Digital Payments — Set 4

Correct Answer: A. Replacing card details with a unique alternative code

• **Replacing card details with a unique alternative code** = Tokenization substitutes your actual 16-digit card number with a randomly generated 'token' — a unique string that means nothing if intercepted. • **Security benefit** — Even if a merchant's server is hacked, the token cannot be reverse-engineered to recover the real card number, protecting cardholders from data breaches. • **RBI mandate** — RBI made card-on-file tokenization mandatory for all Indian merchants from October 2022 onward. • 💡 **Validating card PIN** is authentication, not tokenization. **Canceling a credit card** is card management. **Cash withdrawal tokens** are physical queue tokens at banks — entirely unrelated.

Correct Answer: D. BBPS

• **BBPS (Bharat Bill Payment System)** = BBPS is the interoperable platform that lets consumers pay utility bills, EMIs, insurance premiums, school fees, and more through any channel — app, website, or physical agent outlet. • **OMNI channel** — BBPS works both digitally (PhonePe, Paytm, bank apps) and physically (banks, retail outlets), making it truly channel-agnostic. • **Operated by NBBL** — BBPS is operated by Bharat BillPay Ltd., a wholly-owned subsidiary of NPCI. • 💡 **Ministry of IT** sets policy but does not operate payment systems. **NPCI** is BBPS's parent body, not the operator. **RBI** is the regulator, not the operational manager.

Correct Answer: D. National Financial Switch

• **National Financial Switch** = NFS is the largest shared ATM network in India, operated by NPCI, linking ATMs of all member banks so any cardholder can use any ATM regardless of their bank. • **Interoperability** — Before NFS, each bank ran a standalone ATM network; NFS created a single interconnected grid covering 99%+ of bank ATMs nationwide. • **Free transactions** — RBI mandates 5 free NFS transactions per month at other-bank ATMs for savings account holders. • 💡 **New Financial System** and **National Funding Scheme** are invented names with no existence. **Network Financial Service** is also incorrect — NFS always stands for National Financial Switch.

Correct Answer: A. Can be used at multiple clearly identified merchants

• **Can be used at multiple clearly identified merchants** = Semi-closed loop PPIs (e.g., Paytm Wallet, Amazon Pay) are accepted at a defined group of merchants but cannot be cashed out at an ATM or bank counter. • **Three PPI types** — Open loop (bank-issued, ATM cash allowed) → Semi-closed loop (multi-merchant, no cash) → Closed loop (single merchant only, e.g., Starbucks gift card). • **RBI regulated** — Non-bank entities like Paytm must obtain RBI PPI authorization to issue semi-closed wallets. • 💡 **Central Government does not issue** wallets — these are private/bank products. **Cash withdrawal** is the defining feature of open loop, not semi-closed. **Single merchant** describes closed loop, the opposite of semi-closed.

Correct Answer: A. The final transfer of funds between the banks of the payer and payee

• **Final transfer of funds between the banks of the payer and payee** = Settlement is the back-end process where actual money moves between banks — distinct from authorization (which only checks if funds are available). • **Clearing vs. Settlement** — Clearing calculates the net obligations between banks; settlement is the actual fund movement that discharges those obligations, often done via RBI's books. • **Timing gap** — UPI shows instant credit to the user, but the actual inter-bank settlement happens in batches through NPCI, typically same-day or next-day. • 💡 **Canceling a payment** is a reversal/refund, not settlement. **Creating an account** has no link to settlement. **Reporting fraud** is a dispute process — a separate function entirely.

Correct Answer: A. UPI Autopay

• **UPI Autopay** = UPI Autopay (also called e-mandate on UPI) lets users set up standing instructions for recurring payments — OTT subscriptions, SIPs, insurance premiums — with a one-time authorization. • **How it works** — After the user approves the mandate once, the amount is auto-debited on the set schedule without requiring a UPI PIN each time (for amounts up to ₹15,000). • **Launched 2020** — NPCI introduced UPI Autopay under the UPI 2.0 framework, replacing older ECS-based recurring debits for many use cases. • 💡 **FASTag** is for toll payments only. **AEPS** (Aadhaar-Enabled Payment System) is for Aadhaar-linked cash transactions at BCs. **NETC** (National Electronic Toll Collection) is FASTag's back-end network — none handle recurring subscriptions.

Correct Answer: B. A person-specific and purpose-specific digital voucher

• **Person-specific and purpose-specific digital voucher** = e-RUPI is a pre-paid, contactless voucher delivered as a QR code or SMS to a beneficiary's phone — it can only be redeemed at designated service points for the exact intended purpose (e.g., vaccine, fertilizer subsidy). • **Launched August 2021** — Developed by NPCI in collaboration with DFS, MoHFW, and NHA; the recipient does not need a bank account or smartphone to use it. • **Leakage prevention** — Because funds are earmarked for one purpose and one person, e-RUPI prevents diversion of welfare benefits unlike cash transfers. • 💡 **Bank loan** is a credit product — e-RUPI is pre-funded by the sponsoring entity, not borrowed. **Physical coin with chip** describes a prototype CBDC concept, not e-RUPI. **Cryptocurrency** is decentralized — e-RUPI is government-backed and purpose-locked.

Correct Answer: B. Biometrics

• **Biometrics** = Fingerprint, iris scan, face recognition, and voice patterns are all 'Something you are' — inherent physical or behavioral traits unique to the individual. • **Three authentication factors** — (1) Something you know: password/PIN; (2) Something you have: phone/OTP/card; (3) Something you are: biometrics. Multi-factor auth combines two or more. • **Banking use** — AEPS uses Aadhaar-linked fingerprint as the sole authentication, making banking accessible to illiterate users who cannot remember PINs. • 💡 **Password** = Something you know. **OTP** = Something you have (sent to your registered device). **Debit Card** = Something you have. None of these are inherent traits of the user's body.

Correct Answer: D. A waiting period before high-value transactions can be made

• **Waiting period before high-value transactions can be made** = After a new device registration or UPI ID creation, a cooling period (typically 24 hours) limits the transaction amount a user can send, acting as a fraud buffer. • **Why it matters** — If a fraudster steals someone's SIM or phone and registers a new UPI handle, the cooling period prevents instant large-value theft before the victim can report the compromise. • **RBI guideline** — RBI mandates a cooling period for freshly registered payment instruments or when key credentials are changed, as part of fraud risk management. • 💡 **Debit card issuance** takes days via courier — unrelated to cooling period. **Refund processing** is a merchant/bank timeline issue. **App maintenance downtime** is a technical window, not a security waiting period.

Correct Answer: B. A bank-issued Reloadable Prepaid Card

• **Bank-issued Reloadable Prepaid Card** = Open loop PPIs carry a network logo (Visa, Mastercard, RuPay), can be used at any merchant accepting that network worldwide, and allow ATM cash withdrawals — the broadest category of PPIs. • **Only banks can issue open loop PPIs** — Non-bank entities like Paytm or Amazon are restricted to semi-closed loop instruments by RBI. • **Reloadable** — Unlike gift cards, open loop prepaid cards can be topped up repeatedly and used internationally. • 💡 **Amazon Pay Balance** = Semi-closed loop (no ATM cash, used at Amazon/partner merchants). **Paytm Wallet** = Semi-closed loop. **Mall gift card** = Closed loop (single merchant ecosystem). Only the bank-issued reloadable card qualifies as open loop.