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Understanding the differences between closed and open loop transit payments

3 min read · 2024

Which approach is right for your transit system

With digital commerce, transit authorities have the option to choose between closed and open loop transit payment systems. Learn the differences between these two to determine which approach is right for your mass transit system.

What are closed loop payments?

Pre-paid systems issued by the transit operators and authorities. Commuters fund their transit payment card or app before completing their travel.

What are open loop EMV transit payments?

They enable transit authorities to accept payments from customers using any contactless card regardless of which financial institution each party banks with.

FEATURES

Payment types

Closed loop transit payments

Limited to your branded card.

Open loop EMV transit payments

Allows for a wide variety of payment types including credit or debit card, prepaid EMV card, mobile wallet or smart device.

Device infrastructure

Closed loop transit payments

May require their own sales equipment i.e. systems to issue tickets, the tickets themselves, and devices to validate, secure and manage the payment card ticket value.

Open loop EMV transit payments

Requires validators to inspect whether valid bank cards have been presented. Open loop removes the need for the ticket and sales equipment.

Interoperability

Closed loop transit payments

Limited interoperability since the payment network is only for that one transit authority.

Open loop EMV transit payments

Customers can move seamlessly from different transit systems using their preferred payment method.

How do closed loop payments boost brand loyalty compared to open loop?

Closed loop transit payments

The card or app is branded in your transit authority’s colors and includes your naming to increase brand visibility and loyalty.

Open loop EMV transit payments

Open loop payment systems use existing debit and credit cards which limits the brand awareness for transit authorities.

FEATURES

Offline capabilities

Closed loop transit payments

Can operate.

Open loop EMV transit payments

Reliant on banking authorizations.

Commuter funding

Closed loop transit payments

Commuters will need to fund their transit account before riding. This may cause issues with either over-funding or under-funding their account.

Open loop EMV transit payments

Uses commuters' existing bank card and funds so there’s no need to prepay for a card.

EMV and contactless capabilities

Closed loop transit payments

EMV and contactless capable but may require extra development.

Open loop EMV transit payments

EMV and contactless capable.

Smartphone friendly

Closed loop transit payments

Yes, but will require app development.

Open loop EMV transit payments

Yes, can use tap and go smart device.

What’s the difference in maintenance costs between open loop vs closed loop transit payments?

Man on the tube with headphones holding iphone

Closed loop transit payments

Maintenance costs include maintenance of transit-specific closed loop cards, as well as infrastructure including ticket vending machines and card readers

Open loop EMV transit payments

Has lower ongoing maintenance costs, leveraging existing payment infrastructure without the need for ticket vending machines, card readers and their associated costs. Streamlined fare collection and reduced cash handling costs.

FEATURES

Fare capping

Closed loop transit payments

Offered for transit systems that use closed loop payments.

Open loop EMV transit payments

Offered for transit systems that use open loop payments.

Card lifecycle and sustainability

Closed loop transit payments

Lost cards or those with insufficient funds can be a source of frustration to commuters and the addition of more plastic payment cards can reduce sustainability efforts.

Open loop EMV transit payments

More sustainable than privately issued cards or tickets as there are no costs associated with issuing or replacing cards.

Inclusion for underbanked

Closed loop transit payments

Closed loop payments systems do not exclude the unbanked, underbanked.

Open loop EMV transit payments

TRANSIT

Understanding the differences between closed and open loop transit payments

Which approach is right for your transit system

What are closed loop payments?

What are open loop EMV transit payments?

FEATURES

Payment types

Limited to your branded card.

Allows for a wide variety of payment types including credit or debit card, prepaid EMV card, mobile wallet or smart device.

Device infrastructure

May require their own sales equipment i.e. systems to issue tickets, the tickets themselves, and devices to validate, secure and manage the payment card ticket value.

Requires validators to inspect whether valid bank cards have been presented. Open loop removes the need for the ticket and sales equipment.

Interoperability

Limited interoperability since the payment network is only for that one transit authority.

Customers can move seamlessly from different transit systems using their preferred payment method.

How do closed loop payments boost brand loyalty compared to open loop?

Closed loop transit payments

Open loop EMV transit payments

FEATURES

Offline capabilities

Can operate.

Reliant on banking authorizations.

Commuter funding

Commuters will need to fund their transit account before riding. This may cause issues with either over-funding or under-funding their account.

Uses commuters' existing bank card and funds so there’s no need to prepay for a card.

EMV and contactless capabilities

EMV and contactless capable but may require extra development.

EMV and contactless capable.

Smartphone friendly

Yes, but will require app development.

Yes, can use tap and go smart device.

What’s the difference in maintenance costs between open loop vs closed loop transit payments?

Closed loop transit payments

Open loop EMV transit payments

FEATURES

Fare capping

Offered for transit systems that use closed loop payments.

Offered for transit systems that use open loop payments.

Card lifecycle and sustainability

Lost cards or those with insufficient funds can be a source of frustration to commuters and the addition of more plastic payment cards can reduce sustainability efforts.

More sustainable than privately issued cards or tickets as there are no costs associated with issuing or replacing cards.

Inclusion for underbanked

Closed loop payments systems do not exclude the unbanked, underbanked.

Closed loop payments systems do not exclude the unbanked, underbanked.

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