22 dec 2023
Open Loop vs Closed Loop: difference between Payment Systems
As an event organizer who is faced with the choice of a payment system, you probably come across the terms 'open loop' and 'closed loop'. But what does closed loop mean? And how do they influence the experience at your event or festival? In this article we will delve deeper into these concepts and identify the advantages and disadvantages of both, so that you can confidently make the best choice for your event: open loop vs closed loop.
What are Open Loop and Closed Loop Payment Systems?
An open-loop payment system is a universal payment platform where payment methods, such as debit and credit cards, can be used at a multitude of companies and services. Unlike open-loop, a closed-loop payment system is limited to one specific organization or location, such as a festival bracelet with a chip or a store-specific loyalty card.
Open-loop payment systems are known for their flexibility and universal applicability. Consider payment options such as debit cards (Maestro), credit cards (Visa, MasterCard) or even digital wallets such as Apple Pay. These systems are not tied to one specific entity and can be used across a wide range of companies and services. They are ideal for event goers who are used to the convenience of everyday payments.
In contrast, closed-loop payment systems are more specialized and limited in their use. These systems are specifically designed for certain locations or organizations. Examples are bracelets with chips for festivals or loyalty cards from retail chains. Closed-loop systems, like those offered by us at Tactile, offer unique benefits in terms of customer retention and targeted control over spend.
The Benefits and Challenges
With open-loop systems you enjoy the convenience of well-known payment methods. Customers don't have to worry about creating new accounts or loading credits. However, these systems can be complex to manage and offer fewer opportunities for customer insights and direct marketing.
Closed-loop systems, on the other hand, offer a high degree of customer loyalty and detailed data analysis. You can better monitor customer behavior and take targeted actions. However, they may require additional efforts from the customer, such as pre-loading funds or creating an account.
Applications in Practice
In today's event world we notice a clear trend: more and more events are switching to closed-loop payment systems. This is especially the case with suppliers who offer robust systems that continue to function even during internet outages. This kind of reliability is crucial in the often hectic and unpredictable environment of an event or festival. By choosing a closed-loop system, you are assured of a smooth and uninterrupted transaction experience for both your team and visitors.
However, there are situations where an open-loop system may be the better choice. This is especially the case at events that are not completely closed and where many passers-by come and go. In such circumstances, an open-loop system provides the flexibility and accessibility needed to serve a wide range of visitors, without having to adapt to a specific payment system.
The choice between open-loop and closed-loop payment systems therefore strongly depends on the nature and design of your event. By carefully considering these factors, you can choose a payment system that is not only efficient, but also contributes to the overall experience and satisfaction of your visitors.
Conclusion and Next Steps
Choosing between open-loop and closed-loop payment systems depends on several factors, such as the nature of your event, the expectations of your attendees, and the specific goals you have regarding customer retention and data analysis.
Would you like to know more about how to choose the best payment system for your event? Then read more about cashless payment systems, or contact our specialists directly for personal advice. We are happy to help you find the perfect payment solution for your event.
