Closed vs Open Loop – A Guide to Choose the Best Gift Card Program for Your Business

Gift card programs are becoming a famous marketing strategy for businesses. Big brands are doing them to ensure that their customers have a reason to remember them. Moreover, other businesses are thinking of adding gift cards to their offerings but have no starting point.

This is where the right assistance can make all the difference. There are several decisions to make when choosing to deploy a gift card program and the two of the most crucial decisions to make is whether it is going to be an open or closed-loop and which gift cards providers will enlist them.

In this post, we will discuss how closedloop gift cards are different from open loop ones and the best platform, (cough, Prepayster, cough), to enlist them on.

What are Closed-loop Gift Cards

Closed-loop gift cards are the ones that only work at one store or one corporation’s brands. For example, you can use an Amazon gift card on the Amazon website and nowhere else, and therefore it is a closed gift card.

Advantages of Closed-loop Gift Cards

• Ensures that the buyer comes back to the business for the purchase.

• Can be free to activate for users.

• Unused gift cards also turn a profit for the business.

• As most people buy above the value of gift cards, the business’s profits increase.

Disadvantages of Closed-loop Gift Cards

• Limited flexibility in usage discourages users from getting them.

• Businesses need gift card processing solutions to offer such cards.

What are Open-loop Gift Cards

Open-loop cards are just like credit cards, and do not require the users to purchase on a specific store. These are acceptable everywhere and that makes them open-loop gift cards. These can be processed using credit card systems.

Advantages of Open-loop Gift Cards

• Users can utilize these gift cards at any business of their choice.

• It is almost like cash.

Disadvantages of Open-loop Gift Cards

• Does come with an activation fee that user needs to pay.

• Old credit card terminals might not support payment.

• As these can be used anywhere, there is no guarantee of profits for businesses selling them.

Closed-loop V/S Open-loop Gift Cards

There are several differences between open and closed-loop gift cards, showcased in the table below:

Feature	Open-loop Systems	Closed-Loop Systems
Definition	Gift card that can be used at multiple locations or stores	Gift card that can be used only at a specific store or brand.
Accepted At	Anywhere the payment network is accepted.	Only at the issuing retailer or brand.
Examples	Visa Gift Card, Mastercard Gift Card.	Amazon Gift Card, Xbox gift card.
Activation Fee	Has a purchase or activation fee.	Often has no activation fee.
Flexibility	Highly flexible	Limited to one retailer or its affiliates
Expiration	May have expiration dates and monthly inactivity fees.	Often does not expire or charge maintenance fee.
Branding	Typically carries a network logo like Visa, Amex or Mastercard.	Carries the branding of a specific retailer or company.

Where Do You Sell These Gift Cards?

The next question to answer is where are these gift cards sold? Well, there are several online portals that offer both closed and open-loop gift cards and one among the top providers is Prepayster.

Prepayster is the best platform because they offer an easy 3-step activation process and have millions of users already browsing their website for gift cards. Additionally, they offer secure payment options, which makes them the first choice of an ever-growing audience.

On these websites, you can list your gift cards, giving users the option to buy.

Final Thoughts

Among the two, closed-loop gift cards make the most sense for businesses that are looking to promote their brand. Open-loop gift cards only work for specific businesses as they can earn money from the activation fee while giving users the freedom to choose where they spend the money.

Visit Prepayster to learn more about their offerings and experience the world of gift cards from one of the most trustworthy providers present on the internet.