Open vs. Closed-Loop Payments: Why Your Business Should Accept Both

As a business owner, you might be familiar with the terms “open-loop” and “closed-loop” payments. But do you know the difference between the two? And more importantly, do you know why your business should accept both?

Open-loop payments are transactions that can be used anywhere that accepts the payment network. For example, Visa, Mastercard, and American Express are all open-loop payment networks. Closed-loop payments, on the other hand, are transactions that can only be used within a specific merchant or brand. Examples of closed-loop payments include prepaid cards, employee cards, proprietary apps, and meal vouchers.

Accepting both kinds of payment methods greatly aid your ability to reach every customer that comes to your business. Not only can you accept any payment method your customers use, but you can also accept the payment method they choose to use in that exact moment, giving them a sense of agency and improving their payment experience. Below, we’ll detail the main reasons you should accept both kinds of payment method.

Convenience for Customers

By accepting both open and closed-loop payments, you’re giving your customers more options to pay how they want. Some customers may prefer to pay with their credit card or mobile wallet, and others may prefer a different form of payment, especially if they are located in a closed-loop environment such as a workplace or university.

In these situations, employers or universities may offer their employees or students meal vouchers or employee or student ID cards with which they can pay for snacks, coffee, EV charging, parking or more. This closed-payment method may be topped up by the business or the consumer, and provides operators with an interesting option to set up loyalty programs. For example, if you have vending machines in an office building, you can offer one price for employees who pay with their employee ID and another for visitors who may pay with their credit card.

This will get the employees to keep coming back to you because they get a better price, but will also enable anyone who stops by to grab a snack with a simple tap of their credit card. By accommodating all payment types, you’re making it easy for customers to shop with you.


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Increase Your Revenue

Accepting closed-loop payments, such as employee cards or meal vouchers, can actually increase your revenue. Customers whose employee cards are topped up by their employee are likely to spend that money before anything, and in many cases may spend more than the value of the card, resulting in additional sales for your business. Additionally, closed-loop payments can help you attract new customers who may not have shopped with you otherwise, but who have been given a convenient option to spend their money at your business.

Gain a Competitive Advantage

 Accepting both open and closed-loop payments can give your business a competitive advantage over others who accept more limited types of payment. Customers are more likely to choose a business that offers more payment options, especially if they can pay with their preferred payment method.

In fields such as EV charging, this is particularly relevant. Most EV charging stations require drivers to download an app or subscribe to a service in order to pay for charging. If you’re a charge point operator (CPO) who accepts open payments on top of these closed-loop payment methods, you can capitalize on spontaneous or one-time chargers who want to charge quickly and frictionlessly.

In conclusion, accepting both open and closed-loop payments can benefit your business in multiple ways. By giving customers more payment options,  your business can thrive and grow. Don’t limit yourself to only one type of payment – open your doors to all payment types and watch your business flourish. With Nayax’s advanced payment technologies, you can accept over 80 different payment methods, both open and closed-loop. Contact us to learn more about Nayax’s payment technologies.

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