Name four types of smart cards that are used for electronic payments, and describe the functions of each card

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Answer: Suggested answer:

There are four types of smart cards. Their functions and uses are:

• Memory cards, which are only capable of storing information. For example, a memory card could store a customer's prepaid account balance information. A cash register could deduct charges from the card when the card is inserted in the cash register.
• Shared-key cards, which encrypt all communications between the card and the point of payment device, such as a cash register. Shared-key cards could provide more security for prepaid account balances.
• Signature-transporting cards, which are similar to shared-key cards, but also allow the user to spend digital cash notes. When the customer inserts the card into the cash register, the note is transferred to the cash register. The cash register can verify on-line with the bank that the note has not previously been spent.
• Signature-creating cards, which are similar to signature-transporting cards, but are capable of generating their own digital signatures, allowing the user to write electronic "checks" containing the cardholder's digital signature.