Closed-Loop vs Open-Loop: Complete comparison
Open-loop payments (Visa, Mastercard) work anywhere. Closed-loop payments work within a defined ecosystem. Both are useful. Most businesses need both.
TL;DR
Open-loop and closed-loop are fundamental payment concepts, not competing options. Open-loop payments — Visa, Mastercard, American Express — work across millions of merchants worldwide through card networks. Closed-loop payments — gift cards, corporate accounts, loyalty balances — work within a defined ecosystem (one merchant, one chain, one coalition, one program). Businesses typically use both: open-loop for general revenue, closed-loop for specific programs (gift cards, employee benefits, prepaid programs). The question isn't "which one" but "which one for this specific use case."
Side by side
| Feature | 7Konto | Open-Loop Payments |
|---|---|---|
| Acceptance | Within your ecosystem | Millions of merchants worldwide |
| Transaction fees | Set by you (or 0%) | 1.5-3% + fixed fee |
| Customer data ownership | You own it | Shared with card networks |
| Card issuance cost | Nearly free (wallet card) | Plastic card ~$3-5 |
| Regulatory complexity | Low (closed-loop exemptions) | High (banking regulation) |
| Customer experience control | Full control | Constrained by networks |
| Best for | Gift cards, prepaid, loyalty, B2B2E | General-purpose payment acceptance |
| Chargeback risk | None | Meaningful for businesses |
| Float management | You hold the float | Banks hold the float |
| Cross-merchant use | No (single ecosystem) | Yes (millions of merchants) |
| Online checkout availability 7Konto sits alongside card gateways as an additional payment method — not a replacement | Widget + PSP embedding | Card gateway required |
Strengths of each
7Konto strengths
- Lower per-transaction costs (no interchange fees)
- Complete data ownership and customer insights
- Custom customer experiences without network constraints
- Higher margins for specific programs (gift cards, employee benefits)
- No chargebacks or dispute risk
- Faster deployment (weeks, not quarters)
Open-Loop Payments strengths
- Universal acceptance across millions of merchants globally
- Familiar customer experience
- Established fraud protection and dispute mechanisms
- Consumer credit and rewards infrastructure
Which one for you?
Choose 7Konto if:
- • For gift card programs
- • For corporate meal or employee benefit programs
- • For loyalty programs with real financial value
- • For event or hospitality prepaid accounts
- • For any program where you control the merchant network
- • For higher-margin, closed-ecosystem economics
Choose Open-Loop Payments if:
- • For general-purpose payment acceptance
- • When customers need to spend anywhere
- • For high-value transactions requiring universal acceptance
- • For international commerce across many merchants
Common questions
Do I have to choose one or the other?
No. Most businesses use both. Open-loop (Visa/Mastercard) for main payment acceptance, closed-loop (like 7Konto) for specific programs like gift cards, employee benefits, or loyalty balances. They complement each other — closed-loop doesn't replace your card processing.
Is closed-loop regulated like banking?
Usually no. Closed-loop programs typically operate under exemptions in most jurisdictions (PSD2 in EU, similar frameworks in Ukraine, US, Canada). As long as the funds are spent within a defined ecosystem (not withdrawable as cash, not spendable at unrelated merchants), banking regulation typically doesn't apply.
What about "hybrid" cards like Visa gift cards?
Visa gift cards are technically open-loop (they use Visa network) but they behave like closed-loop (fixed balance, no reload). They're a middle ground with pros and cons of each. True closed-loop (like 7Konto) gives you more control and lower costs but requires the customer to spend within your ecosystem.
Can 7Konto be issued on a physical card like Visa?
Yes, physical cards are available with the same functionality as wallet cards. They use QR codes at checkout instead of NFC. Many businesses issue both physical cards (for gifts, older customers) and wallet cards (for tech-comfortable customers) from the same platform.
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