Deck 11: Electronic Commerce Payment Systems

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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.

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

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.

Question 8

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

Question 9

With a debit card,the money for a purchased item comes directly out of the holder's checking account with the actual transfer of funds from the holder's account to the merchant's taking place within one to two days.

Question 10

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 11

CyberSource is a payment processing service that provides connectivity among merchants,customers,and financial networks that enable authorization and payments.

Question 12

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 13

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

Question 14

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

Question 15

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

Question 16

A number of international,federal,and state regulations govern all payment methods.

Question 17

In the authorization process,the system determines whether a buyer's card is active and the customer has sufficient available credit line or funds.

Question 18

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

Question 19

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 20

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 21

________ 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 22

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 23

CyberSource's 2008 survey of 400 merchants documented each of the following trends except:

A)Total dollars lost to fraud decreased substantially since 2004.
B)The percentage of online revenues lost per merchant has declined slightly since 2004.
C)Fifty-two percent of the merchants surveyed accepted international orders outside the United States and Canada.
D)Overall security expenditures for online fraud detection remained the same from 2006 to 2007.

Question 24

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 25

B2B fulfillment may be more complex than that of B2C because it has at least six dimensions of complexity instead of only two dimensions.

Question 26

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 27

Smart cards that have erasable memory and are modifiable are ________.

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

Question 28

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

Question 29

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 30

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 31

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 32

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

A)dependence
B)portability
C)divisibility
D)regulations

Question 33

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

A)hardware and software independence
B)full traceability of the buyers
C)degree of security of the transfer
D)interoperability with other enterprise systems and applications

Question 34

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 35

Payment cards are electronic cards that contain information that can be used for payment purposes.Which is not a form of payment card?

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

Question 36

The overall implementation and use of contactless payment cards has been ________.

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

Question 37

Approximately 80% 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 38

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 39

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

Question 40

________ 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 41

For many firms,presentment and payment processes are all of the following except:

A)costly
B)time consuming
C)secure
D)error-prone

Question 42

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 43

In a card payment system,________ determines whether a buyer's card is active and whether the customer has sufficient available credit line or funds.

Question 44

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 45

In addition to tracking trends in online ________,the CyberSource surveys also monitor the steps taken by merchants to combat it.

Question 46

The major reasons why many companies prefer to outsource some of the support services include all of the following except:

A)the need to have services up and running rapidly
B)lack of experience or resources needed for many of the support services
C)for a sustainable competitive advantage
D)the desire to concentrate on the core business

Question 47

With a ________,the money for a purchased item comes directly out of the holder's checking account.

Question 48

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

A)time required to create,transfer,and process paper documentation
B)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 49

Most merchants use the fraud detection method known as ________.This method compares the address entered on a Web page with the address information on file with the cardholder's issuing bank.

Question 50

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 51

Approximately ________ percent of B2B payments are still made by check,and the barriers to electronic payments remain essentially the same.

A)10
B)25
C)50
D)80

Question 52

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

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

Question 53

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 54

Barriers inhibiting B2B electronic payment include all of the following except:

A)a shortage of IT staff
B)a lack of integration of payment and accounting systems
C)strict standard formats for remittance information
D)inability of trading partners to send or receive electronic payments with sufficient remittance information

Question 55

In the processing of card payments,________ involves the transfer of money from the buyer's to the merchant's account.

Question 56

The financial institution that provides the customer with a card is the ________.

Question 57

A number of international,federal,and state ________ govern all payment methods.

Question 58

An advantage of e-checks is that they:

A)involve simple processing systems.
B)operate outside the traditional banking industry.
C)contain much more information then traditional paper checks.
D)fit current business practices,and so require little process reengineering.

Question 59

According to a survey by Credit Research Foundation,the major reasons companies turn to enterprise invoice presentment and payment (EIPP)solutions are all of the following except:

A)elimination of billing disputes
B)improved cash flow
C)better customer service for billing and remittance
D)improved data that can lower invoice processing costs

Question 60

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

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

Question 61

Although credit cards are the instrument of choice for B2C payments,in the B2B marketplace,the major credit card companies and associations have encouraged businesses and government agencies to rely on ________ instead of checks for repetitive,low-value transactions.

Question 62

A ________ is a file that includes a customer's information (IP address,name,shipping/billing address,contact numbers,etc. )and the status of that customer.

Question 63

When a credit card is used for payment,the merchant pays a(n)________ of up to 3 percent of the item's purchase price.

Question 64

________ are used for those applications in which the data must be processed very quickly.

Question 65

The ________ stores the monetary value of a smart-value card.

Question 66

________ often are used when global B2B payments need to be made,especially when there is substantial risk associated with the payment.

Question 67

Identify and briefly describe three crucial factors that come into play in determining whether a particular method of e-payment successfully achieves critical mass.

Question 68

A(n)________ is an electronic card containing an embedded microchip that enables predefined operations or the addition,deletion,or manipulation of information on the card.

Question 69

The process by which companies present invoices and make payments to one another through the Internet is known as ________.

Question 70

What costs do online merchants incur for fraudulent transactions?

Question 71

A(n)________ card has an embedded antenna that passes data and applications to and from a card reader unit without contact between the card and reader.

Question 72

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

Question 73

A(n)________ is a legally valid electronic version or representation of a paper check.

Question 74

The ________ number detects fraud by comparing the verification number printed on the signature strip on the back of the card with the information on file with the cardholder''s issuing bank.

Question 75

The Automated Clearing House Network is a nationwide batch-oriented EFT system that provides for the interbank clearing of ________ for participating financial institutions.

Question 76

________,or single purpose,store-value cards are issued by a specific merchant or merchant group.

Question 77

Like computers,smart cards have an underlying ________.

Question 78

The primary purpose of the smart card ________ is to act as a mediator between the card and the host system that stores application data and processes transactions.

Question 79

In general,smart cards are ________ secure than conventional payment cards.

Question 80

A smart card looks like a plastic payment card,but it is distinguished by the presence of an embedded ________.