Payment Technology
Closed-Loop-System
Term from the vending glossary
A closed-loop payment system in which a card or token is accepted only by a specific operator – e.g. employee cards for subsidized workplace meal programmes. No banking connection, no per-transaction fee, but limited usability.
A closed-loop system works exclusively with its own funds: a card, chip, or app is loaded with credit and functions only on this operator's machines. There are no per-transaction card fees, employer subsidies can be implemented, and small transactions are economical because no third party takes a cut.
The disadvantage is the barrier to entry. Someone without a card won't buy anything – and visitors don't have one. In practice, therefore, most sites operate both: credit for staff and contactless cards for everyone else.