FIA Financial Technology & Systems 3 — Questions and Answers
Question 1: Which financial technology standard provides a common language for reporting financial data to regulators using XML-based tagging?
- FIX Protocol
- XBRL (Correct answer)
- ISO 8583
- ANSI X12
Correct answer: XBRL
XBRL (eXtensible Business Reporting Language) is an XML-based standard used by regulators like the SEC to receive standardized financial reports.
Question 2: In payment processing, what does the term 'interchange fee' refer to?
- The fee charged by a clearinghouse to settle payments
- The fee an issuing bank charges the acquiring bank per card transaction (Correct answer)
- The annual fee charged to cardholders by card networks
- The fee for converting currencies in cross-border payments
Correct answer: The fee an issuing bank charges the acquiring bank per card transaction
Interchange fees are paid by the merchant's bank (acquirer) to the cardholder's bank (issuer) and are set by card networks like Visa and Mastercard.
Question 3: What is the role of a 'payment gateway' in e-commerce transactions?
- It physically transports currency between banks
- It authorizes and captures payment data between merchant and processor (Correct answer)
- It sets the exchange rate for international payments
- It provides fraud insurance to merchants
Correct answer: It authorizes and captures payment data between merchant and processor
A payment gateway encrypts and transmits card data from a merchant to the payment processor and returns an approval or decline response.
Question 4: Which regulatory framework requires financial institutions to give third-party providers access to customer account data via APIs?
- Basel III
- Dodd-Frank Act
- PSD2 (Payment Services Directive 2) (Correct answer)
- MiFID II
Correct answer: PSD2 (Payment Services Directive 2)
PSD2, the EU's revised Payment Services Directive, mandates open banking APIs allowing licensed third parties to access customer accounts with consent.
Question 5: In blockchain technology applied to finance, what is a 'smart contract'?
- A legal agreement reviewed by AI for compliance
- Self-executing code that automatically enforces contract terms on a blockchain (Correct answer)
- An encrypted PDF of financial agreements
- A credit agreement with variable interest rates
Correct answer: Self-executing code that automatically enforces contract terms on a blockchain
Smart contracts are programs stored on a blockchain that automatically execute predefined actions when specified conditions are met.
Question 6: What distinguishes a 'permissioned' blockchain from a 'permissionless' one in financial applications?
- Permissioned blockchains use stronger encryption
- Permissioned blockchains restrict participation to approved parties (Correct answer)
- Permissioned blockchains are always faster than permissionless ones
- Permissioned blockchains cannot support smart contracts
Correct answer: Permissioned blockchains restrict participation to approved parties
Permissioned blockchains restrict who can join the network, validate transactions, or view data, making them preferable for regulated financial institutions.
Question 7: Which technology enables contactless payments by allowing devices to communicate at very short range?
- Bluetooth Low Energy (BLE)
- Near Field Communication (NFC) (Correct answer)
- Wi-Fi Direct
- QR Code scanning
Correct answer: Near Field Communication (NFC)
NFC technology enables contactless payments by allowing devices to exchange data when held within a few centimeters of a compatible terminal.
FIA Financial Technology & Systems 3
Which financial technology standard provides a common language for reporting financial data to regulators using XML-based tagging?