A closed-loop gift card is redeemable only inside one merchant’s ecosystem: a Steam or PlayStation card loads that platform’s wallet and spends nowhere else. An open-loop gift card runs on a payment network, so it works at any merchant that accepts the network, the way a network-branded prepaid card does.
The distinction sounds academic until you buy at trade volume. Fees differ, compliance treatment differs and the fraud profile differs, so a B2B buyer who lumps the two together will price at least one of them wrong.
What a closed-loop gift card is
A closed-loop card is a prepayment for one merchant’s own goods. The issuer is the merchant or its platform, the value sits on the issuer’s books as a liability until someone redeems it, and a slice of that value is never redeemed at all, a phenomenon the industry calls breakage.
Game and platform cards live here: Steam, PlayStation, Xbox, Nintendo, Google Play, Apple, Razer Gold. So do single-retailer shopping cards. The card is only worth something inside the ecosystem printed on it, which limits both its usefulness and its abuse.
What an open-loop gift card is
An open-loop card is a prepaid payment instrument issued by a bank or licensed e-money institution and branded with a card network. It spends anywhere that network is accepted, which makes it near-cash. That reach is why it is regulated more like a payment product than a voucher, and why it usually carries activation or maintenance fees rather than a trade discount.
Closed loop vs open loop at a glance
| Closed loop | Open loop | |
|---|---|---|
| Where redeemable | One merchant or platform ecosystem | Any merchant on the card network |
| Network | The issuer’s own redemption system | A payment card network |
| Typical fees | None to the holder; sold to trade buyers below face value | Activation, sometimes maintenance; rarely discounted |
| Regulation touchpoints | Lighter in many jurisdictions; consumer rules on expiry and disclosure | Treated as e-money or prepaid access in many jurisdictions; issuer licensing, AML obligations |
| Examples | Steam, PlayStation, Nintendo, Google Play cards | Network-branded prepaid cards |
Why the split matters to B2B buyers
Compliance treatment differs. In many jurisdictions closed-loop products face lighter requirements because they cannot be spent as general-purpose money. Open-loop products tend to pull the seller closer to payments regulation, with the licensing and monitoring that implies. None of this is legal advice; the point is that the two categories rarely sit in the same regulatory bucket, so check the rules for your own market before adding either to a catalogue.
The economics differ. Closed-loop cards reach trade buyers at a discount to face value, because the issuer treats the discount as marketing spend: the card recruits a customer into its ecosystem. Open-loop cards have no ecosystem to recruit into, so there is little discount to share, and the unit economics lean on fees instead. A distributor’s catalogue is dominated by closed-loop products for this reason.
The fraud profile differs. Open loop is the closer substitute for cash, which makes it the favourite target for scams and laundering. Closed-loop abuse is contained by the ecosystem: a stolen game card buys games, not withdrawals. Closed-loop products carry their own quirks instead, region locks chief among them; we cover those in why gift cards are region-locked.
Frequently asked questions
Is a Visa gift card open loop?
Yes. A network-branded prepaid gift card, Visa or otherwise, is the standard example of an open-loop product: a licensed issuer loads the balance and the card spends at any merchant on the network. That reach brings payment-style regulation and holder fees with it, which is why these cards feel different from a store or game card.
Are game gift cards closed loop?
Yes. A Steam, PlayStation, Xbox, Nintendo or Google Play card redeems only into that platform’s wallet and spends only inside that platform’s store. This is what lets platforms sell them through trade channels at a discount to face value, and it is also why the cards inherit the platform’s region and currency rules.
Why are closed-loop fees lower?
Because the merchant funds the product as customer acquisition rather than as a payment service. There is no card network to pay, no bank issuance, and the merchant keeps the whole balance until redemption, including whatever is never redeemed. Open-loop issuers carry network and banking costs and recover them through activation and maintenance fees.
Can a closed-loop gift card be exchanged for cash?
Not through the issuer: a closed-loop balance spends only inside the merchant’s own ecosystem, and platforms do not cash out wallet credit. Secondary markets exist where holders sell unwanted cards below face value, but that is a private resale, not a redemption feature. The containment is deliberate, and it is a large part of why closed-loop products face lighter regulation and less laundering pressure than open-loop cards.
Should a B2B catalogue include open-loop gift cards?
Only after checking the regulatory position in your own market. Open-loop products behave like general-purpose money, so selling them can pull a business towards e-money and prepaid-access rules, with the licensing and monitoring those imply. They also arrive without much of a trade discount, so the unit economics lean on fees. Most trade catalogues are dominated by closed-loop gaming and platform cards for both reasons.