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Going Cashless – Open loop versus closed loop?

Going cashless doesn’t mean you need to use bank cards (debit or credit) as a means of paying; this open loop option is where balances and payments are held and managed outside of your organisation.

Whilst we’re used to seeing bank card reader terminals, chip and PIN and/or contactless payment options at tills, they are not a practical option if you want a truly cashless environment with all points of sale centralised. Is it really practical to have bank card readers on things like MFDs or washing machines? After all these are points of sale, especially in an education environment. It is unlikely a bank card reader would be able to pass back authentication to a MFD!

On the other hand using a closed loop system ensures that balances are held by the organisation and are managed by them as well. In a closed loop system, the user will be more likely to keep spend on campus, they’ve paid into their account and are therefore more likely to want to use this money to pay for goods and services onsite rather than going off site where the user would have to pay by using extra funds over and above that deposited onsite.

As the organisation is the balance holder in a closed loop situation, they benefit from any interest payments due on funds held and in an education environment this would be a significant amount of money.

What happens when a user loses their card? We’ve all had the hassle of contacting the bank, cancelling a card and then waiting for the replacement, which all takes time. This is what would happen in an open loop system. However using a closed loop system, a user can quickly lock their card and continue to spend by using a secondary authentication (User name/password or PIN) method at payment points. Till points could also display a photo of the user for further identification by the cashier. Issuing a replacement card would also be a quicker depending on the organisations card replacement methodology.

Closed loop systems offer other benefits including; being a great way to reward spend via loyalty schemes, being able to achieve better sales insights through accurate sales tracking as well as being a low risk from a fraud perspective.

If you would like to know how MonitorIT’s transaction management solution can make your environment cashless please get in touch with us. Email solutions@monitorit.co.uk or call us on 01494 565066

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