5 times less than the fraud rate for domestic orders.
C) In 2008, the median value of fraudulent orders was $200, which was 67 percent higher than the average value of valid orders.
D) From 2006-2007, the amount spent on manual review of orders increased over 30 percent, or by about $100 million.

Question 28

The steps merchants have taken to combat fraud include each of the following except:

A) In 2008, merchants used more tools than in the past to combat fraud.
B) In 2008, the median number of tools used by merchants was 4.7, compared with 3 in 2003.
C) Of the .2 percent of online revenue allocated to combating fraud in 2008, most of the money was spent on third-party tools and services.
D) Fraud screens and automated decision models were among the key tools used to combat fraud.

Question 29

Key tools used in combating fraud include

A) address verification.
B) manual review.
C) card verification number.
D) all of the above.

Question 30

A tool that detects fraud by comparing the address entered on a Web page with the address information on file with the cardholder's issuing bank best describes

A) address verification system.
B) card verification system.
C) billing verification system.
D) point of sale system.

Question 31

A file containing customer status and customer information that is used when processing transactions to identify known problem customers is a

A) negative list.
B) problem child list.
C) cancellation list.
D) rejection list.

Question 32

A smart card containing a small gold plate on the face that when inserted in a smart card reader makes contact and passes data to and from the embedded microchip is a

A) plate card.
B) contact card.
C) proximity card.
D) dedicated card.

Question 33

The type of contact card that is erasable and modifiable is

A) EPROM.
B) BIOS.
C) EEPROM.
D) RAM.

Question 34

Which of the following is an open application operating system for smart cards?

A) Linux.
B) SMARTS.
C) Windows Vista.
D) MULTOS.

Question 35

Stored-value cards that are issued by a specific merchant or merchant group and that can only be used to make purchases from that merchant or merchant group are called

A) open-loop cards.
B) closed-loop cards.
C) merchant-specific cards.
D) designated cards.

Question 36

The micropayment model where payments from a single consumer are batched together and processed only after a certain time period has expired or a certain monetary threshold is reached describes

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

Question 37

The micropayment model where up-front payments are made to a debit account, and then purchases are deducted as they are made is

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

Question 38

Purchases under $5 are ________.

Question 39

The ________ eliminated the requirement for merchants to issue receipts for debit purchases of $15 or less.

Question 40

________ are electronic cards that contain information that can be used for payment purposes.

Question 41

A ________ is a type of payment card that provides the holder with credit to make purchases up to a limit fixed by the card issuer.

Question 42

A ________ is a type of payment card where the balance is supposed to be paid in full upon receipt of the monthly statement.

Question 43

________ and ________ are the two major phases of processing card payments.

Question 44

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

Question 45

The ________ activates and reads the contents of the chip on a smart card, usually passing the information on to a host system.

Question 46

A ________ is a smart card containing a small gold plate on the face that when inserted in a smart card reader makes contact and passes data to and from the embedded microchip.

Question 47

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

Question 48

________ and ________ are two varieties of stored-value cards.

Question 49

________ are small online payments, typically under $10.

Question 50

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

Question 51

List the three basic configurations for processing online payments.

Question 52

What is a smart card? Briefly describe two types of smart cards.

Question 53

Briefly describe five basic micropayment models.