Closed Loop Payment
A Closed-Loop Payment system refers to a payment network where the entire payment process is confined within a specific merchant or a select group of merchants.
The most common examples of this type of system are store-issued gift cards, transit cards, and university campus cards. These can only be utilized at the specific vendors who issued them or within a network of participating businesses.
Closed-loop payment systems allow businesses greater control over the transaction process, often leading to lower transaction processing costs and enhanced customer loyalty. However they lack the widespread acceptance enjoyed by open-loop systems.
Open-loop systems include more universally accepted payment methods such as traditional credit or debit cards which can be used at a vast number of merchant locations.