Electronic Commerce 2012 7E Test Bank Chapter 10

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Electronic Commerce 2012, 7e (Turban) Chapter 10 Electronic Commerce Payment

Systems 10.1 True/False Question: The barrier to selling books online, either hardcopy or

electronic, is technical and not financial. Answer:

Question: In the online world, virtually every attempt to disintermediate cash and credit

cards has failed. Answer:

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

Answer:

Question: E-payment systems that require the payer to install specialized security software

have proven more likely to succeed. Answer:

Question: The success of an e-payment method depends on its interoperability with

existing enterprise systems and applications. Answer:

Question: To succeed, special e-payment methods, such as e-cash, have to maintain

anonymity. Answer:

Question: 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:

Question: In the settlement process, the systems must determine whether a buyers card is

active and whether the cardholder has sufficient funds available for the purchase. Answer:

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

settlement. Answer:

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

cards. Answer:

Question: 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. Answer:

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

Answer:

Question: 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. Answer:

Question: Because of their visibility and large sales volumes, larger firms are more

susceptible to fraud than medium-sized firms. Answer:

Question: 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. Answer:

Question: Card verification number (CVN) methods are useless against a fraudster who

possesses the stolen credit cards. Answer:

Question: Over 80 percent of all merchants use the manual review method, which relies on

staff to manually review suspicious orders. Answer:

Question: Thirty-eight percent of all merchants use negative lists, which are files that

include a customers information and the status of that customer. A customers transaction is

matched against these files and flagged if the customer is a known problem. Answer:

Question: 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. Answer:

Question: Contact and proximity are two types of smart card readers. Answer:

Question: Most contact cards are EPROM. Answer:

Question: 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:

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

Answer:

Question: Regardless of the vendors point of view, there is substantial evidence that

consumers are not willing to use their credit or debit cards for micropayments under $5.

Answer:

Question: With the stored value micropayment model, up-front payments are made to a

debit account from which purchases are deducted as they are made. Answer:

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

check. Answer:

Question: The Purchase Order Processing NACHA system does not require specialized

readers for each checkout counter. Answer:

Question: E-checks cannot be used with in-person purchases. Answer:

Question: Mobile payment refers to payment transactions initiated or confirmed using a

persons desktop computer. Answer:

Question: 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.

Answer:

Question: The information divide is the gap between people with effective access to digital

and information technology and those without. Answer:

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

Answer:

Question: The consolidator EIPP model links one seller to many buyers. Answer:

Question: Cash Concentration or Disbursement (CCD) is a type of ACH entry for B2B

transactions. Answer:

Question: With letters of credit, credit risk is reduced because payment is accessed via the

credit worthiness of the issuing bank. Answer:

Question: 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. Answer:

Question: 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 Answer:

Question: 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. Answer:

Question: 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. Answer:

Question: 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.

Answer:

Question: Forms of payment cards include each of the following except A) credit cards. B)

purchase cards. C) charge cards. D) debit cards. Answer:

Question: Which of the following is an example of a charge card? A) MasterCard B)

EuroPay C) Diners Club card D) Visa Answer:

Question: 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. Answer:

Question: A(n) ________ is a third-party service connecting a merchants 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) Answer:

Question: 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 Answer:

Question: 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 Answer:

Question: 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. Answer:

Question: ________ 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 Answer:

Question: 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

Answer:

Question: 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. Answer:

Question: Key tools used in combating online fraud include A) negative lists. B) manual

reviews. C) address verification. D) all of the above. Answer:

Question: Which of the following is an online fraud detection tool that matches a

customers 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 Answer:

Question: 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. Answer:

Question: 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. Answer:

Question: ________ 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 Answer:

Question: 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 Answer:

Question: 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 Answer:

Question: Smart cards that have erasable memory and are modifiable best describe A)

contact cards. B) contactless cards. C) EPROM cards. D) EEPROM cards. Answer:

Question: The largest demand for smart cards continues to come from A) the Asia-Pacific

region. B) Europe. C) North America. D) South America. Answer:

Question: 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 Answer:

Question: The overall implementation and use of contactless payment cards has been A)

slow. B) rapid. C) steady. D) declining. Answer:

Question: 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 Answer:

Question: 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

Answer:

Question: 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.

Answer:

Question: Payroll cards, government benefit cards, and prepaid debit cards are examples of

________ cards. A) closed-loop B) open-loop C) contactless D) EEPROM Answer:

Question: Small online payments, typically under $10, are referred to as ________. A)

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

Answer:

Question: 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. Answer:

Question: Basic micropayment models include each of the following except A) stored

value. B) wholesale. C) subscriptions. D) direct payment. Answer:

Question: 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

Answer:

Question: 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.

Answer:

Question: 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. Answer:

Question: Types of mobile payments include each of the following except A) EIPP

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

Answer:

Question: 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.

Answer:

Question: 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. Answer:

Question: Presenting and paying B2B invoices online best defines A) EIPP. B) NOC. C)

POP. D) ACH. Answer:

Question: EIPP models include each of the following except A) consolidator. B) seller

direct. C) buyer direct. D) intermediate. Answer:

Question: 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 Answer:

Question: Special-purpose payment cards issued to a companys 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. Answer:

Question: 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 Answer:

Question: 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. Answer:

Question: Identify five of the nine crucial factors that come into play in determining

whether a particular method of e-payment successfully achieves critical mass. Answer:

Question: What costs do online merchants incur for fraudulent transactions? Answer:

Question: Define address verification system. What is one disadvantage of the Address

Verification System (AVS)? Answer:

Question: How do B2B electronic payments and billing systems differ from B2C

electronic payments? Answer:

Question: Describe smart cards, stored-value cards, and e-checks. Answer: