This post explains the functioning of a closed-loop mobile payment system and the benefits it ushers in for businesses as well as consumers. Consumers enjoy the convenience to execute payments, top-up balances, check available balances, etc. using smartphones or tablets.
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Closed-Loop Mobile Payments: All You Need to Know!
Executing payments via digital wallets/ Mobile payments solutions have become the order of the day
owing to the emerging digital technologies and an increasing dependency on smartphones.
According to a research report published by the online portal, Mordor Intelligence, “The market value
of mobile payment systems was 1449.56 Billion USD in the year 2020. The mobile wallet market is
expected to grow at a CAGR of 24.5% during the next few years and the market value is predicted to
reach 5399.6 Billion USD by the year 2026”.
Digital wallets have transformed the manner of making payments altogether. The two major
categories under this type of payment methodology are open loop and closed loop mobile payments.
The open-loop payment system involves using a single digital wallet via smartphones for making
payments at several locations. Closed-loop mobile payments, on the other hand, requires prepaying
a certain amount of money to one specific merchant or business brand just like using loyalty/gift
cards at an apparel store or an eatery.
Out of these two mobile payment categories, the closed-loop approach is more preferable by
merchants as well as consumers. In fact, the closed-loop payment model has revolutionized mobile
payment one step further and elevated it to the next level! Let’s gather some quick insights on
closed-loop mobile payments and the business benefits of adopting this approach.
What is Closed-Loop Mobile Payment?
A closed-loop payment refers to the payment transaction wherein a customer uploads money into a
spending account linked to a payment device, just like the functioning of a gift card. This kind of
payment happens between a spending account and a particular business brand. The mobile
equivalent of this payment system