Voice of the Industry

Closed-loop versus open-loop payments in mass transit

Thursday 4 May 2023 06:47 CET | Editor: Irina Ionescu | Voice of the industry

Closed-loop and open-loop payment systems have much to offer mass transit operators and their passengers. Ken Ritchie, Senior Director, Global Industry Solutions at Cybersource, discusses the features and benefits of both.

Mass transit operators' proprietary closed-loop cards quickly became a popular, convenient alternative to paper tickets. More recently, innovations in digital payments and platforms enabled development of open-loop tap-to-ride, allowing payment with contactless EMV® cards and digital wallets. 

Both systems can help transit operators meet riders' expectations for payment choice, and so help maintain and grow ridership.

Closed-loop: integrated ecommerce 

Initially, cash or cards were used at ticketing machines to top up closed-loop cards. Now, digital payments and flexible payment platforms allow operators to integrate ecommerce capabilities, including account-based ticketing and mobile apps. Riders get more choices about how to pay, and value from their closed-loop cards — including access to the best fares and deals even if they are commuting less regularly.

Depending on the operator, an online account or mobile app may give riders access to:

  • Automatic top-ups of the card balance from their linked bank account or card saved on file

  • Ticket purchases that use a variety of fare media, including QR codes

  • Buying travel passes and applying discounts to unlock the best fares

  • Automatic fare-capping on pay-as-you-go journeys

  • Recurring billing, allowing subscription-like services for cost-effective travel without upfront investment in a pass.

In some cases, riders can register their EMV® bank card in their accounts and reap the benefits of a closed-loop system without carrying an extra card.

Naturally, when riders set up accounts, transit operators can gather data about them to offer increased value. Combining this data with a tokenization service, for instance, can allow operators to offer rewards and incentives that help strengthen riders' loyalty and drive increased revenue.

Open-loop opens up

Over the past decade, contactless open-loop has been implemented in 500+ cities1. The simplicity of tap to ride — an extension of the familiar tap-to-pay gesture with a contactless EMV® bank card or smart device —can help bring more riders on board. 

For tourists, visitors and occasional riders in particular, open-loop removes several barriers to using public transport, making it an appealing option to people who might otherwise drive or take a taxi. There's no need to queue, buy a ticket, obtain or top up a closed-loop card, or understand the fare structure. With the same contactless EMV® card or digital wallet used elsewhere, anyone can tap to ride to their destination.

For transit operators, contactless open-loop offers a positive rate of return. Reducing production and management of proprietary cards and tickets can mean cost savings (and less waste). It can also alleviate pressure points at ticket machines and offices, reducing queues and crowds. 

Implementing open-loop payments at a regional or national level can expand the benefits by allowing tap to ride on public transport over a larger area. This can boost ridership by visitors and make public transport an easy-to-use (and greener) alternative to cars, taxis and ride-hailing services. 

At the other end of the scale, contactless tap-to-ride can open up public transport in markets where simple systems suffice. Instead of installing turnstiles, a transit operator can have riders tap a smartphone or tablet to pay as they board. This 'tap to phone' capability shows that open-loop payments can reach and benefit almost everyone.

Tokenization: security, compliance and more 

To keep passengers flowing, authorisation of open-loop tap-to-ride transactions must be deferred. Token management services can enable this (while maintaining security and compliance) by tokenising EMV® card numbers 'in the moment.' As a rider steps through the turnstile, the token and transaction data are transmitted to PCI DSS–compliant storage for authorization at the end of the day — additionally reducing the PCI DSS compliance burden on operators and their solution partners.

Tokenization also provides a complete view of each passenger so they can be recognised whenever they travel. This opens the door to a world of innovation that can help meet passengers' expectations around choice, value and ease of use — enabling, for example, sophisticated fare management in an open-loop system.

Fraud management

Inevitably, as transit operators expand their offerings and accept new payment types, they open themselves up to more risk. Operators should work with their solution partners on end-to-end security to safeguard revenue streams and protect passengers regardless of payment method.

A platform for innovation 

Closed-loop and open-loop payment systems can operate in parallel and co-exist with traditional ticketing options. An open, modular payment platform lets you accept multiple payment types across channels, while securely handling mass transit transaction volumes, schemes and distinctive authorisation needs. 

Working with a payment partner who understands mass transit, and offers payment acceptance, tokenization, fraud management and other services through a single platform, can lay a foundation for enabling the next generation of urban mobility payments. Read our guide to learn more.


1. Source: "Tap to Ride – Whole Nation & Regional Contactless Payments for Urban Mobility," Visa, 2022.


About Ken Ritchie

Ken is part of the Cybersource Global Vertical Solutions team and looks after the Urban Mobility vertical. Ken has driven support and development of the Cybersource platform to support Mass Transit across the globe and has taken the organisation from a proof of concept in the first year to being on track to deliver 15 live projects by the end of year two. Ken has been with Cybersource for four years and was with Mastercard for five years before joining Visa.


About Cybersource

At Cybersource, we know payments. We helped kick start the ecommerce revolution in 1994 and haven’t looked back since. Through global reach, modern capabilities, and commerce insights, we create flexible, creative commerce solutions for everyday life-experiences that delight your customers and spur growth globally. All through the ease and simplicity of one digital platform to manage all your payment types, fraud strategies, and more. Knowing we are part of Visa and their security-obsessed standards, you can trust that your business is well taken care of —wherever it may go.

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Keywords: tokenization, authorisation rate, fraud detection, fraud management, online fraud, credit card fraud, fraud platform, fraud prevention, payment fraud, card scheme, credit card, online payments, PCI compliance, PCI DSS, EMV, travel payments, digital wallet, ecommerce
Categories: Payments & Commerce
Companies: Cybersource
Countries: World
This article is part of category

Payments & Commerce


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