Payment Methods and Business Transactions Quiz

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Questions and Answers

What is one of the periodic costs associated with payment methods?

Public fees

Setup and adjustment costs

Rental fees for hardware (correct)

Procurement costs

What is a security requirement necessary for selecting a payment method?

Transaction control & monitoring (correct)

Simple user interface

Low service fees

High transaction limits

What is a potential problem with payment per invoice?

Delayed payment by the supplier

Invoice sent before payment confirmation

Invoice without delivery (correct)

Payment is received before delivery

In the cash in advance payment method, when does delivery occur?

After payment has been confirmed Signup and view all the answers

Which of the following is part of the GiroPay payment process?

Initiation of payment via GiroPay Signup and view all the answers

What must a customer's bank do for them to use GiroPay?

Attend the GiroPay method Signup and view all the answers

What is one primary role of money in business transactions?

To buffer the value of achievements over time Signup and view all the answers

What must both the customer and supplier accept during a transaction involving notes and coins?

The authenticity of the money Signup and view all the answers

Which of the following describes how cash transactions are conducted?

Both customer and supplier must meet at the same physical location. Signup and view all the answers

What role does the bookkeeper play in transactions involving book money?

Manages the account balance and transfers funds Signup and view all the answers

What comprehensive risk does the supplier face when using the payment per invoice method?

Risk of customer non-payment Signup and view all the answers

Which factor is NOT part of the magic triangle for assessing payment methods from the supplier's perspective?

Seller's profit margin Signup and view all the answers

What is a limitation of using notes and coins in business transactions?

Dependence on a central bank for authorization Signup and view all the answers

Which of the following is considered a one-time cost in payment options?

Procurement costs Signup and view all the answers

What is a significant advantage of using book money over cash transactions?

Higher protection against fraud and loss Signup and view all the answers

Why is cash considered to allow complete anonymity of participants in a transaction?

Due to the lack of digital footprints compared to electronic transactions Signup and view all the answers

Which primary payment method does NOT involve immediate transfer of cash?

Debit note Signup and view all the answers

What is a characteristic of cash as a medium of exchange?

It is divisible into very small units. Signup and view all the answers

What does the periodicity of payment refer to in terms of payment methods?

The frequency of payments, e.g., one-time or periodic Signup and view all the answers

What must a customer verify during a cash transaction?

The authenticity of the goods being purchased Signup and view all the answers

What is one of the technical parameters for selecting appropriate payment methods?

Anonymity of customers Signup and view all the answers

What aspect of notes and coins makes them less effective in certain economic areas?

Their limited geographic acceptance due to various currencies Signup and view all the answers

What is a significant challenge associated with the use of physical money?

There is a high risk of fraud and loss. Signup and view all the answers

What should account owners be aware of regarding their book money transactions?

They may need to exchange book money for notes and coins Signup and view all the answers

What is a primary reason that can cause delays in payment?

Chargeback of credit card payment Signup and view all the answers

Which of the following is NOT a cashing method listed?

Online payment portals Signup and view all the answers

What is the first step a lawyer takes if cashing activities have failed?

Announcing legal activities Signup and view all the answers

Which of these definitions best describes cyber money?

A medium of exchange that is created and stored electronically Signup and view all the answers

What distinguishes virtual currency from other forms of currency?

It is typically controlled by its developers Signup and view all the answers

What is required for money documents to be considered authentic?

A signature Signup and view all the answers

Which statement is correct regarding the characteristics of virtual money?

Neither supplier nor customer needs to be the issuer Signup and view all the answers

What happens if the lawyer's activities are unsuccessful?

The case is forwarded to the court Signup and view all the answers

What is a requirement for a supplier to utilize the GiroPay service?

The supplier must have a bank account. Signup and view all the answers

Which of the following potential issues is associated with payments made via cash on delivery?

Customer issues with change money. Signup and view all the answers

What should the customer provide when opting for cash on delivery?

Delivery address and payment data. Signup and view all the answers

What is a key condition for processing payments via debit note?

The customer has a giro contract with their bank. Signup and view all the answers

How is confirmation of payment handled when using cash on delivery?

The delivery service provider notifies the supplier. Signup and view all the answers

Which of these scenarios can lead to complications in cash on delivery transactions?

Customer refusal of delivery. Signup and view all the answers

What risk is associated with payments through debit notes?

Collection difficulties due to insufficient funds. Signup and view all the answers

In what manner is the risk characterized when using cash on delivery?

The method is risk neutral. Signup and view all the answers

What is a throwaway money card?

A smart card loaded one-time and becomes valueless after that. Signup and view all the answers

Which of the following is true regarding mobile payment methods like mpass?

It requires a mobile phone and a banking account from Germany. Signup and view all the answers

What equipment is typically needed to read a money card during a transaction?

Specific equipment designed for reading money cards. Signup and view all the answers

What is one potential problem with using a money card?

There is a risk of the supplier charging more than authorized. Signup and view all the answers

How does ClickandBuy facilitate online transactions?

It stores customer banking information securely on its server. Signup and view all the answers

Which step is NOT part of the mpass payment process?

Entering a credit card number. Signup and view all the answers

What does the term 'wearable account' refer to in the context of money cards?

An account physically carried by the customer in card form. Signup and view all the answers

What is necessary for a customer to use ClickandBuy in an online shop?

To provide their ClickandBuy username and password. Signup and view all the answers

Study Notes

Electronic Payment Overview

Electronic payment methods are used for e-commerce, replacing cash transactions.
Money acts as a "lubricant" for economic activity, enabling business transactions.
Economic areas without money are usually restricted to small geographic areas.
Money is a means of buffering value over time.
The economic cycle involves delivering a product or service, receiving payment, offering money to get a product, receiving the product, and spending the money.

Traditional Payment Methods

Cash (notes and coins): Simple, low transaction costs, and allows anonymity, but vulnerable to fraud and loss.
Physical currency's business value is higher than its physical value, needing central bank authorization.
Restrictions due to different currencies limit the use of physical currency in various economic areas.

Problems with Traditional Methods

Authenticity may be questionable.
Possible loss or theft.
Acceptance by both parties is required.

Book Money Overview

Today, most business transactions use book money rather than physical notes and coins.
Book money requires a banking account for customers and suppliers.
A bookkeeper guarantees account balances and enables money transfers.
Book money transactions cannot be completely anonymous.
Suppliers are guaranteed payment with book money, but transactions come with costs.

Different Types of Money

Money in cash
Book money
E-money

Primary Payment Methods

Cash payment
Bank transfer
Debit note
Wallet payment

Assessment Factors for Payment Methods

The supplier assesses payment methods based on customer acceptance, prevention of payment shortages, and costs.

Technical Parameters for Choosing Payment Methods

Payment periodicity (one time, periodic, or subscription-based).
Business internationality.
Customer anonymity.
Level of payment guarantee (protection against payment shortfalls or delays).
Distribution and acceptance of the method.

Payment Amounts and Costs

Invoiced amount.
Payment-dependent costs (customer and supplier costs based on transaction or volume).
Payment-independent costs (one-time procurement or setup costs, and periodic costs).

Security Requirements

Transaction control and monitoring.
Secure authentication procedures.
Defined liability scope.

Payment Procedures (Invoice-Based)

The basic process typically includes ordering, delivery, sending an invoice (possibly integrated with delivery), payment (e.g., bank transfer), and confirmation of payment.

Potential Problems (Invoice-Based)

Delivery without invoice.
Invoice without delivery.
Discrepancies between delivery and invoice.
Non-payment by the customer.
Delayed payment.

Assessment of Payment per Invoice Methods

This method is not an integral part of e-commerce.
Risk is carried primarily by the supplier.

Payment Procedures (Cash in Advance)

The key steps are ordering, invoicing, payment, and delivery after payment receipt.

Issues with Cash in Advance Payment Methods

The customer bears the risk for non-delivery.

GiroPay Method

Introduced in 2000.
Founded by a group of German banks.
Steps of transaction include confirming a pre-filled money transfer form and crediting the supplier.
Customer and supplier accounts must allow online bank usage.
Suppliers and customers must contract with a bank.

Potential Problems (GiroPay)

Duration from payment to delivery.
Differentials between payment amount and delivery volume.
Confirmation of payment receipt.

Assessment of GiroPay Method

This method is not embedded in e-commerce; the risk remains with the customer.

Cash on Delivery Payment Methods

Customer places an order with cash on delivery (COD) and specifies the delivery address.
Delivery occurs with an invoice.
Supplier forwards the parcel with the invoice to the delivery service provider.
Delivery service provider delivers to the customer.
Customer pays delivery service provider, who forwards the money payment to the supplier.
Supplier confirms payment.

Problems and Conditions (COD Payment Methods)

Delivery unavailability (customer absence).
Invoice and delivery issues.
Customer cash availability and change issues.
Delivery provider handling of transactions.

Assessment of Cash on Delivery Methods

Not an integral e-commerce part; risk neutral, but with customer facing issues.

Payment per Debit Note (or Credit Memo)

Involves order placement, debit note submission by the supplier at the bank, bank account clearance, the supplier's bank taking the requested money amount from the customer's account—delivery, and invoice forwarding.

Payment per Credit Note Surrounding Conditions

Customer has a giro contract with the bank.
Suppliers have a cashing contract with a bank.
Customer and supplier banks have debit-note handling contracts.

Payment per Debit Note Problems

Money collection issues.
Non-delivery.
Discrepancies between delivery and invoice.

Assessment of Payment per Debit Note

Simple application, trustee function of the bank, greater customer risk, possible security issues related to data on the web.

Payment via Credit Card (Payment per credit note)

Order, invoicing, credit card payment acceptance, and delivery, forwarding invoice (if not online).

Surrounding Conditions (Payment per Credit Card)

Customer has a credit card contract.
Merchant must have credit acceptance contract with a bank and be linked to a payment service provider.

Payment per Credit Card Potential Problems

Non-delivery.
Invoice differences.
Payment malfunctions.

Credit Card Payment Assessment

Payment guaranteed by the credit card company, making the method risk-neutral.

E-Payment Overview

E-Payment methods supplement traditional methods, simplifying e-commerce for sellers and buyers.
Often combining several traditional payment options.

General E-Payment Procedure

Customer initiates payment, supplier requests payment from an e-payment service provider, vendor forwards customer to the e-payment platform, customer confirms transaction, e-payment firm processes transaction, and credits the supplier's account.

Examples of E-Payment Systems

PayPal
Smart Card-based systems (Paysafecard, T-Pay)
Mobile-based systems (mpass, ClickandBuy).

Mobile Phone-Based Systems (e.g., mpass)

Mpass integrates online shopping with mobile technology.
Requires a German mobile number and bank account.
Secure authentication process using personal PIN and SMS verification.
Registration is simple and free; the customer can use it whenever they choose.

ClickandBuy Method

ClickandBuy stores customer data (bank and credit details) on its server.
Customers do not need to display banking credentials; the data is kept safe.
ClickandBuy supports various online shops, including Apple iTunes Store, T-Online Musicload, Steam, bwin, Test.de, FAZ.NET, and iStockphoto.

Receivables Management

Delays in payment can be caused by chargebacks (for credit or debit cards) or delayed invoice payment.
Methods for managing or chasing unpaid receivables include dunning letters, phone calls, and in-person visits.

Legal Actions and Court Procedures

If internal cashing attempts fail, lawyers can initiate legal action and take the matter to court.
These actions may involve notifying the receiver of the activities, citing past judgments, and submitting details that constitute a case.

Cyber Money Overview

Cyber money (or digital currency) involves electronically created and stored money used for online transactions.
Key difference is that it's not a legal tender.

Virtual Money

Virtual money consists of value units stored electronically.
Neither the buyer nor the seller needs to be the issuer of the virtual currency.
Virtual money methods, if properly implemented, can potentially replace physical cash and bank reserve systems.

Virtual Money Requirements and Problems

An agreed upon currency unit is needed.
Defining authority for issuing money documents (similar to a central bank).
Private currencies need their value ensured by the issuers.
Exchange rates must be fixed.
Complete anonymity isn't achieved in web transactions.

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Description

Test your knowledge on various payment methods and their implications in business transactions. This quiz covers periodic costs, security requirements, and specific challenges related to payment processes. Dive into the intricacies of cash transactions and the role of money in business.