Closed Loop Prepaid Cards are typically limited to purchases from which source?

Closed Loop Prepaid Cards are typically limited to purchases from which source?

• A. The issuing merchant
• B. Any merchant that accepts cards
• C. Banks only
• D. Online merchants only

Answer: (A)

Closed loop prepaid cards operate within a single issuer’s ecosystem, meaning the funds can only be spent at merchants affiliated with that issuer. This is what defines a closed loop: the card is restricted to the issuing merchant (or its own network of partners) rather than being usable at any merchant that accepts card payments. So purchases are limited to those specific merchants, not to banks or to every online or in-network merchant. Understanding this helps explain why AML monitoring can be more targeted within the issuer’s trusted network, since activity is confined to a known set of merchants.

Closed loop prepaid cards operate within a single issuer’s ecosystem, meaning the funds can only be spent at merchants affiliated with that issuer. This is what defines a closed loop: the card is restricted to the issuing merchant (or its own network of partners) rather than being usable at any merchant that accepts card payments. So purchases are limited to those specific merchants, not to banks or to every online or in-network merchant. Understanding this helps explain why AML monitoring can be more targeted within the issuer’s trusted network, since activity is confined to a known set of merchants.