A closed loop payment network refers to a system where transactions occur exclusively within a specific network or ecosystem, without involving external parties like banks or credit card networks. In this system, payments are made using proprietary cards or digital wallets that are exclusive to the network's ecosystem. The funds loaded onto these instruments can only be used at designated merchants or service providers within the network.
Common examples include store-issued gift cards, transit cards, and university campus cards. Unlike open loop cards (which can be used anywhere within a card network), closed loop cards are valid only at the particular company that issued them, such as a retail chain or gas station. Keep in mind that closed loop cards may be easier to qualify for but often come with higher interest rates
Some of the closed loop payment networks are: ZONG, Superrewards, DWOLLA, PayPal, Bitcoin, Boku, Sometrics, Amazon paymentrs, Obopay