Open-loop vs closed-loop cards explained

Open-Loop vs Closed-Loop Cards Explained

Digital payment cards have become a common choice for rewards, gifting, and employee engagement. Among the different formats available, open-loop and closed-loop cards are the two most widely used options. Each serves a different purpose, and understanding how they work helps businesses choose the right method for their reward and engagement journeys. With more organisations moving towards digital-first systems, these cards play an important role in creating smooth and flexible user experiences.

What Closed-Loop Cards Mean

Closed-loop cards are restricted to a specific brand or a group of associated brands. These cards are simple, direct, and suitable when a business wants to give a reward tied to a particular store or service.

• Usable only at a selected brand or merchant
• Often used for retail, food, fashion, entertainment, or lifestyle categories
• No interchange fee since the card is limited to one brand
• Useful when the goal is to direct spending towards a specific partner

Closed-loop options are popular in corporate gifting, festive rewards, and customer engagement campaigns where the brand preference is strong.

What Open-Loop Cards Mean

Open-loop cards function like prepaid payment cards and are accepted at multiple merchants. They work on established networks such as Visa, Mastercard, or RuPay, offering greater flexibility for recipients.

• Accepted across a large number of online and offline merchants
• Useful for general spending and everyday needs
• Acts as a convenient alternative to cash rewards or reimbursements
• Helps businesses offer more choice to employees or customers

These cards suit performance rewards, milestone recognition, customer compensation, and broader incentive programmes.

Key Differences Between the Two

Although both types are used for rewards and gifting, they differ in where and how they can be used.

• Closed-loop: Limited to one brand; ideal for category-specific gifting.
• Open-loop: Accepted widely; suitable for flexible or large-scale reward use.
• Closed-loop: Usually lower cost and easier to manage.
• Open-loop: Offers broader usage but may involve higher compliance requirements.

Choosing the Right Format

The choice depends on the objective of the gifting or reward programme. Closed-loop cards offer better brand alignment and targeted value. Open-loop cards offer wider acceptance and suit situations where flexibility matters most. Many organisations use both formats depending on the campaign or user segment.

How Businesses Use These Cards

• Festive gifting for staff and customers
• Milestone and performance-based rewards
• Customer win-back journeys
• Refunds, compensation, or goodwill gestures
• Channel partner and retailer engagement

How Hubble Money Supports Both Formats

Hubble Money helps companies manage open-loop and closed-loop cards from a single platform. Teams can distribute digital cards in bulk, automate parts of their campaigns, and reduce manual work. This keeps operations smooth and ensures that recipients receive their rewards quickly.

• Access to a wide range of brand-specific cards
• Support for prepaid open-loop formats
• Bulk and automated distribution
• Clear reporting and tracking for issued cards

The Evolving Role of Payment Cards in Rewards

Both open-loop and closed-loop cards will continue to grow as essential tools for digital reward systems. As companies shift to online-first engagement models, these formats help create simple, quick, and user-friendly experiences. Hubble Money plays an important part by offering a smooth setup for businesses to use these cards effectively.