Choice "D" is correct. Encryption performed by physically secure hardware is more secure than that performed by software because software may be more accessible from remote locations. In addition, because hardware decrypts faster than software, more complex algorithms (which are more difficult to "crack") may be used.
Choice "c" is incorrect. If data confidentiality is a primary concern, encryption would be more important than verifying message authenticity.
Choice "b" is incorrect. Message authentication in EDI systems ensures that only authorized trading partners are submitting transactions, whereas controls related to the segregation of (many system) duties are designed to prevent any one person from having the ability to both perpetrate and conceal fraudulent activities.
Choice "a" is incorrect. The service provider does not provide transaction security.