Open or closed: How transit agencies can win back riders in a post-COVID world

For those in the transit industry, it’s easy to get lost in the jargon. Terms like card-based, account-based, open-loop and closed-loop are frequently tossed around and, even more frequently, redefined or adapted faster than a game of telephone. It’s enough to make anyone loopy, and it reminds us of how complex the ticketing landscape has become, especially as transit agencies work to win back riders in a post-pandemic world. 

 Agencies have yet to reach pre-lockdown ridership levels. They are also under pressure to attract a new tech-savvy generation of travelers, all while grappling with the looming threat of reduced government funding. Riders, however, don’t care about the jargon or the backend complexities; they want their transit experience to be modern, seamless, easy and reliable. That’s why the choice between an open-loop or closed-loop ticketing system is so critical for getting riders back on board. 

The pandemic exposed the need for transit agencies to adapt to meet rider expectations. The systems that worked in the ‘80s won’t cut it for today’s riders who expect innovation and inclusion. To understand what this means for the transit industry’s future, we need to explore what open-loop and closed-loop systems are and why the choice between the two matters. 

Open-loop vs closed-loop ticketing 

At its core, closed-loop ticketing is like purchasing a Target gift card, where you buy a transit smartcard, load it with value or a fare product and can use it within that agency’s network. Smartcards have long been used in place of cash or paper tickets, helping agencies reduce the time and costs of cash handling and boarding. However, having a fare card before traveling can be cumbersome for some riders, especially those without easy access to top-up kiosks or locations. 

Open-loop ticketing allows travelers to pay with their credit card, debit card or mobile wallet (like Apple Pay or Google Pay). Because these payment methods can be used outside the transit network and involve third-party entities like banks, the loop is open. Transport for London (TfL) first launched an open payment system in 2012, and today, open-loop tokens account for about 70 percent of all TfL pay-as-you-go bus journeys.  It’s a true gift of love for riders, especially occasional travelers and tourists, who can tap and go using what they already have in their pocket with no need to pre-purchase an agency transit card. 

Balancing convenience and equity 

For riders who value convenience, open-loop ticketing is a clear win, which is why many agencies have adopted it for their customers, despite the complexity of settling transactions with banks. It’s economical, lowering costs for card issuance, fare vending equipment and cash handling. It’s also more sustainable, cutting down on ticket and smartcard waste. Open-loop systems allow agencies to implement fare caps and travel rewards, broadening their appeal while also helping to reduce accidental fare evasion through simpler payments. 

However, open-loop systems have drawbacks. They require agencies to pay service fees for each transaction, which can add up quickly with millions of low-value fares, potentially eating into revenue. More critically, they can exclude unbanked or underbanked riders, leaving out those who rely on cash.  

By contrast, closed-loop systems give agencies more direct control. Prepaid fares inject funds directly and partnerships with retail networks allow cash-preferred riders to top up easily, ensuring inclusivity. However, because funds are locked into the card, closed-loop systems can make it harder for low-income riders to budget for transportation, and they lack interoperability across different regions, making them less practical for travelers. 

Meeting rider expectations in a post-pandemic world 

The pandemic drastically impacted ridership, putting many agencies in a tough spot. Now, with reduced funding levels looming, agencies must appeal to riders who expect seamless interactions, like walking into an Amazon Go store and leaving without a checkout. Open-loop ticketing can provide a seamless payment experience, but it must be balanced with inclusivity.  

A public service like transit must serve the entire public, including disadvantaged riders who don’t have a bank or credit card and rely on cash. A system that alienates any segment of the population risks failing in its core mission: to serve the public.  

Fare policies can be effective in bridging the gap. If fares for open-loop and closed-loop systems are unequal, or if concessions are only available for closed-loop systems, open payments won’t take off. For example, the New York OMNY system recently became the first to offer concessions on pre-registered open-loop tokens, a crucial step toward equity that can serve as a blueprint for other agencies. Addressing fare parity and access to concessions enables agencies to meet the needs of all riders, not just those with bank cards or mobile wallets. 

Tech will shape ticketing’s future, but only if we align it with rider needs and get our terminology right. Years ago, account-based ticketing (ABT) meant all your value was stored on your transit card, and if you lost it, you were flat out of luck. Now, modern ABT systems store rider information and purchases in the cloud rather than on the physical card itself, so a lost card doesn’t mean lost funds, making life easier for riders and agencies. However, as we adopt new technologies, we must be clear about what terms like ABT mean, otherwise we risk confusing everyone, from riders to the agencies working to win them back.  

Innovation should always put rider needs first. For example, a transit agency in the U.S. recently disabled a customer service bot after riders said they preferred direct human interaction. Insights like this help agencies to innovate without leaving people behind. Technology should only enhance the rider experience, not create barriers.  

A complex decision  

For agencies, the choice between open-loop and closed-loop ticketing isn’t easy—it’s not a no-brainer. The complexity is shaped by rider needs, political pressures and financial realities. Open-loop systems can add challenges like fees, but they are better at meeting modern rider expectations. On the other hand, closed-loop systems provide control and inclusivity but may feel outdated to younger riders. 

Whatever path they choose, agencies must balance innovation with equity to ensure transit remains a service for all.