APRP Payment Systems 3 — Questions and Answers
Question 1: What is the role of a 'payment facilitator' (PayFac) in the merchant acquiring ecosystem?
- It acts as the card network that sets interchange fees
- It sponsors merchants under its own master merchant account, handling onboarding and settlement (Correct answer)
- It issues payment cards on behalf of banks
- It processes chargebacks on behalf of the acquiring bank
Correct answer: It sponsors merchants under its own master merchant account, handling onboarding and settlement
A PayFac aggregates sub-merchants under its master merchant account, enabling faster onboarding and taking on liability for those merchants.
Question 2: Which concept describes the practice of using a single transaction to offset obligations between multiple counterparties, reducing gross settlement to a net amount?
- Tokenization
- Multilateral netting (Correct answer)
- Straight-through processing
- Float management
Correct answer: Multilateral netting
Multilateral netting consolidates obligations among multiple parties so only net positions are settled, reducing liquidity needs and credit exposure.
Question 3: What distinguishes a 'closed-loop' payment system from an 'open-loop' payment system?
- Closed-loop systems require EMV chip technology; open-loop systems do not
- Closed-loop systems are usable only within a specific merchant or network; open-loop systems are accepted broadly (Correct answer)
- Open-loop systems settle in real time; closed-loop systems use batch processing
- Closed-loop systems are regulated by the Federal Reserve; open-loop systems are not
Correct answer: Closed-loop systems are usable only within a specific merchant or network; open-loop systems are accepted broadly
Closed-loop systems (e.g., Starbucks gift cards) are accepted only within a defined network, while open-loop systems (e.g., Visa) are accepted across many merchants.
Question 4: In the context of card networks, what is a 'floor limit'?
- The minimum interchange fee charged per transaction
- A transaction value threshold below which offline authorization may be accepted without real-time approval (Correct answer)
- The minimum daily settlement amount required by an acquirer
- The lowest credit limit that can be issued on a consumer card
Correct answer: A transaction value threshold below which offline authorization may be accepted without real-time approval
A floor limit allows merchants to accept transactions up to a specified amount without seeking online authorization, used historically in environments with limited connectivity.
Question 5: Which NACHA rule category addresses the requirements that originators must obtain proper consumer authorization before initiating ACH debit entries?
- Risk Management Rules
- Authorization Requirements (Correct answer)
- Debit Velocity Controls
- Micro-deposit Verification
Correct answer: Authorization Requirements
NACHA's Authorization Requirements rules mandate that originators obtain written or verifiable authorization from consumers before pulling funds via ACH debit.
Question 6: What is 'payment latency' and why does it matter to risk managers?
- The delay between a transaction's authorization and its final settlement, which creates exposure windows for fraud and reversals (Correct answer)
- The time it takes for a cardholder to dispute a charge after receiving their statement
- The lag between when interchange rates are set and when they take effect
- The delay in receiving chargeback notifications from the card network
Correct answer: The delay between a transaction's authorization and its final settlement, which creates exposure windows for fraud and reversals
Payment latency is the gap between authorization and settlement; during this window, funds are not yet final, creating risk of fraud losses, reversals, or counterparty default.
Question 7: Which of the following is an example of a 'push-to-card' payment use case?
- A customer paying a merchant with a debit card at point of sale
- An insurance company disbursing a claim payment directly to a policyholder's Visa card (Correct answer)
- A subscription company charging a stored card on file monthly
- A cardholder initiating a balance transfer between two credit cards
Correct answer: An insurance company disbursing a claim payment directly to a policyholder's Visa card
Push-to-card payments use networks like Visa Direct or Mastercard Send to push funds to a recipient's debit or prepaid card in near real time.
APRP Payment Systems 3
What is the role of a 'payment facilitator' (PayFac) in the merchant acquiring ecosystem?