Payment Systems Overview
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Questions and Answers

What is a common method for transferring money between different bank accounts?

  • Mobile payment apps
  • Email transfers
  • Electronic Fund Transfer (EFT) (correct)
  • Direct debit

Which component is essential for ensuring data integrity and confidentiality in electronic transactions?

  • Encryption algorithm
  • Transaction history log
  • Public-key infrastructure (PKI) (correct)
  • Digital wallet

What security feature is commonly used to prevent fraud in credit card transactions?

  • Card verification number (CVN) (correct)
  • Two-factor authentication
  • Biometric signatures
  • Customer service hotline

What happens when a customer initiates an EFT to a different bank?

<p>The request is forwarded to an ACH (B)</p> Signup and view all the answers

Which of these is a disadvantage of accepting credit cards for online payment?

<p>High transaction fees (C)</p> Signup and view all the answers

What technology is used to safeguard transactions conducted over public networks?

<p>Transport layer security (TLS) (D)</p> Signup and view all the answers

Which of the following is an emerging trend in fund transfer methods?

<p>Internet-based EFT (D)</p> Signup and view all the answers

Which factor contributes to the risk of identity theft in online banking?

<p>Inadequate website coding (D)</p> Signup and view all the answers

What is the main use of a debit card compared to a credit card?

<p>It deducts funds immediately from the cardholder's bank account. (A)</p> Signup and view all the answers

Which actor in the credit card system is responsible for issuing the card to the consumer?

<p>The card issuer bank (D)</p> Signup and view all the answers

What is a key feature of smart cards that differentiates them from regular credit or debit cards?

<p>They have a microprocessor chip embedded in them. (A)</p> Signup and view all the answers

What defines an e-money transaction?

<p>It occurs over the network without middleman involvement. (D)</p> Signup and view all the answers

Why is a debit card commonly perceived as a way to control spending?

<p>It has a daily withdrawal limit imposed. (C)</p> Signup and view all the answers

What is a significant disadvantage of debit cards compared to credit cards?

<p>They demand sufficient balance in the bank for transactions. (B)</p> Signup and view all the answers

Which of these is an example of a smart card?

<p>Mondex card (C)</p> Signup and view all the answers

In an e-cash transaction, what is required from both customer and merchant?

<p>A bank account with the issuing company (C)</p> Signup and view all the answers

Flashcards

Credit Card Sales

Activities leading to selling goods using a credit card.

Debit Card

A card linked to a bank account that deducts funds instantly.

Debit Card vs Credit Card

Debit cards deduct funds immediately from your account, credit cards don't.

Smart Card

A card with a chip storing data, used for transactions and access control.

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E-Money Transactions

Funds transferred between financial bodies over a network (no middleman).

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E-Cash

A type of e-money where both parties need to register with a company.

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Credit Card Payment Cycle

The monthly period for paying credit card bills.

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Card Holder

The customer who possesses the credit or debit card.

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EFT (Electronic Fund Transfer)

A popular method for transferring money between bank accounts electronically.

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ACH (Automated Clearing House)

A system used to transfer funds between accounts in different banks.

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Cryptocurrency (e.g., Bitcoin)

An example of digital money, often used for transferring value.

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Public-Key Infrastructure (PKI)

A system for verifying the identity of parties.

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Transport Layer Security (TLS)

A security protocol used for communication over the internet.

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Card Verification Number (CVN)

A code used to verify a credit card.

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Credit Card Transaction Fees

Fees paid by a merchant for accepting credit card payments.

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Study Notes

Payment Systems

  • Sales: All activities leading to selling goods, often tied to credit card payment cycles.

Credit Card System Actors

  • Card Holder: Customer
  • Merchant: Seller accepting credit card payments
  • Card Issuer Bank: Cardholder's bank
  • Acquirer Bank: Merchant's bank
  • Card Brand: Visa, Mastercard, etc.

Debit Cards

  • Mechanism: Payment immediately deducted from linked bank account; requires sufficient funds.
  • Benefits: Eliminates carrying cash/checks; readily accepted by merchants; spending limits.

Smart Cards

  • Characteristics: Small microprocessor chip, stores work/personal information, used for transactions.
  • Security: Access through personal identification number (PIN); encrypted data storage.
  • Examples: Mondex, Visa Cash.

E-Money

  • Mechanism: Electronic payment transfers between financial entities without intermediaries.
  • Types: Online payments using credit cards, debit cards, smart cards, e-cash, and cryptocurrencies like Bitcoin.
  • Convenience: Fast, convenient, and time-saving.

Electronic Fund Transfer (EFT)

  • Purpose: Transferring funds between bank accounts (same or different banks).
  • Methods: Automated Teller Machines (ATMs), computers, and increasingly, internet-based transfers.
  • Internet EFT: Customer logs in, requests transfer, bank transfers funds (same/different bank, using ACH for transfers to other banks.)

Online Payment Security

  • Authentication: Financial institutions on receiving end must obtain certificates from authorized certification authorities (CAs).
  • Data Integrity & Confidentiality: Public-key infrastructure (PKI) used.
  • Website Security: Customer-facing websites need careful coding to prevent credential leaks and identity theft.
  • Transport Layer Security (TLS): Protects transactions over public networks.

Credit Card Security in Specific Countries

  • Concerns: Countries like China and India face challenges with credit card security.
  • Security Enhancements: Card verification number (CVN) – compares verification number with cardholder’s bank information.

Credit Card vs Debit Card

  • Cost: Debit cards are often cheaper for merchants than credit cards due to lower transaction fees.
  • Security: Similar security measures exist but cost varies.

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Description

Explore the fundamental concepts of payment systems, including credit and debit card mechanisms, smart cards, and e-money. Understand the roles of various parties involved, such as cardholders and banks. This quiz is essential for anyone studying financial transactions and electronic payment methods.

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