Open vs Close-Loop Mobile Payments Which is Better?

Aug 11, 2021

Mobile wallets have shifted the way we pay for goods and services.  In Singapore alone, mobile payments growth rose from 34% in 2018 to 46% in 2019, based on a global survey published by PricewaterhouseCoopers. But not all mobile payments are equal. 

Close-Loop payment system

A close-loop mobile payment method allows consumers to pre-load funds into a spending account and make it possible for customers to pay with their mobile devices at a particular retailer. A close loop payment system is issued and affiliated with a particular retailer, and can only be redeemed with that retailer, like Starbucks, Koi, and any in-game currency.Close-loop mobile payment systems enable customers to manage their spending accounts via their mobile devices. Customers can check their accounts, top-up, and pay with the retailer’s branded mobile app.

Limited Usage

From a consumer’s standpoint, close-loop payment cards are limited in terms of where they can be used. Retailer-specific cards are limited to purchases from the issuing retailer.

Deterrence Factor

While close-loop systems make the customer experience with a single vendor more convenient, they also require that customers download and register a payment app for each retailer. As mobile payments become more pervasive and consumers expect mobile payment acceptance, having a closed-loop mobile payment system could deter them from using mobile payments.

Open-Loop payment system

An open-loop mobile payment solution, on the other hand, is often issued with a payment network such as Visa, UnionPay, Mastercard, JCB, Discover and can be redeemed anywhere that accepts payments from that network. They are more adaptable and able to be used at more retailers from one centralised virtual account. For example, UnionPay’s global acceptance network has expanded to 179 countries and regions, covering over 52 million merchants and about 2.9 million ATMs. Outside the Chinese Mainland, UnionPay is accepted at over 29 million merchants and 1.75 million ATMs.

A Better Way to Pay

Open-loop virtual debit cards provide consumers with convenience, security and flexibility. A centralized app that lets you pay anywhere, for anything is simpler than having to handle multiple mobile apps for each and every retailer.

Funds are universally acceptable

Consumers can make purchases anywhere in the world the payment network is accepted.

Convenient and easy to use

Virtual cards function just like a debit card with added payment conveniences such as using QR codes to pay for purchases. Consumers simply need to scan the code using a mobile phone to initiate the payment transaction. Its faster, more secure and easier.

Security and consumer protection

Consumers are protected from fraud and loss protections. In Singapore, Aleta Planet provides payment services governed under the Payment Services Act, regulated by the Monetary Authority of Singapore.

Sponsored rebates

Enjoy network promotions such as UnionPay-sponsored U•Plan marketing promotions as a UnionPay merchant and enable your customers to enjoy rebates when they pay with UnionPay.

Avoid costly bank fees

A set amount of funds are loaded in advance of a purchase, so consumers can control their budget and avoid bank interest charges and overdraft fees.

Financial Inclusion

Open-loop virtual cards open the door to “unbanked” or “underbanked” individuals without a basic banking product or lacking access to credit facilities

Streamlined expense tracking

Virtual cards are easier to track than paper receipts with transaction tracking.

Flexible payment

Businesses can easily pay employees their wages, commissions, expenses, reimbursement, freelancer payments with one tool.

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