Payment Systems Overview

Question 1

The _____ is a processing and delivery system that provides for the distribution and settlement of electronic credits and debits among financial institutions

Answer 1

ACH Network

Question 2

The ACH movement began in ___ when a group of California bankers formed the Special Committee on Paperless Entries(SCOPE)

Answer 2

1968

Question 3

In 1974, ___ was formed to coordinate the ACH movement nationwide

Answer 3

Nacha (National Automated Clearing House Association)

Question 4

The main benefits associated with the use of the ACH network are ___ and improved productivity over paper check transactions

Answer 4

Cost reduction

Question 5

ACH Operators may be private companies or the Federal Reserve Bank. The current private sector operator is the ___

Answer 5

Electronic Payment Network

Question 6

___ provide management, education, assistance, and services to link all types of financial institutions (commercial banks, savings banks and credit unions) across the United States.

Answer 6

Payments associations

Question 7

The ACH system is a ___ store-and-forward system. Transactions received by the financial institution during the day are stored and processed later in a batch mode.

Answer 7

batch processing

Question 8

The ___ is the entity that agrees to initiate ACH Entries into they payment system according to an arrangement with a Receiver.

Answer 8

Originator

Question 9

An ___ is the central clearing facility operated by a private organization or a Federal Reserve Bank (FRB) on behalf of DFIs to or from which participating DFIs transmit or receive ACH entries.

Answer 9

ACH Operator

Question 10

The ___ is the institution that receives payment instructions from the ___ and forwards Entries to the ACH Operator

Answer 10

ODFI, Originator

Question 11

A ___ is a natural person or an organization that has authorized an originator to initiate an ACH entry to that person’s or organization’s account with the RDFI. A ___ can either be a company or a consumer, depending on the type of transaction.

Answer 11

Receiver, Receiver

Question 12

Unlike a check, which is always a debit instrument, an ACH entry may be either a ___, ___, or a ___, entry.

Answer 12

Credit, Debit, Non-Monerary

Question 13

Dividends, payrolls, and government vendor payments are examples of ACH ___.

Answer 13

Credits

Question 14

Before any transaction is initiated, the Originator and ODFI execute an ___ to use the ACH network to originate payments.

Answer 14

Agreement

Question 15

Among other things, the ___ should bind the originating company to the ___, define the parameters of the relationship between the two parties, identify processing requirements for the specific application(s), and establish liability and accountability for procedures related to certain application(s).

Answer 15

Agreement, Operating Rules.

Question 16

The ___ is one of the world’s oldest forms of payment, and today exists as one of the most common methods of payment, both in the US and Internationaly.

Answer 16

Check

Question 17

The traditional Check is a ___ payment instrument that is widely accepted and used by businesses, governments, and and consumers as payment for virtually any form of commerce.

Answer 17

Debit

Question 18

Fedwire processes each transaction as it is initiated in a real-time, gross-settlement system, rather than ___ by ___

Answer 18

Processing, batch

Question 19

The Fedwire securities are held and transferred in ___ form known as book-entry securities; unlike the Fedwire Funds Service, the Fedwire Securities Service is a ___ system with regard to payments.

Answer 19

Electronic, debit/pull

Question 20

The Fedwire Funds Service is a ___ system in which only the Originator’s financial institution can remove funds from its Federal Reserve account.

Answer 20

credit/push

Question 21

___ are not true payment instruments because they do not result a direct transfer of funds from the payor to the payee.

Answer 21

Credit cards

Question 22

___ are used by cardholders at ATMs to withdraw cash from their accounts and may be used as a means of payment, either on-line or off-line, for goods or services purchased as a retail establishment.

Answer 22

Debit Cards

Question 23

Unlike a ___ card, where the cost of goods is charged to an account that is paid later and to which interest may be applied, the cost of goods charged against a ___ card is taken directly from a demand deposit account.

Answer 23

Credit, debit

Question 24

The two banking conventions that advanced paper check processing are ___ and ___.

Answer 24

Routing numbers, MICR

Question 25

The check system participant known as the payee’s depository financial institution is also known as ___.

Answer 25

Bank of first deposit

Question 26

The first check participant who creates. An image of the original check, or the first bank that transfers, presents, or returns the image of the original Check, is known as the ___.

Answer 26

Truncating bank

Question 27

When a check is sent to another depository institution for collection, it is called a ___ check.

Answer 27

Transit

Question 28

What type of card is similar to a debit card but the balance is not associated with a DDA or other financial institution account.

Answer 28

Prepaid/Stored value card

Question 29

The use of a ___ debit card results in immediate funds transfer.

Answer 29

PIN/Online

Question 30

Each transfer of funds on this payment system is considered irrevocable: ___.

Answer 30

Wire transfer payment system