Fuel cards to gift cards: How companies benefit from closed-loop payments
Closed-loop payment systems, which rely on certain exclusions to the EU payments directive, are a stable, strategic means for European businesses to embed payment functionality and innovate without the burden of full regulatory licensing. A report from PaymentGenes delves into how this works.
A significant portion of Europe’s payment ecosystem operates outside of the stringent licensing requirements typically imposed by the European Union’s Payment Services Directive (PSD2). This directive requires that payment services be authorized by a national authority such as the central bank.
These systems, known as closed-loop or limited-scope payment models, function as an essential and stable backbone for innovation in sectors such as fuel, retail, and telecommunications. They allow companies to embed payment functions without obtaining a full Payment Institution (PI) or Electronic-Money Institution (EMI) license.
The report from PaymentGenes shows that over 90% of exemptions fall into just three categories: Fuel cards and mobility platforms; content and telecom; and gift and prepaid schemes. There is a common assumption that these types of payment systems are somewhat uncommon, but the reality is that they represent a sizable and stable subset of the European payments ecosystem.
“In the fast-evolving world of European payments, open-loop systems often dominate headlines. Yet, behind the scenes, closed-loop payment models remain a critical enabler of innovation,” says PaymentGenes.
“Closed-loop payments are not a loophole, they are a deliberate design choice enabling controlled, efficient market entry. For product leaders and compliance teams, the message is clear: understand the exemption framework, monitor regulatory developments, and plan for scalability.”
Benefits of a closed-loop system
Closed-loop systems are defined by the issuer controlling where the payment instrument can be used. Examples include a fuel card accepted only at a participating network of stations, a city transit application valid only in one city, or a gift card redeemable only at a specific brand’s stores.
By fitting within the specific criteria of a few notable exclusions to the PSD2 rules, firms that use closed-loop payment systems gain several key advantages: They can accelerate their launch times, avoid extensive capital and reporting obligations, and optimize acceptance costs by eliminating certain types of fees.
Fuel cards and gift cards
A recent analysis of over 1,500 exempted entities across Europe reveals that most exemptions concentrate heavily in three specific, high-volume, and clearly defined business models. The largest category is fuel cards and mobility platforms, which account for around 1,000 exempted entities.
These include fleet card providers, toll operators, and location-specific parking applications. The second major cluster is content and telecom, representing approximately 200 entities. This category uses the exclusion for electronic-communications providers to bill digital content or voice services directly to a subscriber’s account, subject to transaction limits.
The third major group is gift cards (or prepaid cards), with over 150 retailers utilizing this exclusion for branded gift cards and wallet programs redeemable only within their defined network.
There is variation across different European countries as to how these exemptions are used. Germany leads significantly in the use of these exemptions for fuel and mobility, while France dominates in exemptions for telecom and digital content, aligning with a long tradition of mobile operators acting as financial intermediaries.
Balancing innovation with oversight
New EU rules (PSD3) are expected to introduce stricter criteria for closed-loop payments, but the exemption framework continues to be an essential and stable feature of the payment landscape. PaymentGenes notes that the strategic challenge for legislators will be to balance the need for clearer oversight and consumer protection with the necessity of preserving this valuable tool for innovation.
In terms of why these exemptions are popular in some industries, the report notes that “the appeal is clear: Faster go-to-market, lower compliance costs, and full control over user experience.”
“These systems eliminate scheme fees, simplify infrastructure, and allow integration with loyalty programs or fleet management tools. For retailers, they drive repeat purchases and customer lock-in. For mobility providers, they enable seamless expense tracking. For telecoms, they create frictionless digital ecosystems.”
