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Closed-Loop Payments: The Quiet Backbone of European Payment Innovation

Payments
Payment innovation
PaymentGenes Consulantcy
Jan 15, 2026
Whitepapers

Closed-loop payment systems restrict the use of a payment instrument to a defined network of merchants or services. Think of a fuel card accepted only at specific stations, a transit app valid within one city, or a retailer gift card redeemable exclusively in its own stores. These models thrive under PSD2 exemptions, specifically Articles 3(k) and 3(l), which allow businesses to embed payment functionality without obtaining a full Payment Institution (PI) or Electronic Money Institution (EMI) license.

This regulatory flexibility has fueled adoption across Europe. Our research shows over 1,500 firms in 30+ countries operate under these exemptions.

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 seam

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