Difference between open-loop and closed-loop payment cards

  • September 22, 2021
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What is open-loop?

Open-loop payments are attracting attention worldwide as a convenient method of paying for transport and other services. Open-loop means any payment method can be used to make payments without having to be part of the system itself. In essence, a customer can use their existing contactless card to pay for a journey even if they are not affiliated to the transport network. A single payment method can therefore be used for multiple payment services.

What is closed-loop?

In closed-loop systems the payment method (a card) is linked to the system. For example, a transport card distributed by an operator can only be used for services provided by this operator, such as the Oyster card in London. Most operators functioning as closed-loop models face higher maintenance costs and have fewer options for managing fares, which are more complex and have to be applied at different levels of the system. From the customer’s perspective, closed-loop means a card is required and needs to be funded either through top up or subscription. Ticket counters and vending machines are still required in this scenario, further increasing maintenance costs.



Closed loop payments allow consumers to pre-load funds into a spending account that is linked to the payment device (such as a wristband or card).  Customers can re-load amounts during the event through a variety of mechanisms, including automatic top-up.

Unspent funds at the end of the event are not useable outside of the event and so must be refunded to the customer or retained by the event.

Open loop payments link the customer’s payment device directly to a credit or debit card.

Consumers can use the device in the same way that they would use the linked card, subject to whatever terms and conditions the card issuer provides to the consumer.

The devices can even be used outside of the event, if the terms allow, at any retailer that supports contactless payment.

Gift cards are convenient for the purchaser, quick and easy to buy. The retailer may benefit from the tendency for people to spend in addition to the card amount and the fact that many gift cards are never redeemed.

Stores may offer both open and closed loop cards, such as a store-branded Visa card in addition to a store-specific credit card.

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