Payment Instruments And Systems

Question 1

How are payments made?

Answer 1

In cash

By cashless payment instruments

Question 2

Who are the payment service providers?

Answer 2

Credit institutions
Payment institutions
Other institutions

Question 3

What is PSP’s purpose?

Answer 3

They allow their users to transfer funds between accounts.

Question 4

What are the payment instruments?

Answer 4

Credit transfer
Direct debit
Payment card
E-money
Cheque
Bill of exchange
Promissory note

Question 5

What is Credit Transfer?

Answer 5

A payment order initiated by the payer to its bank requesting that an amount of funds be deposited in a payee’s account.

Question 6

What is direct debit?

Answer 6

A pre-authorised payment order initiated by the payee on the payer’s bank account. It is used to collect receivables or pay taxes.

Question 7

What is a payment card?

Answer 7

A physical device or virtual instrument used to perform payment transactions.

Question 8

What is a payment card used for?

Answer 8

• to make payments to merchants that accept cards
• to withdraw money from an ATM
• to transfer funds between accounts

Question 9

What are international card schemes?

Answer 9

International card schemes (VISA, Mastercard) are used for transactions outside the card’s home country.

Question 10

Types of Payment Cards by usage

Answer 10

Credit card (allows drawing of funds up to an approved credit limit)
Debit card (allows drawing of funds up to the amount of money that exists in the account)
Debit card with an overdraft (allows drawing of funds up to an overdraft at which point negative balance is presented)
Prepaid card (a card with a pre-loaded amount of funds, such as a gift card used for specific payments)

Question 11

Types of payment card by issuer

Answer 11

Bank cards (issued by banks)
Store card (issued by retailers, gift cards, discount cards)
Co-issued cards (issued by retailers in collaboration with banks)

Question 12

Types of payment cards by technology

Answer 12

Card with a magnetic stripe
Card with a microprocessor
Dual card (with both)

Question 13

Types of cards by the payment time/area

Answer 13

Pay before: prepaid cards
Pay now: debit cards
Pay later: credit cards

Domestic cards
International cards

Question 14

What are the electronic payment instruments?

Answer 14

Physical card
Virtual card (used for online transactions)
Internet banking
Home banking
Mobile banking

Question 15

What is e-money

Answer 15

E-money is fiat money in the virtual space, used to facilitate online transactions. It can be exchanged for physical money.

Question 16

What are the debit payment instruments?

Answer 16

Cheque
Bill of exchange
Promissory note

Question 17

What is the cheque?

Answer 17

The cheque is a document through which the user has the right to request a certain amount of funds from the bank if the user has the required funds in the account when he presents the document.

Question 18

What is the bill of exchange?

Answer 18

It is a document through which the issuer gives an order to the payer to pay a payee at maturity.

Question 19

What is a promissory note?

Answer 19

A document through which the issuer undertakes to pay a payee at maturity.

Question 20

What is a letter of credit?

Answer 20

A contractual agreement through which a bank allows another bank to make payments to a beneficiary.

Question 21

What is a letter of guarantee?

Answer 21

It is a document through which a bank agrees to pay one of its customers’ debt on behalf of the customer.

Question 22

What is a payment system?

Answer 22

A set of instruments and procedures used for the transfer of funds among the members of the system.

Question 23

What are the components of a payment system?

Answer 23

Real Time Gross Settlement (settles large value payments on a 1 to 1 basis)
Automated clearing house (settles low value high volume (retail) payments
Securities settlement system (settles payments with securities)

Question 24

What is TARGET 2?

Answer 24

It is a real time gross settlement system owned by the Eurosystem.
Usages:
-monetary policy operations
-interbank transfers

Question 25

What is TARGET Instant Payment System?

Answer 25

An extension of TARGET 2 which allows PSP’s to transfer funds to their clients nonstop.

Question 26

What is Euro Banking Association Clearing?

Answer 26

A private owned clearing service. It offers both high and low value clearing services.

Question 27

What is EURO1?

Answer 27

A privately owned real time gross settlement system.

Question 28

What is STEP1?

Answer 28

A privately owned payment system complementary to EURO1. It facilitates payments to banks outside EURO1. Banks in STEP 1 have full EURO1 benefits.

Question 29

What is the Continuous Linked Settlement system?

Answer 29

An international clearing and settlement system for cross-border foreign exchange transactions.

Introduced in 2002.

Question 30

What is the Fedwire?

Answer 30

A real time gross settlement system provided by the Federal Reserve Banks to make high-value time-sensitive payments.

Question 31

What is STEP2?

Answer 31

The Pan-European clearing house used for payments smaller than 50,000 Euro.

Question 32

What is SEPA?

Answer 32

SEPA is the single european payment area. It enables customers to make non-cash euro payments to any beneficiary located in the euro area.

Question 33

What are SEPA’s objectives?

Answer 33

• to create a single domestic market
• to eliminate the differences between domestic and cross-border payments in euro
• to bring economic opportunities

Question 34

What is the Romanian payment system composed of?

Answer 34

Romanian Electronic Gross Interbank Settlement (RTGS)
the System for Electronic Net Settlement (Automated Clearing House)
TARGET-2 Romania
SaFIR and RoClear are two Romanian security settlement systems.