Digital Payments in E-Commerce: Payment Gateways, UPI/Cards/Wallets, Security Basics and Fraud Prevention Questions

Question 1

Define payment gateway.

Accepted Answer

A **payment gateway** is a service that securely captures and routes online payment information between the customer, merchant, and bank/network to get **authorization** (concept).

Question 2

What is UPI?

Accepted Answer

**UPI** is an instant bank-to-bank payment system that allows transfers using a UPI ID or QR code (concept).

Question 3

Tokenization means replacing sensitive card data with a token. (True/False)

Accepted Answer

True. **Tokenization** replaces sensitive card details with a non-sensitive token to reduce exposure (overview).

Question 4

What is authorization in digital payments?

Accepted Answer

**Authorization** is the approval/decline decision from the bank/network for a payment transaction at checkout (concept).

Question 5

Define chargeback (in simple terms).

Accepted Answer

**Chargeback** is a card payment dispute where the customer asks the bank to reverse a transaction after investigation (overview).

Question 6

Phishing is an attempt to steal passwords/OTPs using fake messages or sites. (True/False)

Accepted Answer

True. **Phishing** is social engineering to steal credentials/OTP and commit fraud (concept).

Question 7

Explain the role of a payment gateway in e-commerce (any three functions) using a table.

Accepted Answer

Role of **payment gateway** (concept):

| Function | What it does |
|---|---|
| Secure capture | encrypts/transmits payment data safely |
| Routing | sends transaction to bank/card network/UPI |
| **Authorization response** | returns success/failure to merchant |
| Risk checks | basic fraud screening/blocks suspicious attempts |
| Refund support | helps initiate refunds and reconciliation |

Write any three correct functions.

Question 8

Differentiate authorization, settlement and refund (any three points) using a small table.

Accepted Answer

Difference (concept):

| Term | Meaning | When it happens |
|---|---|---|
| **Authorization** | approve/decline decision | at checkout (immediate) |
| **Settlement** | transfer of funds to merchant after fees | later (T+1/T+2 etc.) |
| **Refund** | money returned to customer | after cancellation/return |

Any three differences are sufficient.

Question 9

Draw the basic payment flow in e-commerce (flowchart) and mention any three steps.

Accepted Answer

Basic payment flow (concept):

```text
Customer -> Merchant Checkout -> Payment Gateway -> Bank/Network/UPI -> Authorization -> Order Confirm
```

Any three steps: checkout initiation, gateway routing, bank **authorization** (success/fail).

Question 10

List any three common payment frauds and one control for each (use a table).

Accepted Answer

Common frauds and controls (concept):

| Fraud type | Example | Control (concept) |
|---|---|---|
| **Phishing** | fake SMS/site steals OTP | awareness + never share OTP + **2FA** |
| Card-not-present fraud | stolen card details used online | OTP/3DS + risk scoring |
| Account takeover | password reuse/SIM swap | device checks + login alerts |
| Friendly fraud | false dispute/chargeback | delivery proof + clear logs |

Write any three rows.

Question 11

Compare UPI, cards and wallets for e-commerce payments (any three points) using a table.

Accepted Answer

Comparison (concept):

| Mode | Key feature | Typical strength |
|---|---|---|
| **UPI** | bank-to-bank instant transfer | fast, low friction |
| **Cards** | card network + OTP/3DS | wide acceptance, credit facility |
| **Wallets** | stored value/linked instruments | quick checkout + offers |

Any three correct comparison points are sufficient.

Question 12

Explain velocity checks and risk scoring in payment fraud prevention (any three points) using a small table.

Accepted Answer

Fraud systems use rules/signals to detect abnormal behavior (concept).

| Control | Meaning | Example (concept) |
|---|---|---|
| **Velocity check** | limits number/value of attempts in a time window | block many OTP retries in 5 minutes |
| **Risk scoring** | assigns a risk score based on signals | high score for new device + high value order |
| Manual review/step-up | extra verification for risky payments | additional OTP/verification for high risk |

Any three correct points are sufficient.

Question 13

Explain digital payments in e-commerce and the role of payment gateway (exam-style) with a flowchart.

Accepted Answer

### Digital payments in e-commerce
Digital payments allow customers to pay online using **UPI**, **cards**, **wallets**, etc., enabling faster checkout and better customer experience (concept).

### Role of payment gateway
A **payment gateway** securely captures payment data, routes it to the bank/network, returns **authorization** status, and supports settlement/refunds and basic risk checks (concept).

### Payment flow (diagram)

```text
Customer -> Merchant Checkout -> Gateway -> Bank/Network/UPI -> Authorization -> Order Confirm -> Settlement
```

Conclusion: Smooth and secure payments increase conversion and build trust (concept).

Question 14

Explain security measures in digital payments and why they are required (exam-style) with a table.

Accepted Answer

### Why security is required
Online payments involve sensitive data and remote authorization, so security is needed to prevent fraud and protect **privacy** (concept).

### Measures (table)

| Measure | Purpose (concept) |
|---|---|
| **Encryption (HTTPS/TLS)** | protects data in transit |
| **OTP/2FA** | prevents unauthorized use |
| Tokenization | reduces exposure of card details |
| Fraud monitoring | flags suspicious patterns |
| Alerts & device checks | reduce account takeover risk |

Conclusion: Strong security improves trust and reduces losses/chargebacks (concept).

Question 15

Discuss payment frauds in e-commerce and suggest a basic fraud prevention framework (exam-style) using a table.

Accepted Answer

### Common frauds
E-commerce payments face **phishing**, card-not-present fraud, account takeover and false disputes/chargebacks (overview).

### Basic fraud prevention framework (table)

| Layer | Control (concept) |
|---|---|
| Authentication | **OTP/2FA**, device binding |
| Transaction checks | velocity limits, risk scoring |
| Monitoring | real-time fraud alerts, manual review for high-risk |
| Customer education | warn against sharing OTP/pins |
| Evidence & dispute handling | delivery proof + logs to manage chargebacks |

Conclusion: Layered controls reduce fraud while keeping checkout smooth (concept).

Function	What it does
Secure capture	encrypts/transmits payment data safely
Routing	sends transaction to bank/card network/UPI
Authorization response	returns success/failure to merchant
Risk checks	basic fraud screening/blocks suspicious attempts
Refund support	helps initiate refunds and reconciliation

Digital Payments in E-Commerce: Payment Gateways, UPI/Cards/Wallets, Security Basics and Fraud Prevention

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